Inheritance Tax and Intestacy rules

travlinmusicman

Can’t find a thread for this so hope this is okay to post.

My father-in-law died intestate leaving a living wife. His total personal estate is valued at £350k which is £25k over his inheritance tax allowance threshold. Now as I understand it, if his wife inherited everything there would be no inheritance tax to pay. There are however 2 surviving children, and under the rules of intestacy, the first £270k of his estate would go to his surviving wife. Of the remaining £80k, 50 percent would go to his wife and the other 50 percent would be divided between his children. This would mean that his wife did not in fact inherit his whole estate, so my question is … would inheritance tax have to be paid because of this, or would it be deemed his wife inherited his whole estate except for the £40k and so avoid inheritance tax?

Any advice would be greatly appreciated.

DullGreyGuy

How have you calculated the estate value? Have you included property and/or pension/insurance payouts?

If there is property was it joint tenants with his wife? Were pensions/insurances not written in trust?

travlinmusicman

Thanks for your reply,

Everything including property has been taken into account, the property was tennents in common.

p00hsticks

Would the children be willing to give up their share ?

If so they could sign a Deed of Variation to pass the entire estate to the wife.

theoretica

There is no inheritance tax to pay now - but when the wife dies her estate will not be able to use the full allowance from her husband as £40k of it will have been used up by this inheritance.

travlinmusicman

theoretica said:

There is no inheritance tax to pay now - but when the wife dies her estate will not be able to use the full allowance from her husband as £40k of it will have been used up by this inheritance.

Thanks so much for your reply, this is as I had hoped it would work. So basically, her allowance would be £610k, unless of course she was to take advantage of the 'residence nil-rate band' by passing on her main residence to her children.