Filling out IHT 405 (Homes etc) 1 February at 8:17PM in Deaths, funerals & probate 6 replies 161 views

Pejoli_2

Hello,

I'm filling in the IHT forms ahead of my mums probate application as will executor - she died recently, the chargeable estate is a bit over 650K (my dad died previously and has 100% NRB to transfer), and as it includes the family home I'll be applying for the RNRB to ensure we're below the overall threshold for tax. We're fortunate to have a very straightforward 3 way split of the estate between me and my two sisters (all very amicable).

A few questions:

When I come to IHT405, the last question 12 asks about the sale of the property. We will be selling the house within 12 months (in all likelihood), but have made no plans as yet
- should I answer 'Yes', just fill in question B with 'will be sold later', and leave questions C-F blank ? Does this invite further questions from HMRC ?
- If I answer 'No' to this question, does it have any implications ?

Secondly,  probably a dumb question, but just to check on the terms on the RNRB. The house is left to us children (so TMU qualifies for RNRB as direct descendants), but what does that actually mean? I take it we won't have to actually transfer the deeds to our names (presumably then selling it would count as a second home and attract CGT, as we all own our own houses) ? Do I assume correctly we are free to just sell it as part of the estate and then divvy up the proceeds, and still qualify for the RNRB ? 

Finally a hypothetical (this won't apply, but I'm interested now I've gone through all these forms) - if the value of the property at date of death means we're overall below the threshold for IHT, what happens if the actual sale price realized would push us above it ?

poppystar

RNRB doesn’t require you to put the house in your names. As you are inhering the house you can claim it. Yes, sell, and divvy up the proceeds per the Will. 

The value at date of death is the value for IHT calculation. If the value rose between then and sale any increase would be liable to CGT for which the estate would have an annual allowance before it becomes payable. 

Sorry can’t help on the form filling but someone will be along soon who can.

Pejoli_2

7poppystar said:

The value at date of death is the value for IHT calculation. If the value rose between then and sale any increase would be liable to CGT for which the estate would have an annual allowance before it becomes payable. 

Thanks - it’s interesting that 12F on the IHT405 form asks “do you want to use the sale price as the value at date of death”. This suggests I can include that as the value for IHT, and thus (assuming the total is within the IHT limits) avoid any CGT. Sounds unlikely ?

poppystar

Pejoli_2 said:

7poppystar said:

The value at date of death is the value for IHT calculation. If the value rose between then and sale any increase would be liable to CGT for which the estate would have an annual allowance before it becomes payable. 

Thanks - it’s interesting that 12F on the IHT405 form asks “do you want to use the sale price as the value at date of death”. This suggests I can include that as the value for IHT, and thus (assuming the total is within the IHT limits) avoid any CGT. Sounds unlikely ?

Isn’t the issue there that there isn’t a sale price yet? So you wouldn’t be able to use it, so wouldn’t be able to complete the forms. 

12F is sale price not asking price. 

Pejoli_2

If it was tax advantageous, I could put the house up for sale and wait until I’d agreed a sales price before filing ? (an estate agent I spoke to said I didn’t need probate to agree a house sale, only to exchange).

poppystar

Well, I suppose that is technically possible as long as you can still submit the forms within the twelve month deadline and aren’t worried about losing those buyers who don’t want to agree to buy a property where probate has not been applied for. 

Linton

Pejoli_2 said:

7poppystar said:

The value at date of death is the value for IHT calculation. If the value rose between then and sale any increase would be liable to CGT for which the estate would have an annual allowance before it becomes payable. 

Thanks - it’s interesting that 12F on the IHT405 form asks “do you want to use the sale price as the value at date of death”. This suggests I can include that as the value for IHT, and thus (assuming the total is within the IHT limits) avoid any CGT. Sounds unlikely ?

Yes you can set things up so that the value at death is defined to be the sale price - this was done on my relative's death.  Whether filling in the section in IHT405 is the full process I do not know.