Use of bridging loan to settle IHT account

cglover95

Hi,

Sadly my Uncle passed away early this year and left my Dad and I as joint executors. Upon valuing his estate, it became clear the total value would be over the IHT limit and some tax would be due to be paid. As we're doing it ourselves, we're letting HMRC calculate the final value for us but will be circa £70k. We are not in a position to pay this out of our own pocket, and he only left around £4k as cash in a bank account. 

The estate is a simple one of only a bank account, S&S ISA and share certificates. As I understand it we can't sell any shares to pay for the IHT until Probate is granted and I read about getting a bridging loan to pay for the amount and repay once probate is granted. Has anyone had any experience of this and potentially advise of any suitable lenders? Or is there any way we could get probate granted before settling the IHT? I don't think instalments are an option as property isn't part of the estate.

Thanks

Chris

handful

I'm currently a joint executor and were in a similar position, not enough cash to pay the IHT of around £120k. We engaged the services of a probate specialist accountant who was able to persuade the deceased's FA (Quilters) to sell enough of her investments to pay the IHT. We had confirmation this week that this has happened. The investments were roughly half S&S ISA and the other half in a CIA (Collective Investment Account) I don't know yet what was sold in order to pay the IHT. I also don't believe Quileters would have done this on just our (executors) request and the fact it was being done professionally was definitely a factor.

We were really anxious about having to organise bridging finance. Before we engaged the services of the accountant I looked around and Tower Street Finance looked as if they could be an option because the loan would be secured against the estate rather than my house but again they needed it to be handled by a professional firm and they weren't cheap either. I don't believe you have any chance of probate being granted without paying the IHT though!

poppystar

Is it possible for the bank to pay the IHT direct from his account if presented with the bill from HMRC? May be worth speaking to their bereavement department. 

Edit:

Oops sorry, missed the bit where it said only £4k!

SusieT

You may find that the ISA will release funds to pay HMRC, possibly directly to them to make sure you do not use them for anything else. Would that, plus the £4k in the bank be enough to cover the IT? Otherwise t may be worth paying as much as possibly from any assets that can be released, and then talking to HMRC about how to release more, as I would expect the interest charged by HMRC would be less than will be charged on a bridging loan.

cglover95

Thank you all for the reponses so far! We're going to try and reach out the the ISA provider to see if they will release those funds, unfortunately that would still mean we are short of the total IHT amount by appox. £40k so looks like it will be a phone call to HMRC!
Thanks

SiliconChip

If the estate is as simple as you state then surely the easiest option is to get the probate application in asap in the hope that it'll be granted in time to allow enough shares to be sold to cover the cost of the tax that's due. Is there any reason why you think that should take longer than 6 months?

And even if you are late paying it may be cheaper to pay the interest on the tax (currently 6.5%) than to pay interest on a bridging loan.

Daniel54

I understand that you do not require probate before paying making an on account IHT payment.

I received advice yesterday from the solitons we are employing.

We are nearly 5 months into the process

Once we have agreed their draft,we will all wet sign IHT 400 and this will then be submitted

We will also wet sign instructions to the investment managers to realise at a minimum the amount required to make a payment on account sufficient to avoid interest

The solicitors will provide this to the investment managers together with an instruction for them to pay HMRC directly ( IHT 423)

Unlike property,liquidation of investments does not require transfer of ownership to a third party,so I have always been of the understanding that we do not require probate to sell investments into cash on behalf of the estate,prior to grant of probate.

https://www.gov.uk/paying-inheritance-tax/pay-early