Complicated Estate advice please

Yvfm

Can anyone please let me know the situation in the following circumstances. 
An unmarried couple own a property 50/50
One dies and has appointed the other joint executor of Will and leaves thier 50% share to partner. As inheritance tax was payable Estate has not applied for probate. Remaining partner choose to leave Executor suites to other Executor, as they were in poor health.
Remaining partner dies before their deceased partners Will has been administered.
Only asset for both partners is a property above IHT allowance.
Does Executor for last person who died have to include the amount left to them by partner in the IHT calculations (even though this may be unknown and challenges could be made to that Will) if they have not received inheritance?
Thanks

Savvy_Sue

This sounds like a situation where proper legal advice would be wise.

Did the unmarried couple own the house as tenants in common, or joint tenants? You can check on the Land Registry website, and I believe it may make a difference to the amount of IHT due.

It's entirely possible that in order to sell the house, probate will be needed for both parties.

Also fairly sure that HMRC will want whatever IHT is due for each death, before anyone else inherits.

Marcon

Yvfm said:

Can anyone please let me know the situation in the following circumstances. 
An unmarried couple own a property 50/50
One dies and has appointed the other joint executor of Will and leaves thier 50% share to partner. As inheritance tax was payable Estate has not applied for probate. 

If IHT was payable, then interest is charged from 6 months after the death. The 'estate' doesn't apply for probate; personal representatives (executors or administrators, depending on whether or not there was a will) have to do that.

Yvfm said:

Remaining partner choose to leave Executor suites to other Executor, as they were in poor health.
Remaining partner dies before their deceased partners Will has been administered.
Only asset for both partners is a property above IHT allowance.
Does Executor for last person who died have to include the amount left to them by partner in the IHT calculations (even though this may be unknown and challenges could be made to that Will) if they have not received inheritance?
Thanks

Yes. To avoid an unholy mess, it would make sense for the first estate to be properly administered now, and then the second estate can be dealt with in a much more sensible fashion.

Keep_pedalling

If the house was the only asset then its value would need to be in excess of £650k before IHT was due on the first death. The executor of the first partner to die needs to get a proper (paid for) valuation of the house to work out the amount of IHT that needs to be paid. If for example the house is worth £800k then the first partner’s share was £400k so IHT would apply to £75k @ 40% = £30k.

The second partner’s estate will be worth £770k (the house - the IHT owed by the first partner’s estate). The executor of the second partner’s estate needs to work closely with the other executor to make sure this goes smoothly.

Did either of them have children or were either of them previously widowed?

p00hsticks

Keep_pedalling said:

If the house was the only asset then its value would need to be in excess of £650k before IHT was due on the first death. 

Does that apply even when the OP says that the couple were not married?

poppystar

p00hsticks said:

Keep_pedalling said:

If the house was the only asset then its value would need to be in excess of £650k before IHT was due on the first death. 

Does that apply even when the OP says that the couple were not married?

As they only owned half the house then yes.

Flugelhorn

p00hsticks said:

Keep_pedalling said:

If the house was the only asset then its value would need to be in excess of £650k before IHT was due on the first death. 

Does that apply even when the OP says that the couple were not married?

yes because they could leave their 325K to the partner and the first estate would be  tax free - however they need to sort the first estate first 

Keep_pedalling

p00hsticks said:

Keep_pedalling said:

If the house was the only asset then its value would need to be in excess of £650k before IHT was due on the first death. 

Does that apply even when the OP says that the couple were not married?

It only applies to an unmarried couple, spousal exemption would apply to married couples (or couples in a civil partnership) so IHT would not apply on the first death regardless of the house value. 

Keep_pedalling

Yvfm said:

Thanks for all the replies.
What/would there be any difference if they had been joint tenants.
Thanks

Only in the fact that ownership to the surviving partner would be automatic and that it could not be included in either will, it makes no difference for IHT purposes.

How much is the house worth? Did either have children? Had either of them been previously widowed? 

Yvfm

House is worth approx 800k. No other assets only debts by first person to die. First person has daughters in their 40s who have never lived in property and weren't close. Second person was widowed over 40 years ago and never remarried. They had no children only step son.
Thanks for replies

Keep_pedalling

Yvfm said:

House is worth approx 800k. No other assets only debts by first person to die. First person has daughters in their 40s who have never lived in property and weren't close. Second person was widowed over 40 years ago and never remarried. They had no children only step son.
Thanks for replies

That changes the numbers somewhat. If the first to die had left their share to their daughter their estate would have been exempt from IHT as the residential NRB could be claimed. The debts also reduce the net value of the estate and reduce the amount of IHT due. How big are these debts?

As the second partner was widowed it is likely that they inherited their spouse’s estate so will have the transferable NRB available pushing their exemption to £650k.

Technically, if the first partner died within the last two years IHT can be avoided completely, but this would require the main beneficiaries of the second partner to make a deed of variation on the first will giving part or all of the first share of the home to the partner’s daughter but I can’t see too many people giving up a 6 figure sum to save some tax.