IHT400 and/or Excepted Estate

GoogleMeNow
GoogleMeNow Posts: 328
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edited 29 September 2023 at 10:29AM in Deaths, funerals & probate
Please could you help me in understanding the rules here in layman's terms?

My mother (widowed) recently passed away (father passed away 20+ years ago).

I am an only child and the Will passes everything to me, with defined amounts going to two adult grandchildren.  I am the sole Executor of the Will.

My mother's property has been valued at £385k.

My mother had savings in various accounts (one ISA) totalling £200k.

A few chattels (jewellery/furniture/paintings) not worth a lot on the second hand market (say £1000)

There are no overseas investments, no shares, no trusts, no debts, no gifts, property was mortgage free, mother was domiciled in the UK.

As I understand it, mother would have a £325k nil rate band
Possibly father would also have had a £325k nil rate band, transferred to mother on his death.  Everything was passed to mother in his Will.
As a direct descendent, child, another £175k to be added.

So, does this mean the estate is an Excepted Estate and therefore no IHT400 to complete?

How do I claim the unused nil rate band?

As the total of the assets is £586k, and the nil rate band and resident nil rate band could be £825 (according to my previous paragraph), can I complete the Probate form (PA1P) without all the other forms for HMRC, or do I still need to complete the IHT400, along with all the various additional Schedules?

Sorry, if I seem really thick, but I am struggling to understand the rules surrounding this and I thought, as a simple estate, it would be easy for me to apply for the grant of probate myself.  I'm also not sure whether my father's death 29 years ago would mean the nil rate band of £325k was still applicable today.

Thank you so much for reading and I look forward to responses!



The Notes accompanying IHT400 state

Low value estates

These are estates where there can be no liability to Inheritance Tax because the gross value of the estate does not exceed the Inheritance Tax nil rate band or twice the nil rate band where there is a valid claim to transfer the unused nil rate band from a predeceased spouse or civil partner. The conditions for these estates are that
: • the deceased died domiciled in the United Kingdom (UK)
 • the gross value of the estate does not exceed the Inheritance Tax nil rate band (go to note on page 3)
• if the estate includes any assets in trust, they are held in a single trust and the gross value does not exceed £250,000
• if the estate includes foreign assets, their gross value does not exceed £100,000
• if there are any specified transfers, their chargeable value does not exceed £250,000
• the deceased had not made a gift with reservation of benefit
• gifts out of income totalling more than £3,000 in any year must be shown in full
• no charge arises on the individual’s death under any of the provisions relating to alternatively secured pensions For claims to transfer the unused nil rate band from the estate of a predeceased spouse or civil partner, the following additional conditions apply:
 • the full or partial nil rate band must be available to transfer from the earlier death
• there is only one predeceased spouse or civil partner
• a suitable claim is made to transfer the unused nil rate ban

Comments

  • poppystar
    poppystar Posts: 1,249
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    If you need to use the residential NRBs then you would have to complete IHT400 but it sounds like the estate will be excepted so that won’t be necessary. The valuation of the house may be crucial here.

    There is no specific form to claim unused NRB from your father - that would be dealt during the Probate application assuming you o proceed as an excepted estate and are not claiming the residential NRB
  • Her estate is quite a bit below the combined nil rate bands so you will not need to claim either residential nil rate band and therefore you don’t need to submit an IHT return. 
  • Thank you both very much for your responses. 

    It reassures me that I only need to count the estate as the two NRBs and not bother with the RNRBs and that therefore the estate will be classed as Excepted.

    Very grateful for your help and advice.
  • thewad
    thewad Posts: 330
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    Your father passed away 20 plus years ago so would need to use the calculator to find out what his NRB would have been......currently sorting M in Laws will and her husband died in 1998 and his NRB  is £215,000.....that would put our total NRB £540,000.
    If God didn't want us to eat animals, why did he make them out of meat. :beer::beer:
  • poppystar
    poppystar Posts: 1,249
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    thewad said:
    Your father passed away 20 plus years ago so would need to use the calculator to find out what his NRB would have been......currently sorting M in Laws will and her husband died in 1998 and his NRB  is £215,000.....that would put our total NRB £540,000.
    But it is the percentage used that is applied - so if all went to the spouse on first death there is 100% available and that percentage is applied to current threshold. So it would be £325k. It can only be less if on the first death part of the estate was left to non spouse. AIUI
  • poppystar said:
    thewad said:
    Your father passed away 20 plus years ago so would need to use the calculator to find out what his NRB would have been......currently sorting M in Laws will and her husband died in 1998 and his NRB  is £215,000.....that would put our total NRB £540,000.
    But it is the percentage used that is applied - so if all went to the spouse on first death there is 100% available and that percentage is applied to current threshold. So it would be £325k. It can only be less if on the first death part of the estate was left to non spouse. AIUI

    Thank you for confirming @poppystar.  I was starting to panic, but my father did pass everything to my mother.

    Found this on the internet, which seems to explain it:  

    In July 2008, the Transferable allowance was introduced whereby any unused part of the nil rate band on the first death could be transferred and added to the nil rate band of the second to die.

    How does it work?

    What is transferred is the unused percentage of the first to die’s nil rate band.

    Example 1

    Mr Adam dies on the 1 July 2001 and leaves everything to his wife, Mrs. Adam. At the time of his death the nil rate band was £242,000.

    Mrs Adam dies on the 1st April 2010 at the date of her death the nil rate band was £325,000.

    As Mr Adam used none of his nil rate band then 100% is transferable but at the level at the time of Mrs Adam’s death so her estate will receive a nil rate band of £650,000.

    Example 2

    The same facts as above but Mr Adam left legacies to his children of £121,000 and the remainder to his wife. No IHT was paid on his death as the legacies were within the nil rate band of £242,000 and the remainder of his estate passes to Mrs Adam which is spouse exempt.

    When Mrs Adam dies on the 01 April 2010 she has her own nil rate band of £325,000 and the unused 50% of Mr Adam’s nil rate band can be added giving Mrs Adam’s estate a nil rate band of £487,500.

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