Help and advice on inheritance tax

Millyalfie123

Hiya, i'm in need of some help and advice. I've been looking online and even asked a solicitor for advice but i haven't had a clear answer

I'll try and keep it short and to the point.

Basically a friend will be leaving me a property in their will. She also has 3 other houses, 1 of which she will definitely be leaving to her stepdaughter. The value of the properites will be over 1.5 million. My friend doesn't want me to pay inheritance tax on the property she'll be leaving me, she wants to ideally leave it to me as a gift. She said what she is considering on doing is selling 2 of the houses to pay the inheritance tax off. I don't know if that is possible for her to do as im a friend.

I've never been in this position before anyone leaving me anything yet alone a property.

Thanks for reading.

p00hsticks

Beneficiaries don't pay inheritance tax, the estate of the deceased does. 

It's not really up to you as a potential beneficiary to be seeking advice or consulting solicitors  - your friend should be getting expert legal advice to draw up a will that considers all the possibilities and as far as possible achieves what she wants to - for example, if she leaves you a particular named property but that property is then sold before her death - for example, to pay for care fees - they you would inherit nothing. It may be that she would be better leaving you a fixed cash amount or a percentage of the total account. 
A good solicitor would talk through all these possibilities with her and draw up a suitable will.  

Keep_pedalling

You can leave specific gifts to a beneficiary free of tax which effectively means all the IHT comes from the residuary estate. It is unwise to specified specific properties within a will as there is a risk that on your death you might no longer own it so the bequest fails.

She really need to see a local solicitor to talk through what she want to achieve and draft up a will that meets her requirements.

Albermarle

I can see where your friend is coming from. If when she dies her estate is liable for IHT ( it sounds like it will be ) and there is not enough cash/liquid investments to pay the tax owed, then the estate could well have to sell one or even two properties to pay the tax bill, hopefully still leaving two properties for you and the stepdaughter.

However as explained in the posts above, the whole idea of leaving properties is probably not the best, if it can be done another way.
From a personal point of view it might be better to get a cash inheritance rather than a property you do not need? However of course you would have to be careful suggesting that. Anyway the main point is she needs to pay a solicitor a few hundred Pounds to draw up a proper will, that will take account of different eventualities.

Millyalfie123

Thanks for the help. She has a solicitor and has spoken to them about it but they haven't given her a clear answer or what's the best way to do it. She has already left me the property in the will and has all been done and signed ect. 

What her main concern is me paying the iht. She wants her estate to pay for it and she didn't know if it would pay for me as im not family. She has spoken to her solicitor but there hasn't been a clear answer for her and not actually helped.

She thought if she sold 2 houses then the money from that she will keep aside to pay the iht when the time comes to it.

She asked me to find out what is what when it comes to the iht as her solicitor hasn't been helpful. I've said to her to find another solicitor who actually will help you as your paying them and they haven't helped you or explained about paying iht.

I'm also looking at what possible out come there is for paying the iht, as I will be inheriting a property and would like to know what i'm in for and what to expect as I never had any thing left to me. Espcially as im not family.

Thanks again

lincroft1710

To repeat what has previously been posted, you as a beneficiary do not pay Inheritance Tax, it is paid by the estate before the estate is distributed. So when you actually take possession of the property the IHT will have been paid. If there is not enough cash in the estate to pay the IHT then some of your friend's possessions or property will have to be sold by the executors of the estate to meet the IHT bill.

Albermarle

I'm also looking at what possible out come there is for paying the iht, as I will be inheriting a property and would like to know what i'm in for and what to expect as I never had any thing left to me. Espcially as im not family.

The fact that you are not family is not relevant at all.

Beneficiaries of a will are paid out AFTER inheritance tax has been paid by the estate, so there is NO liability for the tax for beneficiaries.

Millyalfie123

Thanks so much, I don't understand why she hasn't been told that. This is where she and I was getting confused with it all. I will let her know.

Thanks again

Millyalfie123

The property which I will be inheriting is valued less than £325.000. 

If the tax allowence is 325.000 will anything have to be paid at all. Bearing in mind her stepdaughter has a tax allownce which I think it more. - ( £500.000) I think. Will the allownce be used on the property she is given only or both of us?

Sorry for the questions, just trying to wrap my head around it all.

uknick

You've been left a specific bequest in a will.  Once the estate has been granted probate the the executors must give you that bequest in its entirety.  The only time they don't have to, is when there is a specific clause in the will that states the asset may be sold to raise any IHT due.  From what you've said that's not the case.

To clear the IHT bill to enable probate the executors will have to sell other assets from the estate to raise any IHT due.  Or, take out some form of IHT loan to cover the short term and then sell estate assets to pay the loan back.

The tax allowance you talk about applies to the estate, not individuals and the maximum an estate can get at present is £1m, assuming your friend had a spouse who pre-deceased them and the settlement of their estate didn't use any of their allowances.  The value of the item you have been left is not relevant to that, other than it is included in the total value of the estate.

I'm surprised you haven't had a clear answer from a solicitor as this pretty straight forward stuff for any one involved in drafting of wills.

The problem you may well have is when your friend passes and her step daughter isn't very happy having to pay IHT on your bequest from her part of the estate, assuming she is the other main beneficiary.

Albermarle

Millyalfie123 said:

The property which I will be inheriting is valued less than £325.000. 

If the tax allowence is 325.000 will anything have to be paid at all. Bearing in mind her stepdaughter has a tax allownce which I think it more. - ( £500.000) I think. Will the allownce be used on the property she is given only or both of us?

Sorry for the questions, just trying to wrap my head around it all.

Sorry to labour the point again, but inheritance tax allowances only apply to the dead persons estate. Who the beneficiaries are, and their own personal financial and tax situation is totally irrelevant.