Inheritance Tax Calculator

courtenay62

Hello,

 I’m in the process of dealing with my father’s estate and Probate, and am confused by the Government’s websites regarding Inheritance Tax and how to value an Estate for IHT.

 To clarify the situation, my father’s home is in Tenants in Common with his wife; they each own half the house’s value.  He has left his half of the house’s value in trust to his 2 children (I am one of them), with his wife, now a Life Tenant, continuing to occupy the property until she dies. 

 His Will, properly drawn up, shows aside from the necessary requirements of the Trust fund and his wife’s life interest in the house, the value of the Residue (after bequests and chattels) divided up 3 ways between his wife and the 2 children.

 I’m using the Inheritance Tax Checker: "gov.uk.valuing.estate.of.someone.who.died.estimate.estate.value  

 What I want to know is how should I answer the question:

“Has he left all assets to his surviving wife”.  

 I have currently answered YES.  I’m assuming “all assets” doesn’t refer to what he has Willed her, but am I right?

Keep_pedalling

As life tenant his wife is the beneficial owner of his share of the house so the bequest is subject spousal exemption so does not use any of his NRB. Two thirds of his residual estate however are going to his children, this will use up at least some of his NRB so the answer is to the question is no. 

courtenay62

Keep_pedalling said:

As life tenant his wife is the beneficial owner of his share of the house so the bequest is subject spousal exemption so does not use any of his NRB. Two thirds of his residual estate however are going to his children, this will use up at least some of his NRB so the answer is to the question is no. 

Thank you. I've re-done the  Inheritance Tax Checker with that answer amended to "no", then followed through with the other questions.
The next question asks "what was the value of assets left to a surviving wife?"  Does this mean Cash Assets only, or should I also include the value of the Chattels with the Cash assets?

Having got to the end  of the checker it says "You need to pay Inheritance Tax", and underneath it says "Your inheritance tax result is £600,000".   I'm not sure what "result" means - is it saying that is the most IHT I might have to pay?  Also, presumably I could reduce this total by the £325000 Nil Rate Band, and hopefully a further £175,000 Residence nil rate band?

Keep_pedalling

Could you actually provide the numbers involved here so we can determine the IHT position please?

courtenay62

Keep_Pedalling, I've attached 3 screenshots taken from the completed Gov.UK  'online Inheritance tax Checker'.  They show P17 'Check your answers' in 2 parts, and the 'You need to pay Inheritance Tax' last page, showing the IHT Tax 'result'. Does this give you information to say how much IHT is payable?

courtenay62

Any responses from anyone please?

Keep_pedalling

Sorry, somehow I missed your reply to my question. 

Assuming £109k is one third of his residual estate, there is an error here in that his share of the house is subject to spousal exemption, so although it is going into trust and will eventually be inherited by his children as life tenant beneficial ownership passes to his wife so should be included in the assets passed to the spouse, which will result in no IHT to be paid as only £218k of his NRB will be used up. 

On the death of his wife his share goes to his children, but is included in her estate for IHT purposes. 

courtenay62

Ah, thank you, I'd definitely made a mistake!  The key question in the gov.uk IHT Checker was "What was the value of assets left to (the) surviving wife".  I'd only shown the one third of the residual estate - around 109k - and didn't realise that his half share of the house was included in the 'Assets' and was also exempt from IHT.

Could I just check one other thing, should I also include here the value of his half share of their joint bank account?

Keep_pedalling

courtenay62 said:

Ah, thank you, I'd definitely made a mistake!  The key question in the gov.uk IHT Checker was "What was the value of assets left to (the) surviving wife".  I'd only shown the one third of the residual estate - around 109k - and didn't realise that his half share of the house was included in the 'Assets' and was also exempt from IHT.

Could I just check one other thing, should I also include here the value of his half share of their joint bank account?

It counts as far as IHT is concerned but as it automatically goes to his wife again it is exempt.

courtenay62

Thanks again, been a great help.

courtenay62

Following the above advice I ran through the UK.Gov IHT Checker again, and this time it confirmed that the Inheritance Tax result is £194,000 (before the IHT threshold is applied) and there is NO inheritance tax to pay - good news!

I have now moved on to submitting a Probate PA1P application, but have come up against a difficult question at
Para 7.1   It says Did I complete an Inheritance Tax Estate report online?  Does this mean completed the IHT Checker?
If I answer YES then it asks for the IHT identifier - what is this, and where do I get it from?  It further asks for the GROSS and NET Estate Figures - would I take these from the IHT checker last page?

If I answer NO to 7.1 then it seems that I need to have completed either IHT205 (which is N/A), or IHT207 (also N/A), or IHT400 and IHT 421.  Form IHT 421 is for Northern Ireland (ie N/A), and regarding Form IHT400 I'd understood from my solicitor that I didn't need to complete it. 

So I'm unsure how to proceed and request some advice please.