filling in correct forms

bumpergirl

I'm trying to put affairs in order[age 86] and realise I need to mitigate IHT as I have given away £300,000 over last 7 years?
I am a widow and now investigating transferring husband's NRB -[ he left his share of property to children £315000, so i believe I can belatedly apply his RNRB to his probate , take remainder from his NRB and transfer the rest to me.
At the time of his death I completed form 205 -didn't mention RNRB, and probate went through quickly. I've just filled IHT form 216 to transfer his unused IHT, for my executors, will it be too late to claim? I know a solicitor will have to be involved. Are there any more forms i can complete? Grateful for any advice advice 

Keep_pedalling

Any available transferable NRB will be claimed by your executors, it is not claimable until you die. What was the date of your husband’s death? 

Did your husband leave his share to your children directly or did he also leave you a life interest in that share?

Your assumption about a solicitor needing to be involved is not correct, your executors can do it all themselves or if they are struggling they could use the services of a solicitor to help them.

bumpergirl

thanks for your reply;-
husband left estate to children directly.
He died in 2018

 also now not sure whether to fill in IHT216 or IHT402

Keep_pedalling

bumpergirl said:

thanks for your reply;-
husband left estate to children directly.
He died in 2018

 also now not sure whether to fill in IHT216 or IHT402

Leaving his share directly to the children was not the best option as (unless they all still live with you) they will face a CGT liability on their share when the house is eventually sold. Also if any of them don’t already own their own home they will have lost their first time buyer states and will have to pay an extra 3% SDLT if they buy now.

Unfortunately it is too late to correct the error with a deed of variation as that has to be done with 2 years.

You can’t retrospectively claim his RNRB as it was never available to use. The RNRB can only be used if you have used up the standard NRB. His gift of the house to your children used up 97% of his NRB and none of his RNRB. This means on your death your executors will be able to transfer 3% of the transferable NRB and 100% of his RNRB to your estate, there is nothing you need to do now.

Under the current rules and exemptions the maximum exemptions for your estate will be £685k which is made up of tour NRB and RNRB plus your husband’s RNRB + 3% of his NRB. If at the time your share of the house is worth less than £350k then the exemption will be £1 less for every £1 of value under the £35ok. This is another downside for not using an immediate post death interest trust. 

bumpergirl

thank you again - what a disaster.  We were tenants in common and the house was immediately sold on death and children received their half.
I now own a small flat £120000.
I always understood RNRB could be applied before NRB.
 My NRB is of course used up.

poseidon1

bumpergirl said:

thank you again - what a disaster.  We were tenants in common and the house was immediately sold on death and children received their half.
I now own a small flat £120000.
I always understood RNRB could be applied before NRB.
 My NRB is of course used up.

Actually now that you mention what happened to his half of the property ( proceeds released to children on early sale ), this seems to me effective IHT mitigation whilst releasing capital early for your children to invest as they please.

Certainly, by downsizing yourself, you have sensibly  done what many widows in your position fail to do so no need to berate yourself ( or husband ) unduly. 

Finally your NRB is renewable after 7 full years have passed and your RNRB is intact, so live long and continue to be comforted by the quantum of IHT HMRC will not receive by virtue of your earlier mitigation strategies.

Keep_pedalling

bumpergirl said:

thank you again - what a disaster.  We were tenants in common and the house was immediately sold on death and children received their half.
I now own a small flat £120000.
I always understood RNRB could be applied before NRB.
 My NRB is of course used up.

Can you supply some actual numbers as to exactly how much you have given away, when you gave it away and how much of your savings  have you retained? 

The situation with the RNRB is not as bad as you think, as your executors can apply the downsizing rule which means your estate will have £350k or 50% of the sale price of your previous home if it was less than that.

bumpergirl

Thank you again
house was sold for £630,000 [half each]
I have since  given to my children £300000 [after allowances] over 7 years, ending 2021 when I realised my mistake.

I have the flat c£120,000, 
+ £100,000 cash left which I think  will be taxed 40% and no TRNRB because I don't have £315000 to leave to children - so only my RNRB, limited to  value of my flat.  This is why I hoped I could transfer his  remaining NRB, after using his RNRB on his original probate
complicated!

Keep_pedalling

bumpergirl said:

Thank you again
house was sold for £630,000 [half each]
I have since  given to my children £300000 [after allowances] over 7 years, ending 2021 when I realised my mistake.

I have the flat c£120,000, 
+ £100,000 cash left which I think  will be taxed 40% and no TRNRB because I don't have £315000 to leave to children - so only my RNRB, limited to  value of my flat.  This is why I hoped I could transfer his  remaining NRB, after using his RNRB on his original probate
complicated!

 Thanks for the info. 

Should you die tomorrow your total estate for IHT purposes is £220k plus PETs of £300k so a total of £520k. This is quite a bit below your allowable exemptions, because under the downsizing rules your executors can still claim your full RNRB based on the value of the house you sold. With your NRB that gives you £500k and the remaining £20k can be covered by the transferrable RNRB from your husband.

Gifting never makes you worse off for IHT purposes, but I would advise you to hang on to the rest of your savings as you may very well need them.

bumpergirl

Just for me to be clear - my share of previous home was £315000 but I only have c£220000 to leave, so i understand I can't claim downsizing on that home,  but I can for my flat £120,000 [which limits claim to that value]. As I have used nearly all NRB, I think i will have a shortfall of tax on £100,000 unless I keep going!!

Keep_pedalling

bumpergirl said:

Just for me to be clear - my share of previous home was £315000 but I only have c£220000 to leave, so i understand I can't claim downsizing on that home,  but I can for my flat £120,000 [which limits claim to that value]. As I have used nearly all NRB, I think i will have a shortfall of tax on £100,000 unless I keep going!!

You are misunderstanding the rules. You have not used any of your NRB or RNRB, they will only be used on your death. If you die with 7 years of making those gifts then they stay in your estate so your executors will need to use your NRB, your RNRB, and your husband’s RNRB to avoid paying any IHT. If however you  die after those gifts have dropped out of your estate it will only consist of your property and your remaining savings which will all be covered by your NRB.

In either case there will be no IHT to pay, in the former your executors will need to do a full IHT return to claim the RNRBs in the later they will only need to complete probate.