Intestate Estate - How to deal with property, savings, work benefits?

GoogleMeNow

theoretica said:

Yes - if they give the property to the boyfriend (rather than a deed of variation) then their own estate may also need to pay inheritance tax on this gift (or more likely it will use up practically all their nil rate bands leaving IHT on their estate in full).  AND if they delay and the property rises in value between the daughter's death and the gift they will need to pay CGT on the increase in value.

Thanks.  I will let them know about this.

Marcon

GoogleMeNow said:

theoretica said:

Yes - if they give the property to the boyfriend (rather than a deed of variation) then their own estate may also need to pay inheritance tax on this gift (or more likely it will use up practically all their nil rate bands leaving IHT on their estate in full).  AND if they delay and the property rises in value between the daughter's death and the gift they will need to pay CGT on the increase in value.

Thanks.  I will let them know about this.

It could possibly be far worse than that - they could be on the hook for CGT for the whole of the market value of the property (it isn't their main residence so that exemption doesn't apply), even if they simply give it to the boyfriend. Neatly spelt out here: https://www.litrg.org.uk/savings-property/capital-gains-tax/capital-gains-tax-gifts#toc-do-i-have-to-pay-cgt-if-i-make-a-gift-to-another-family-member-

If you make a gift to someone you are not connected to, such as a friend, or you sell something to them at less than market value, then you can still be treated as making the disposal at market value if the disposal is not at arm’s length.

In most instances, if you gift an asset to someone or you knowingly agree to receive less than market value for the asset by virtue of your personal relationship with that person, the transaction will not be considered as being at arm’s length (or to put it another way, it will not be a normal commercial transaction).

In this case, the actual amount paid (if anything) for the asset will be ignored and the market value will be used instead to calculate any capital gain arising.

Keep_pedalling

GoogleMeNow said:

Marcon said:

GoogleMeNow said:

Marcon said:

How would the IHT be paid if the daughter is found to have left a valid EOW form and has asked for the money to go to (say) a charity...?

@Marcon thank you so much for your very useful advice.

  I think the parents were intending to gift the property to the boyfriend, but keep the DIS for their own 'needs'.  They seem willing to pay the IHT out of the DIS.....!I

If the EOW form says it goes to charity, it goes to charity and then I don't know how the IHT would be paid.

I twitch when I see the words 'gift the property to the boyfriend' - unless this is going to be done by deed of variation.  If they dither and miss the two-year deadline for doing that (and given her father knows everything and won't be taking advice from anyone, it's entirely possible) they could end up in a real mess - or rather, in even more of a mess than the one they are currently creating for themselves.

To understand why, you might want to have a look at this: https://www.litrg.org.uk/news/gifting-property-some-tax-points-consider

You say the parents are thinking of keeping the DIS for themselves, but the chances of the trustees awarding any of it - never mind all of it - to them given they have just inherited the whole of her estate, are pretty low, given there is a boyfriend in the mix who dependent on her financially. There seem to be a lot of assumptions going on here, which aren't likely to be borne out in practice.

Ok that's interesting.  I assumed that the rules of intestacy would mean that the parents (in the absence of spouse/civil partner and children) would inherit everything, which would include the DIS benefit.  The boyfriend was dependent on her financially in the sense that he lived in her property and didn't pay any rent or bills.  He does work full time but didn't own a property at the time he met the daughter.  I believe he was renting.  He has an ex wife and children but I know little about that part of his life.

DIS benefits do not form part of the estate and are not covered by intestacy rules. Payment is entirely at the discretion of the trustees.

GoogleMeNow

Keep_pedalling said:

GoogleMeNow said:

Marcon said:

GoogleMeNow said:

Marcon said:

How would the IHT be paid if the daughter is found to have left a valid EOW form and has asked for the money to go to (say) a charity...?

@Marcon thank you so much for your very useful advice.

  I think the parents were intending to gift the property to the boyfriend, but keep the DIS for their own 'needs'.  They seem willing to pay the IHT out of the DIS.....!I

If the EOW form says it goes to charity, it goes to charity and then I don't know how the IHT would be paid.

I twitch when I see the words 'gift the property to the boyfriend' - unless this is going to be done by deed of variation.  If they dither and miss the two-year deadline for doing that (and given her father knows everything and won't be taking advice from anyone, it's entirely possible) they could end up in a real mess - or rather, in even more of a mess than the one they are currently creating for themselves.

To understand why, you might want to have a look at this: https://www.litrg.org.uk/news/gifting-property-some-tax-points-consider

You say the parents are thinking of keeping the DIS for themselves, but the chances of the trustees awarding any of it - never mind all of it - to them given they have just inherited the whole of her estate, are pretty low, given there is a boyfriend in the mix who dependent on her financially. There seem to be a lot of assumptions going on here, which aren't likely to be borne out in practice.

Ok that's interesting.  I assumed that the rules of intestacy would mean that the parents (in the absence of spouse/civil partner and children) would inherit everything, which would include the DIS benefit.  The boyfriend was dependent on her financially in the sense that he lived in her property and didn't pay any rent or bills.  He does work full time but didn't own a property at the time he met the daughter.  I believe he was renting.  He has an ex wife and children but I know little about that part of his life.

DIS benefits do not form part of the estate and are not covered by intestacy rules. Payment is entirely at the discretion of the trustees.

This is not sounding good at all.

If the parents did not gift the boyfriend the property, just let him live there, or sell it and give him a lump sum instead (or he gets the DIS if approved by the trustees), that would be a better outcome?

Marcon

GoogleMeNow said:

Keep_pedalling said:

GoogleMeNow said:

Marcon said:

GoogleMeNow said:

Marcon said:

How would the IHT be paid if the daughter is found to have left a valid EOW form and has asked for the money to go to (say) a charity...?

@Marcon thank you so much for your very useful advice.

  I think the parents were intending to gift the property to the boyfriend, but keep the DIS for their own 'needs'.  They seem willing to pay the IHT out of the DIS.....!I

If the EOW form says it goes to charity, it goes to charity and then I don't know how the IHT would be paid.

I twitch when I see the words 'gift the property to the boyfriend' - unless this is going to be done by deed of variation.  If they dither and miss the two-year deadline for doing that (and given her father knows everything and won't be taking advice from anyone, it's entirely possible) they could end up in a real mess - or rather, in even more of a mess than the one they are currently creating for themselves.

To understand why, you might want to have a look at this: https://www.litrg.org.uk/news/gifting-property-some-tax-points-consider

You say the parents are thinking of keeping the DIS for themselves, but the chances of the trustees awarding any of it - never mind all of it - to them given they have just inherited the whole of her estate, are pretty low, given there is a boyfriend in the mix who dependent on her financially. There seem to be a lot of assumptions going on here, which aren't likely to be borne out in practice.

Ok that's interesting.  I assumed that the rules of intestacy would mean that the parents (in the absence of spouse/civil partner and children) would inherit everything, which would include the DIS benefit.  The boyfriend was dependent on her financially in the sense that he lived in her property and didn't pay any rent or bills.  He does work full time but didn't own a property at the time he met the daughter.  I believe he was renting.  He has an ex wife and children but I know little about that part of his life.

DIS benefits do not form part of the estate and are not covered by intestacy rules. Payment is entirely at the discretion of the trustees.

This is not sounding good at all.

If the parents did not gift the boyfriend the property, just let him live there, or sell it and give him a lump sum instead (or he gets the DIS if approved by the trustees), that would be a better outcome?

Better outcome for whom? Depends what the parents want to achieve. Without the full facts (eg how much the whole estate is worth, whether the boyfriend would make a claim for 'reasonable provision'), it's impossible to answer.

There are glaring holes in your grasp of things, but that's true of most people when confronted with a situation they've never encountered before, so is entirely understandable - but you do need to recognise that fact, and not rely on drip fed responses here each time you raise something. I can only repeat my earlier suggestion that your husband considers getting some proper legal advice before you start making any sort of 'suggestions' to your in-laws based on your/his misunderstanding of relevant points. Things might then start to sound rather better.

Marcon

Keep_pedalling said:

DIS benefits do not form part of the estate and are not covered by intestacy rules. Payment is entirely at the discretion of the trustees.

Who could, of course, choose to pay it to the estate (which seems unlikely in this situation).

GoogleMeNow

Marcon said:

GoogleMeNow said:

Keep_pedalling said:

GoogleMeNow said:

Marcon said:

GoogleMeNow said:

Marcon said:

How would the IHT be paid if the daughter is found to have left a valid EOW form and has asked for the money to go to (say) a charity...?

@Marcon thank you so much for your very useful advice.

  I think the parents were intending to gift the property to the boyfriend, but keep the DIS for their own 'needs'.  They seem willing to pay the IHT out of the DIS.....!I

If the EOW form says it goes to charity, it goes to charity and then I don't know how the IHT would be paid.

I twitch when I see the words 'gift the property to the boyfriend' - unless this is going to be done by deed of variation.  If they dither and miss the two-year deadline for doing that (and given her father knows everything and won't be taking advice from anyone, it's entirely possible) they could end up in a real mess - or rather, in even more of a mess than the one they are currently creating for themselves.

To understand why, you might want to have a look at this: https://www.litrg.org.uk/news/gifting-property-some-tax-points-consider

You say the parents are thinking of keeping the DIS for themselves, but the chances of the trustees awarding any of it - never mind all of it - to them given they have just inherited the whole of her estate, are pretty low, given there is a boyfriend in the mix who dependent on her financially. There seem to be a lot of assumptions going on here, which aren't likely to be borne out in practice.

Ok that's interesting.  I assumed that the rules of intestacy would mean that the parents (in the absence of spouse/civil partner and children) would inherit everything, which would include the DIS benefit.  The boyfriend was dependent on her financially in the sense that he lived in her property and didn't pay any rent or bills.  He does work full time but didn't own a property at the time he met the daughter.  I believe he was renting.  He has an ex wife and children but I know little about that part of his life.

DIS benefits do not form part of the estate and are not covered by intestacy rules. Payment is entirely at the discretion of the trustees.

This is not sounding good at all.

If the parents did not gift the boyfriend the property, just let him live there, or sell it and give him a lump sum instead (or he gets the DIS if approved by the trustees), that would be a better outcome?

Better outcome for whom? Depends what the parents want to achieve. Without the full facts (eg how much the whole estate is worth, whether the boyfriend would make a claim for 'reasonable provision'), it's impossible to answer.

There are glaring holes in your grasp of things, but that's true of most people when confronted with a situation they've never encountered before, so is entirely understandable - but you do need to recognise that fact, and not rely on drip fed responses here each time you raise something. I can only repeat my earlier suggestion that your husband considers getting some proper legal advice before you start making any sort of 'suggestions' to your in-laws based on your/his misunderstanding of relevant points. Things might then start to sound rather better.

Thanks for your response. 

I don't know what the whole estate is worth because I don't know what the daughter had in savings, but I have already said that the property is worth £800k and the DIS is worth £400k, so it's £1.2k so far.  Whether the boyfriend makes a claim for reasonable provision I couldn't say.  It's a possibility.

I know there are glaring holes in my grasp of things.  I'm not a legal person but I do understand a lot more than the parents do, so I am trying to understand as much as I am able.   The parents will not seek legal advice.  My husband will most likely seek legal advice, which will help with our understanding.  However, we do not benefit from his sister's death and the parents don't care that the inheritance tax we may have to pay once they pass could be substantial and we would have to pay that before making an application for probate.

Marcon

GoogleMeNow said:

This is not sounding good at all.

If the parents did not gift the boyfriend the property, just let him live there, or sell it and give him a lump sum instead (or he gets the DIS if approved by the trustees), that would be a better outcome?

Better outcome for whom? Depends what the parents want to achieve. Without the full facts (eg how much the whole estate is worth, whether the boyfriend would make a claim for 'reasonable provision'), it's impossible to answer.

There are glaring holes in your grasp of things, but that's true of most people when confronted with a situation they've never encountered before, so is entirely understandable - but you do need to recognise that fact, and not rely on drip fed responses here each time you raise something. I can only repeat my earlier suggestion that your husband considers getting some proper legal advice before you start making any sort of 'suggestions' to your in-laws based on your/his misunderstanding of relevant points. Things might then start to sound rather better.

Thanks for your response. 

I don't know what the whole estate is worth because I don't know what the daughter had in savings, but I have already said that the property is worth £800k and the DIS is worth £400k, so it's £1.2k so far.  Whether the boyfriend makes a claim for reasonable provision I couldn't say.  It's a possibility.

I know there are glaring holes in my grasp of things.  I'm not a legal person but I do understand a lot more than the parents do, so I am trying to understand as much as I am able.   The parents will not seek legal advice.  My husband will most likely seek legal advice, which will help with our understanding.  However, we do not benefit from his sister's death and the parents don't care that the inheritance tax we may have to pay once they pass could be substantial and we would have to pay that before making an application for probate.

No - it's £800K so far. As explained above, DIS payments (if made at the discretion of trustees), are normally outside the estate. You don't yet know what the trustees will decide and it's possible they might award part of the DIS to your husband.

Seeing legal advice will not just improve your understanding; it might also make you feel a lot better. Many of the points I've made are deliberately 'worst case' scenario to encourage you/your husband in that direction - doesn't mean they will come to pass!

From what you've said pretty much anyone knows more than the parents, but it's still important not to make suggestions to them based on an inadequate, or just plain wrong, grasp of matters.

You do seem to be very focussed on what IHT might be payable on the death of your in laws. Maybe right now they are focussed on the death of their only daughter and 'not caring' about what IHT would be payable on their death (which would mean facing up to their own demise, which can't be that far away if they are in their 80s and in poor health) is hardly a surprise, surely?

GoogleMeNow

Marcon said:

GoogleMeNow said:

This is not sounding good at all.

If the parents did not gift the boyfriend the property, just let him live there, or sell it and give him a lump sum instead (or he gets the DIS if approved by the trustees), that would be a better outcome?

Better outcome for whom? Depends what the parents want to achieve. Without the full facts (eg how much the whole estate is worth, whether the boyfriend would make a claim for 'reasonable provision'), it's impossible to answer.

There are glaring holes in your grasp of things, but that's true of most people when confronted with a situation they've never encountered before, so is entirely understandable - but you do need to recognise that fact, and not rely on drip fed responses here each time you raise something. I can only repeat my earlier suggestion that your husband considers getting some proper legal advice before you start making any sort of 'suggestions' to your in-laws based on your/his misunderstanding of relevant points. Things might then start to sound rather better.

Thanks for your response. 

I don't know what the whole estate is worth because I don't know what the daughter had in savings, but I have already said that the property is worth £800k and the DIS is worth £400k, so it's £1.2k so far.  Whether the boyfriend makes a claim for reasonable provision I couldn't say.  It's a possibility.

I know there are glaring holes in my grasp of things.  I'm not a legal person but I do understand a lot more than the parents do, so I am trying to understand as much as I am able.   The parents will not seek legal advice.  My husband will most likely seek legal advice, which will help with our understanding.  However, we do not benefit from his sister's death and the parents don't care that the inheritance tax we may have to pay once they pass could be substantial and we would have to pay that before making an application for probate.

You do seem to be very focussed on what IHT might be payable on the death of your in laws. Maybe right now they are focussed on the death of their only daughter and 'not caring' about what IHT would be payable on their death (which would mean facing up to their own demise, which can't be that far away if they are in their 80s and in poor health) is hardly a surprise, surely?

Thanks.  Yes, I guess I am focussed on what we might have to pay.  It has all been a shock to discover that the daughter/sister verbally promised that my husband would get the property, only to discover that without a written expression of wishes or a Will, that that won't happen, to being told that our liability for IHT is likely to be substantial when the parents eventually pass - of course they might outlive us!  We don't have the money to pay upfront so I am concerned, but perhaps it is a little premature to be concerned now.

Of course the parents are focussed on the death of their daughter and it may be that when they specifically stated that they weren't concerned about potential future IHT following their passing, that they were not thinking straight and have spoken before actually considering it.  So, no, not a surprise.  

Marcon

GoogleMeNow said:

Marcon said:

GoogleMeNow said:

This is not sounding good at all.

If the parents did not gift the boyfriend the property, just let him live there, or sell it and give him a lump sum instead (or he gets the DIS if approved by the trustees), that would be a better outcome?

Better outcome for whom? Depends what the parents want to achieve. Without the full facts (eg how much the whole estate is worth, whether the boyfriend would make a claim for 'reasonable provision'), it's impossible to answer.

There are glaring holes in your grasp of things, but that's true of most people when confronted with a situation they've never encountered before, so is entirely understandable - but you do need to recognise that fact, and not rely on drip fed responses here each time you raise something. I can only repeat my earlier suggestion that your husband considers getting some proper legal advice before you start making any sort of 'suggestions' to your in-laws based on your/his misunderstanding of relevant points. Things might then start to sound rather better.

Thanks for your response. 

I don't know what the whole estate is worth because I don't know what the daughter had in savings, but I have already said that the property is worth £800k and the DIS is worth £400k, so it's £1.2k so far.  Whether the boyfriend makes a claim for reasonable provision I couldn't say.  It's a possibility.

I know there are glaring holes in my grasp of things.  I'm not a legal person but I do understand a lot more than the parents do, so I am trying to understand as much as I am able.   The parents will not seek legal advice.  My husband will most likely seek legal advice, which will help with our understanding.  However, we do not benefit from his sister's death and the parents don't care that the inheritance tax we may have to pay once they pass could be substantial and we would have to pay that before making an application for probate.

You do seem to be very focussed on what IHT might be payable on the death of your in laws. Maybe right now they are focussed on the death of their only daughter and 'not caring' about what IHT would be payable on their death (which would mean facing up to their own demise, which can't be that far away if they are in their 80s and in poor health) is hardly a surprise, surely?

Thanks.  Yes, I guess I am focussed on what we might have to pay.  It has all been a shock to discover that the daughter/sister verbally promised that my husband would get the property, only to discover that without a written expression of wishes or a Will, that that won't happen, to being told that our liability for IHT is likely to be substantial when the parents eventually pass - of course they might outlive us!  We don't have the money to pay upfront so I am concerned, but perhaps it is a little premature to be concerned now.

Not only is it premature, it simply isn't necessary. It's a problem faced by executors all the time - and HMRC are well aware of it:

If you cannot access the assets in the deceased’s estate before a grant of probate has been granted, you can ask HMRC to postpone payment of all or some of the tax and interest due until after you’ve got the grant.

Once the grant has been issued, you will be expected to pay the outstanding tax as soon as possible. This is called a ‘grant on credit.’

You can apply to postpone payment of all or some of the tax and interest due if you’re unable to release funds from the estate.

https://www.gov.uk/guidance/applying-for-a-grant-on-credit-for-inheritance-tax