Do I need to present IHT forms in my case?

micklesthwaite

Hello,
My father passed away just after christmas. He owned his house as tennants in common with my mother, who is still with us. He left about £160k in cash along with half the house worth £180k (£340k total value) to my brother and myself, with the house going in to a life interest trust so my mother can continue living there until she passes away.

Given the total value of his assets are £335k, does that mean I have to fill in the IHT forms in order to claim the NRB on the house inherritance before applying for probate?

Thanks

Keep_pedalling

No IHT return required. The cash bequest uses up some of his NRB, but the house is covered by spousal exemption as the beneficial ownership passes to your mother and for IHT purposes it will form part of her estate.

The trust is the legal owner of his share of the house and needs to be registered with HMRC within two years of his death.

micklesthwaite

Keep_pedalling said:

No IHT return required. The cash bequest uses up some of his NRB, but the house is covered by spousal exemption as the beneficial ownership passes to your mother and for IHT purposes it will form part of her estate.

The trust is the legal owner of his share of the house and needs to be registered with HMRC within two years of his death.

Do we effectively inherit my father's part of the house from the trust when my mother passes on?

Keep_pedalling

micklesthwaite said:

Keep_pedalling said:

No IHT return required. The cash bequest uses up some of his NRB, but the house is covered by spousal exemption as the beneficial ownership passes to your mother and for IHT purposes it will form part of her estate.

The trust is the legal owner of his share of the house and needs to be registered with HMRC within two years of his death.

Do we effectively inherit my father's part of the house from the trust when my mother passes on?

Basically yes,  you are the ramaindermen and the trust ends on your mother’s death at which point you inherit. Apart from the security this provides your mother it also avoids the possibility of you having a CGT liability when it eventually sold.

micklesthwaite

Apologies but I have some confusion about how to answer some of the questions in the online inheritance tax checker, which I am using to get the probate values for the probate application. The main confusion is that the tool finishes by giving a list of things I have to do next.

There are two questions in HMRC's online inheritance tax checker tool.

Did they leave a home to a direct descendant?

As the house has gone into an immediate post death interest trust with my brother and me as beneficiaries and my mother as having the life interest, do I answer yes or no to this question?

It later asks:

What was the value of assets left to a surviving husband, wife or civil partner?

Or do I put the value of his half of the house here as my mother is the beneficial owner?

 

If I put zero for the second question and £175,000 for the first question then I get the net qualifying  value for  IHT of £337,000  and then a what to do next list which includes:

Submit a full return of estate (opens in new tab) using form IHT400. (which I thought wasn't necessary in my case).

thanks for any advice

Keep_pedalling

micklesthwaite said:

Apologies but I have some confusion about how to answer some of the questions in the online inheritances tax checker, which I am using to get the probate values for the probate application. The main confusion is that the tool finishes by giving a list of things I have to do next.

There are two questions in HMRC's online inheritance tax checker tool.

Did they leave a home to a direct descendant?

As the house has gone into an immediate post death interest trust with my brother and me as beneficiaries and my mother as having the life interest, do I answer yes or no to this question?

It later asks:

What was the value of assets left to a surviving husband, wife or civil partner?

Or do I put the value of his half of the house here as my mother is the beneficial owner?

 

If I put zero for the second question and £175,000 for the first question then I get the net qualifying  value for  IHT of £337,000  and then a what to do next list which includes:

Submit a full return of estate (opens in new tab) using form IHT400. (which I thought wasn't necessary in my case).

thanks for any advice

The answer to question one is no, beneficial ownership passes to your mother and forms part of her estate for IHT purposes.

The answer to question two, is that you include his house share as part of his estate passing to your mother.

I don’t blame you for your confusion HMRC guidance is rarely very clear.

micklesthwaite

A further question if I may:

Do we need to apply for my father’s RNRB to be transferred to my mother now or when we eventually deal with her estate? (house has been valued at £350k, so his half = £175k)

Same question for the NRB not used for my father?

He left 155k to my brother and me after funeral expenses. So £325k - £155k = £170k unused and can be used by mother's estate. Is that correct?

Keep_pedalling

No need to do anything at this stage. 

If the NRB does not change then yes you have £170k not used, but it’s actually done as a percentage so if the NRB changes it will have used up 47.7% of whatever the new rate is.