Probate/inheritance tax

pants04

Possibly been answered elsewhere...but I'm not good at navigating this site.
So....a relative has died leaving about 400k in cash and shares, they also have a property. Obviously anything over 325k is subject to IHT. However we don't know when or if we want to sell the property. How will that work regarding IHT if the property does get sold at a later date. Property probably worth about 250k, so in total estate worth about 650k. Do we just pay IHT on that amount now?? Or is there another way around this? Obviously property price may fluctuate so therefore so we may have paid to much or to little IHT.

Hoenir

If you sell the property at a later date for a higher price than declared at probate. There's CGT to pay. 

IHT is normally payable in full before HMRC will grant probate. 

p00hsticks

pants04 said:

 Obviously anything over 325k is subject to IHT.

Not that obvious... 

Had they been married ?
If so did their spouse pre-decease them ?
Did the spouse leave everything to the relative ?

If the answer to those three is yes then they'll inherit their late spouses allowance which pushes that £325k to £650k.

Next set of questiions is 

Who inherits the house ? 
Are they direct decendants of the deceased ?

If so there is potentially two further RNRB allowances that can be used up to the value of the house.   
 

pants04

Widowed person ....and widowed prior to the purchase of current property.  Property just becomes part of the "estate" expectation is that it will be sold, but does this have to be done immediately before probate/IHT is sorted?

Cash and shares being split 10 ways
Property sale being split 4 ways

JGB1955

The property can't be sold before probate is granted.

Olinda99

you file a probate application and calculate the amount of IHT due by adding the cash, house value etc together. 

make sure you know exactly what allowances you are allowed - obviously the basic 325k plus was there any from a spouse death plus direct descendant £175k if applicable

pay the IHT from the cash and get probate.

you can then sell the house whenever you want

if the house subsequently sells for more than the value declared on the IHT return then there will be capital gains tax to pay on the 'profit'

RAS

Are any of the beneficiaries direct descendants? 

Did the spouse leave everything to the deceased? In what year did the spouse die?

Keep_pedalling

pants04 said:

Widowed person ....and widowed prior to the purchase of current property.  Property just becomes part of the "estate" expectation is that it will be sold, but does this have to be done immediately before probate/IHT is sorted?

Cash and shares being split 10 ways
Property sale being split 4 ways

Assuming they inherited everything from their spouse their estate would have two NRBs giving a total exemption of £650k. If that is the case then you will only need to do an IHT return if their net estate exceeds that value. If the beneficiaries are children or grandchildren then you can use can also their residential NRB to avoid IHT if the estate exceeds the joint NRBs but this will still need an IHT return.

IHT needs paying within 6 months of death but it sounds like you have enough liquid assets to cover that. If you do need to submit an IHT return this has to be done first, and you then submit probate 20 working days later.

With 4 people inheriting the house I think you would be unwise not to sell it, you are just asking for trouble later down the line if you don’t.

bobster2

pants04 said:

Widowed person ....and widowed prior to the purchase of current property.  Property just becomes part of the "estate" expectation is that it will be sold, but does this have to be done immediately before probate/IHT is sorted?

Cash and shares being split 10 ways
Property sale being split 4 ways

As others have asked - are any of these beneficiaries direct descendants of the deceased? This will make a big difference to the IHT allowances available.

pants04

All the beneficiaries are either children or grandchildren. 

Keep_pedalling

pants04 said:

All the beneficiaries are either children or grandchildren. 

In which case their will be no IHT to pay, but if the net value of the estate exceeds £650k (or £325k plus any remaining transferable NRB if any of it was used up on the first death)  you will need to do a full IHT return to claim the residential NRB. Do not undervalue the house to avoid this as that is going to lead to a capital gains tax liability.

Are any of the grandchildren minors?