Inheritance tax and life interest.

flora135

RAS said:

People will struggle to advise you at the moment because there are rumours that IHT rules will change when the Budget takes place.

But since step-mum is widowed, under the current rules when she dies the executors can use both the basic non-residential and the residential allowances, for both spouses, so a total of £1m if the house is worth £350k or more. 

Thank you I wasn’t aware of the residential allowances. I will have a read about them and we’ll wait and see what the new budget brings, thank you.

doodling

Hi,

The really simple answer to this question is that the MILs executors will be responsible for paying any inheritance tax due (but that tax may be aportionned to both the trust owning the house and her beneficiaries as appropriate).

If there is insufficient money to pay the tax then the most common way of finding the money to pay the inheritance tax associated with a property is to sell it.

If you think that inheritance tax might end up being due and you want to keep the property then you will need to find the cash needed to pay the tax.

As others have noted, it is likely that the value of the property would have to be substantial before any tax is due given the current reliefs available.

Robinette

If IHT is due on your step-mum's estate, you will only be responsible for the amount attributed to the property. The property will be professionally valued to work out the proportion. This is under the current rules; however, as RAS says, it could change in the Budget. 

Willeri

Full value of property at time of her death is part of her estate on her death, whether any IHT payable then will depend on value of her estate and IHT rules then, no crystal ball to tell