Think I got probate values wrong - implications?!

OldSmithy

Three years ago I acted as executor for my father's Will.  I calculated his IHT figures and his estate was well below IHT limits so didn't complete an IHT return but I did need to get probate to obtain money from one of the banks that was in his name.

My parents were tenants in common 50:50.  Mum is still alive and all banks accounts were closed and everything passed to her.

However, although mum has a life interest in the property, I assumed my father's 50% ownership which is due to ultimate pass to his children/grandchildren was part of his estate, not therefore passing to mum.  I therefore used a property valuation/estimate to assign his 50% and included this in the figures sent to probate as part of his gross and net valuation figures.

I'm now of the belief this may have been wrong and I should have taken this share as if it had passed to mum so his probate figures would have been much lower.  This doesn't appear to have created an issue to date but I've been thinking and am now concerned that if/when anything happens to mum I am likely to need to use some of my father's remaining nil rate band to avoid paying IHT.  Everything will go to children/grandchildren ultimately and be below the two combined Nil rate bands added together so I don't believe any additional allowances are relevant/necessary unless I have caused an issue with my declaration. 

Can anyone tell me if this is likely to be the case or when anything happens to mum can I amend the IHT figures I calculated for my father, ie remove his 50% property estimate and thus leaving me the correct nil rate band available for transfer, and include the full property valuation at the time for mum to reflect this knowing that overall the position will be correct for IHT purposes?

Obviously I didn't complete an IHT return previously as it was below the limit but I'm not sure if when I complete it for mum and request to use his unused nil rate band if HMRC will have reference to my father's probate application which they then may believe there isn't enough of his nil rate band available to bring the total below the limits for IHT.

I hope that makes sense as it's not easy to describe, but any ideas are welcome! Thanks. 

Keep_pedalling

For probate purposes any solely owned property, including his share in his home is heritable so should be included for probate purposes whoever inherits it. 

His share of the property should have been included, so you have not made a mistake. The life interest created an immediate post death interest trust and although the trust is the legal owner your mother is the beneficial owner so it was covered by spousal exemption. Your mother is currently the beneficial owner and it will form part of her estate for IHT purposes, but not for probate purposes. 

Have you registered the trust with HMRC?

OldSmithy

Thanks for the response which has helped put my mind at rest. Yes, the trust has been registered with HMRC so I think I’ve got everything else correct. 

So when mum passes I presume there will be a form or something for me to complete to transfer the unused nil rate band to cover effectively the whole estate as it all passed to her?  The two combined nil rate bands would keep it below IHT limits but mum’s alone would not. Is my thinking correct on this?

Really appreciate the support as always. 

Keep_pedalling

If at the time of death her estate (including the trust) exceeds both NRBs her executors will need to do a full IHT return. This will include the supplementary sheets to cover the transferable NRB and residential NRB. 

OldSmithy

@Keep_pedalling thank you. Unless there is a significant increase in house values then the total value will not exceed both nil rate bands added together.  I’ll check if there are still forms to complete for IHT despite this or if it is then an accepted estate so I’d just have probate to deal with again.

Executors will be my sister and I but I know it will fall to me hence I’m just trying to ensure I have an idea on what next looks like. Fingers crossed it won’t be for a good while yet as mum is in reasonable health.