Legacy left to estate after Grant of Probate

RalphieDog

We obtained a Grant of Probate for my mother in law a few months ago. We have recently found out that a friend of hers who pre-deceased her has left her some money which is due to be paid to the estate in the near future. As Probate is based on assets at time of death how is a legacy paid post Probate to an estate dealt with?  

SiliconChip

Was IHT due on the estate as valued in probate, or will it become due when the value of the legacy is added in?

RalphieDog

IHT was not due on original probate and the legacy would keep it under IHT threshold. The core question is whether a bequest is deemed to have been an asset at time of death and therefore subject to potential IHT. If a living person receives a bequest the benefactor's estate will have paid IHT. Is an estate treated differently and therefore HMRC get  a double IHT payment?

SiliconChip

If your MiL's estate is under the IHT limit after receiving the bequest then I'm not sure why you think a double payment would be required.

RalphieDog

What if the bequest was over the IHT limit. My question is whether it is regarded as being hers at date of death even though paid months after. It is not like finding a missing bank account which was in place at date of death.

Keep_pedalling

Yes the bequest formed part of her estate. The payment should be given to the executors of your MIL’s estate so they can distribute it appropriately.

This does mean the amount declared for probate is wrong, but unless this bequest had an impact on IHT then there is no need to report the change in value.

poseidon1

RalphieDog said:

IHT was not due on original probate and the legacy would keep it under IHT threshold. The core question is whether a bequest is deemed to have been an asset at time of death and therefore subject to potential IHT. If a living person receives a bequest the benefactor's estate will have paid IHT. Is an estate treated differently and therefore HMRC get  a double IHT payment?

Your question reminded me of a very little known relief that expressly addresses potential for double IHT charges applicable to estates where deceaseds die within quick succession of each other. Unsurprisingly it is known as 'quick succession relief' - see link below

https://www.buzzacott.co.uk/insights/how-to-calculate-quick-succession-relief-qsr-for-estate-administration

I have no doubt that since it is little known by DIY executors as well as lower echelon solicitors the relief will have been overlooked by many estates over the years, to which it could have been applied.

SiliconChip

RalphieDog said:

What if the bequest was over the IHT limit. My question is whether it is regarded as being hers at date of death even though paid months after. It is not like finding a missing bank account which was in place at date of death.

So it's a completely theoretical question, it might have been better not to confuse things by leaving your MiL's estate out of the post completely. It looks like @poseidon1 has provided an answer that would apply in some situations, but if there's a longer gap between probate and receiving the additional bequest then it may be necessary to complete a HMRC C4 form.

https://www.gov.uk/government/publications/inheritance-tax-corrective-account-c4