Tidying up, ready for my executors

Newly_retired

I have just about completed executing my late husband's estate. This is included registering an IPDI Trust on our property which was held as tenants-in-common. which was done via a solicitor. The paperwork is all in place. The property will need to be sold when I die so that my children and my stepchildren can receive the proceeds.
My husband's estate incurred no IHT or CGT. His assets were divided between myself and his two children in equal shares. I believe this will affect his NRB, but this is an area I don't fully understand. I did Probate myself. The amount declared for Probate is lower than the actual estate as his collections have subsequently sold well. I understand I don't need to inform HMRC but how will this affect the future?

I  have made a new will and LPAs. My assets wil be divided between my two children, plus a few small monetary bequests to others.  My two children are my executors. As they had nothing to do with my late husband's estate I want to ensure I leave all the necessary information in a folder in readiness for them.  At the moment my estate will not incur IHT but who knows how the law on this may change in the future?
Any advice on any paperwork I can leave to make their task easier, please?

Keep_pedalling

You say his estate was distributed between you and his children equally, does this include the IPDI trust? If it does the trust does not use any of his NRB as although the trust is the legal owner of his share, you are the beneficial owner so it is covered by spousal exemption. This means the whole house will part of your estate and there will be no CGT liability for his children. 

Newly_retired

No the IPDI trust covering the property leaves his share to his two children, with my share going to my two.

Keep_pedalling

Newly_retired said:

No the IPDI trust covering the property leaves his share to his two children, with my share going to my two.

I understand that, but that does not answer the question, does the 50% include the trust?

Runner_Duck

Regarding your question about "paper work you can leave to make their life easier" somewhere on this site I came across Age UK's LifeBook.  Sorry I can't find it now to leave a link, but it is an editable pdf file that you can complete. From a quick flick through it seemed comprehensive

SiliconChip

https://www.ageuk.org.uk/information-advice/money-legal/end-of-life-planning/lifebook/

tacpot12

Why I spent a year making a spreadsheet to help families after a death | by Tom Hiskey | Medium

poseidon1

Keep_pedalling said:

Newly_retired said:

No the IPDI trust covering the property leaves his share to his two children, with my share going to my two.

I understand that, but that does not answer the question, does the 50% include the trust?

My sense from outset of OP's post is she does not fully understand the IHT treatment of an IPDI trust where she gets to occupy husband's half share as life interest beneficary, with the trust half share reverting to husband's children only after her death.

Without this fundamental understanding that the IPDI actually represented an exempt 'gift' of husband's half share of house to her ( for IHT purposes), it will be a struggle to explain what remaining transferable nil rate bands ( from him) will be available on her eventual death.

In terms of what her executors will eventually need when the time comes, depends on whether an IHT 400 was completed on husband's death.

 If there was, that should contain sufficient data for her executors to calculator the extent of the husband's transferable NRB which was used when chattels, cash and other non property assets were split 50:50 between her and his children.  Important that she ensure her 'folder' contains the original probate value of those  assets and in particular  the chattels/collectibles  which apparently were later sold for more than probate value.

Worth pointing out her children will benefit from her residence nil rate band ( RNRB) on her half of the property, whilst the deceased husband's RNRB should be available for the trust half share, on the assumption the deceased husband's children can be considered as being the OP's  'step children ' for the purposes of this relief.

Ultimately her executors success in dealing with her estate on death will depend on their level of  understanding of how the nil rate bands are calculated and deployed in this 'blended family' scenario. They will have the primary obligation in ensuring nil rate bands are allocated properly between trust and OP's personal estate on death, a requirement which might necessitate seeking technical professional advice at that time, if they are unable the navigate the rules in this area.. 

Keep_pedalling

poseidon1 said:

Keep_pedalling said:

Newly_retired said:

No the IPDI trust covering the property leaves his share to his two children, with my share going to my two.

I understand that, but that does not answer the question, does the 50% include the trust?

My sense from outset of OP's post is she does not fully understand the IHT treatment of an IPDI trust where she gets to occupy husband's half share as life interest beneficary, with the trust half share reverting to husband's children only after her death.

Without this fundamental understanding that the IPDI actually represented an exempt 'gift' of husband's half share of house to her ( for IHT purposes), it will be a struggle to explain what remaining transferable nil rate bands ( from him) will be available on her eventual death.

In terms of what her executors will eventually need when the time comes, depends on whether an IHT 400 was completed on husband's death.

 If there was, that should contain sufficient data for her executors to calculator the extent of the husband's transferable NRB which was used when chattels, cash and other non property assets were split 50:50 between her and his children.  Important that she ensure her 'folder' contains the original probate value of those  assets and in particular  the chattels/collectibles  which apparently were later sold for more than probate value.

Worth pointing out her children will benefit from her residence nil rate band ( RNRB) on her half of the property, whilst the deceased husband's RNRB should be available for the trust half share, on the assumption the deceased husband's children can be considered as being the OP's  'step children ' for the purposes of this relief.

Ultimately her executors success in dealing with her estate on death will depend on their level of  understanding of how the nil rate bands are calculated and deployed in this 'blended family' scenario. They will have the primary obligation in ensuring nil rate bands are allocated properly between trust and OP's personal estate on death, a requirement which might necessitate seeking technical professional advice at that time, if they are unable the navigate the rules in this area.. 

I think that is correct, and the reason I asked the question. Hopefully the OP will come back to this thread.

Newly_retired

Thanks for the detailed replies. I think you have hit the nail on the head, Keep_pedalling, regarding my lack of understanding of IHT and NRB. I am learning as I go along on a 'need to know' basis.

As stated above, the property in the IPDI trust will ulitmately be effectively split four ways, between my two children and my two step-children. The property is currently valued at around £300,000.

My husband's estate was an excepted estate so no IHT400 needed to be completed.
The disposable estate was distributed between my two step-children and me in 3 equal shares. The cash assets were known, but I had no idea that the collectibles could raise so much. It took a lot of hard work on my part to realise their value, in both senses of the word, thanks to expert advice.

Ultimately it will be up to my executors to obtain Probate and to distribute my estate in accordance with the prevailing IHT rules at the time and these may have changed from today's rules. Currently I understand my estate will not be subject to IHT. I expect my executors to take professional advice when the time comes, but I do need to leave the right paperwork for them. 
I have also created a file of my own assets. Being an avid saver I have many accounts which are frequently changing.

Keep_pedalling

The house is treated somewhat different to your husband’s other assets, which will have used up a portion of his NRB. The house uses neither his NRB nor his Residential NRB as you are the beneficial owner of his share of your home and is covered by spousal exemption. His children are classed as remaindermen and they dont actually inherit until your death. 

The whole house forms part of your estate for IHT purposes, but your estate can claim any unused NRB and the RNRB from your husband’s estate. This also avoids any CGT liability for his children.The sale of the property will require the cooperation of your executors and the trustees of the IPDIT.