Complicated will

poseidon1

A very, very poor effort of a supposedly professionally drafted will,  especially since it was only drawn up 2018. 

As for reccomended course of action, if all residual beneficiaries ( including wife) are adults and agreeable, then suggest a Deed of Variation be executed to vest ownership of house to wife absolutely or at the very least an IPDI trust on her behalf. This would preserve both residence nil rate bands intact on 2nd death going forward. 

If wife is short of funds as result of only 1/3rd of other assets coming her way, the DOV could also address this shortfall also.

Despite the very modest size of the estate, suggest the OP seek the services of a STEP qualified solicitor to draft an appropriate DOV.

Surprisingly the firm that drafted the will has a network of offices which  apparently have STEP members at each location.  In the first instance the OP could lodge a formal complaint concerning the poor drafting of the will, and seek redress by way of the firm ( via a STEP qualified member) being called on to draft the DOV for no charge. 

In any event, would advise the family  have the mother's will reviewed ASAP, to ensure  it is not also defective in some manner.

Keep_pedalling

Have to agree with others it is a very badly drafted will, even the thing about the spouse inheriting tax free is nonsense as spousal exemption applies here. The other issue with the spouse being largely disinherited is that there may be a large IHT liability on his estate. As above a deed of variation can correct this.

AgentMoo

The residual estate will now include the home, which in the will states to be split 3 ways. My mum, his wife has her own property so the issue of wife being shirt of funds dies not apply. However, as his wife does she automatically get 1/3 free of inheritance tax? In other words if the entire estate is worth £480,000 would IH be due? The other two beneficiarie are their children. 

RAS

You probably need to look at the IHT situation longer term.

Dad's estate has an allowance of £(325+175)k but anything inherited by a spouse is exempt from IHT.

Mum's estate would normally inherit dad's allowances, giving her estate £1m. My understanding is that because this will means £320k could be going to beneficiaries other than mum, her estate will lose that much from dad's allowances. 

So the beneficiaries of mum's estate will pay more IHT.

This could be swings and roundabouts but you need to take advice, including whether to claim dad's RNB or NRNB.

Keep_pedalling

AgentMoo said:

The residual estate will now include the home, which in the will states to be split 3 ways. My mum, his wife has her own property so the issue of wife being shirt of funds dies not apply. However, as his wife does she automatically get 1/3 free of inheritance tax? In other words if the entire estate is worth £480,000 would IH be due? The other two beneficiarie are their children. 

Anything left to a spouse is exempt regardless of the amount. Where was your father living at the time of death, one of his own houses or your mother’s house? Where will your mother be living? I ask because a married couple can only have one primary residence so the RNRB may not be available.

What is the value of your father’s house and the total value of his estate? Without a deed of variation there is a danger that your father’s estate will have IHT to pay which should never be the case with the first death for married couples.

RAS

AgentMoo said:

The property is worth £250,000 and the estate other than property is worth £235,000

Split according to initial post.

poseidon1

AgentMoo said:

The residual estate will now include the home, which in the will states to be split 3 ways. My mum, his wife has her own property so the issue of wife being shirt of funds dies not apply. However, as his wife does she automatically get 1/3 free of inheritance tax? In other words if the entire estate is worth £480,000 would IH be due? The other two beneficiarie are their children. 

On these numbers mum gets 1/3  of £480k ( £160k ) IHT free.

As regards 2/3 rds to kids this would either use £166,667 of father's residence nil rate band ( 2/3rd of £250k ) and £158,333 of his nil rate band or £320k of his nil rate band if residence nil rate band is not claimed.

If your mother has her own separate house and other separate assets, what will those be worth on her death, and would you need any of your father's unused nil rate bands to avoid IHT on her death (assuming you do stand to inherit from her )?

Are we to understand your mother did not own her own home when your father's will was executed in 2018 but there has been a lot of changes in their joint circumstances in the 7 years thereafter, so his will failed to recognised those changes in their  subsequent living arrangements?

 It is odd that your mother seems to have been significantly disinherited by those 7 year passage of  events compared to your father's intentions in 2018, unless one of the properties sold by your father ended up as the proceeds that purchased your mother's property.

I suspect there is alot more behind your original post you chose not to share, that has perhaps given us a wrong 'steer' as to the appropriate action and response to HMRCs request.

AgentMoo

poseidon1 said:

AgentMoo said:

The residual estate will now include the home, which in the will states to be split 3 ways. My mum, his wife has her own property so the issue of wife being shirt of funds dies not apply. However, as his wife does she automatically get 1/3 free of inheritance tax? In other words if the entire estate is worth £480,000 would IH be due? The other two beneficiarie are their children. 

On these numbers mum gets 1/3  of £480k ( £160k ) IHT free.

As regards 2/3 rds to kids this would either use £166,667 of father's residence nil rate band ( 2/3rd of £250k ) and £158,333 of his nil rate band or £320k of his nil rate band if residence nil rate band is not claimed.

If your mother has her own separate house and other separate assets, what will those be worth on her death, and would you need any of your father's unused nil rate bands to avoid IHT on her death (assuming you do stand to inherit from her )?

Are we to understand your mother did not own her own home when your father's will was executed in 2018 but there has been a lot of changes in their joint circumstances in the 7 years thereafter, so his will failed to recognised those changes in their  subsequent living arrangements?

 It is odd that your mother seems to have been significantly disinherited by those 7 year passage of  events compared to your father's intentions in 2018, unless one of the properties sold by your father ended up as the proceeds that purchased your mother's property.

I suspect there is alot more behind your original post you chose not to share, that has perhaps given us a wrong 'steer' as to the appropriate action and response to HMRCs request.

My mother and father owned a house jointly in 2018 when the will was written and my father owned one in his sole name. In 2021 both the sole named property and the joint house sold and my mother bought a property in her sole name and my father who had declining health wanted a small place by the sea. 
He died in a nursing home. 

poseidon1

AgentMoo said:

poseidon1 said:

AgentMoo said:

The residual estate will now include the home, which in the will states to be split 3 ways. My mum, his wife has her own property so the issue of wife being shirt of funds dies not apply. However, as his wife does she automatically get 1/3 free of inheritance tax? In other words if the entire estate is worth £480,000 would IH be due? The other two beneficiarie are their children. 

On these numbers mum gets 1/3  of £480k ( £160k ) IHT free.

As regards 2/3 rds to kids this would either use £166,667 of father's residence nil rate band ( 2/3rd of £250k ) and £158,333 of his nil rate band or £320k of his nil rate band if residence nil rate band is not claimed.

If your mother has her own separate house and other separate assets, what will those be worth on her death, and would you need any of your father's unused nil rate bands to avoid IHT on her death (assuming you do stand to inherit from her )?

Are we to understand your mother did not own her own home when your father's will was executed in 2018 but there has been a lot of changes in their joint circumstances in the 7 years thereafter, so his will failed to recognised those changes in their  subsequent living arrangements?

 It is odd that your mother seems to have been significantly disinherited by those 7 year passage of  events compared to your father's intentions in 2018, unless one of the properties sold by your father ended up as the proceeds that purchased your mother's property.

I suspect there is alot more behind your original post you chose not to share, that has perhaps given us a wrong 'steer' as to the appropriate action and response to HMRCs request.

My mother and father owned a house jointly in 2018 when the will was written and my father owned one in his sole name. In 2021 both the sole named property and the joint house sold and my mother bought a property in her sole name and my father who had declining health wanted a small place by the sea. 
He died in a nursing home. 

As I suspected.

You now need to decide whether to  claim and use most of your father's £325k NRB to avoid the IHT on the 2/3rds gift of Residue to children ( as suggested by HMRC) or the more complex use of partial residence nil rate band together with lesser amount of NRB as set out above. 

 For simplicity you may wish to just use your father's £325k NRB, leaving his £175k RNRB to carry over to your mother's property, if it is valuable enough in future to need it.

RAS

OP, you do need to know the value of you mother's property? Is it above £350k?