How to declare a loan for IHT

The_Governor

Not quite sure how to approach this, my mother in law loaned my daughter money to buy a car earlier this year, which my daughter has been paying back, unfortunately my MIL died recently so obviously the loan hasn't been repaid in full (my daugher is conintuing to pay it back into my MIL's bank account) - there is no interest being paid on the loan

When I do the IHT forms, do I include the remaining value of the loan as though it is cash that my MIL has in her bank account for the purposes of valuing the estate or do I need to declare it separately in some way?

poseidon1

You declare the amounting outstanding on the date your MIL died on the IHT form .

Your daughter should suspend further payments direct to MILs bank account since that account needs to close or be suspended by the bank. 

Depending on whether you or spouse inherit from MIL's estate, then daughter's loan can be offset against that inheritance. Of course if daughter is a direct beneficiary in her own right her loan can be directly  offset  on distribution of the estate, allowing of course for any post death loan repayments.

Should all be a straightforward accounting excercise.

Keep_pedalling

Is her estate large enough to gave to do an IHT return? If she was a widow one is unlikely to be required unless it exceeds £650k.

If an IHT return is required then the loan is declared on supplementary sheet IHT 416.

Why is MILs bank account still open? The bank should have been informed of her death and the account frozen.