Inheritance Tax

HannuH

Hi, Tricky one this but hope you can assist. In March this year my Auntie passed away, I am her only living relative and the residuary beneficiary of her will. Her partner, (never married and I believe never in a civil partnership) of over 40year passed away in April 2024 leaving 51% of the house and all contents unless mentioned in the will (Two Paintings left to his family) to my auntie. 
The estate is over £325000 therefore incurs inheritance tax. 
The solicitors and executors of both wills are planning to take the 40% tax out of my residuary benifit. 
My question is, given that they were co-habitating should the tax be split between both sides?. 

itsthelittlethings

Surely it doesn’t matter if he left everything to your aunt?

HannuH

itsthelittlethings said:

Surely it doesn’t matter if he left everything to your aunt?

Well this is my question as if you take out 49% of the house and the paintings it reduces the amount of inheritance tax that comes out of my benifit 🤔

itsthelittlethings

What, that you take 40% out of the paintings? Are they valuable? As I understand it you’re getting the house?

Keep_pedalling

Estate expenses, including IHT usually come out of the residuary estate unless the terms of the will say otherwise. 

itsthelittlethings

Who owned the house?

HannuH

itsthelittlethings said:

What, that you take 40% out of the paintings? Are they valuable? As I understand it you’re getting the house?

Yes they are and I get 51% of the house 

HannuH

itsthelittlethings said:

Who owned the house?

Joint ownership

sheramber

HannuH said:

itsthelittlethings said:

Who owned the house?

Joint ownership

If joint ownership of the house there is no 51% share to leave. It all automatically goes to the other joint owner. 

To leave a share it must have been tenants in common . Who owned to other 49%?

p00hsticks

They'll need to deal with each estate separately - so pay IHT on the total value of the partners estate (including the paintings), and then pay IHT again if necessary on the total value of the aunts estate, which won't include the paintings. You'll get whatever is left. 

Because they weren't married or in a civil partnership they're not entitled to any IHT exceptions on the first estate. 

sgthammer

Wind this back a bit for clarity.

Two wills means two estates. The first decessor, your aunt's partner, dies in 2024 leaving some artworks to his family and everything else to your aunt? Is this right? 

– Or were the house and contents split 49/51, giving her a controlling share so that the relatives couldn't sell her home out from under her?

–  Or did your aunt already own 49% of the house and inherit the rest?

This first will may or may not have crossed the IHT threshold if it only accounts for 51% of the property, but anything due should have been settled - or at least identified - at that point.

Your aunt then dies a year later. The paintings should now be ancient history. Did she die owning 100% of the house or only 51%? If the first decessor's family also have a claim on it, then the IHT should be settled by the executors of will#2 before division, and I'm not sure why the executors of the will#1 are still involved at all.