Intestacy, Joint Tenants & IHT Liabilities?

woodbine66

My father has just died without making a will. He is married to my mother and I have one brother. His assets are;

Marital home owned with mother as joint tenants - £225,000  (value of his half of house)

Rental property owned in his sole name               - £425,000

Savings and cash in bank                                      - £125,000

TOTAL                                                                   - £775,000

My questions are;

As an intestacy, I understand that £322,000 of his estate plus 50 per cent of the remaining estate goes to our mother? As the marital home is owned by our parents as joint tenants, is it's total value excluded from this calculation?

Can anyone tell me what the immediate IHT liability will be on this estate please? What reliefs and exemptions are available?

Also, if the estate is divided between the three of us according to the intestacy rules (ie. £322,000 plus 50% to mother, rest to us), what will the IHT liability be when our mother passes away? Is there anything we can do before or after the administration of our father's estate to lessen IHT liabilities due when our mother passes away?

Final question - by not making a will, has our father inadvertently increased our IHT liabilities?

I hope all of the above makes sense and hope I'm not asking too much. If any futher info is needed please ask. Thanks in advance of any help.

Keep_pedalling

The house is not part of his heritable estate as it passes to your mother by survivorship, so his total heritable estate is £550k and under intestacy rules £436k (£322 + 50% of the remainder) goes to your mother and £114 to his children. No IHT will pay payable because the amount going to your mother is covered by spousal exemption, but the amount of the transferable NRB to your mother’s estate will be reduced but 35% leaving her estate with £886k in exemptions. 

You have not said what sole assets your mother owns so it is not possible to say what her estate’s liability is likely to be, but with house valued at £900k (I have assumed you only gave a 50% share in the above figures) and £436k inherited from her husband her estate is going to be significantly into IHT terretory.

Dying intestate does not have a negative impact on their joint IHT liability, as the reduction in transferable NRB is cancelled out by the amount the children inherit directly from his estate. 

Mands

Keep_pedalling said:

The house is not part of his heritable estate as it passes to your mother by survivorship, so his total heritable estate is £550k and under intestacy rules £436k (£322 + 50% of the remainder) goes to your mother and £114 to his children. No IHT will pay payable because the amount going to your mother is covered by spousal exemption, but the amount of the transferable NRB to your mother’s estate will be reduced but 35% leaving her estate with £886k in exemptions. 

You have not said what sole assets your mother owns so it is not possible to say what her estate’s liability is likely to be, but with house valued at £900k (I have assumed you only gave a 50% share in the above figures) and £436k inherited from her husband her estate is going to be significantly into IHT terretory.

Dying intestate does not have a negative impact on their joint IHT liability, as the reduction in transferable NRB is cancelled out by the amount the children inherit directly from his estate. 

I think the whole house is 450k, not the father's half. See here:

https://forums.moneysavingexpert.com/discussion/6551656/marital-home-iht-exeption-still-apply-if-estate-varied-to-son#latest

Keep_pedalling

Mands said:

Keep_pedalling said:

The house is not part of his heritable estate as it passes to your mother by survivorship, so his total heritable estate is £550k and under intestacy rules £436k (£322 + 50% of the remainder) goes to your mother and £114 to his children. No IHT will pay payable because the amount going to your mother is covered by spousal exemption, but the amount of the transferable NRB to your mother’s estate will be reduced but 35% leaving her estate with £886k in exemptions. 

You have not said what sole assets your mother owns so it is not possible to say what her estate’s liability is likely to be, but with house valued at £900k (I have assumed you only gave a 50% share in the above figures) and £436k inherited from her husband her estate is going to be significantly into IHT terretory.

Dying intestate does not have a negative impact on their joint IHT liability, as the reduction in transferable NRB is cancelled out by the amount the children inherit directly from his estate. 

I think the whole house is 450k, not the father's half. See here:

https://forums.moneysavingexpert.com/discussion/6551656/marital-home-iht-exeption-still-apply-if-estate-varied-to-son#latest

So it seems the OP’s mother has no sole assets so the total joint net worth is actually bang on £1M meaning no or little IHT is likely to be due in the future. 

Do you have power of attorney for your mother? If the plan is to keep the rental property she is going to be lumbered with becoming a landlord unless the plan is to sell the rented property. 

gjcody

woodbine66 said:

My father has just died without making a will. He is married to my mother and I have one brother. His assets are;

Marital home owned with mother as joint tenants - £450,000

Rental property owned in his sole name               - £425,000

Savings and cash in bank                                      - £125,000

TOTAL                                                                   - £1,000,000

My questions are;

As an intestacy, I understand that £322,000 of his estate plus 50 per cent of the remaining estate goes to our mother? As the marital home is owned by our parents as joint tenants, is it's total value excluded from this calculation?

Can anyone tell me what the immediate IHT liability will be on this estate please? What reliefs and exemptions are available?

Also, if the estate is divided between the three of us according to the intestacy rules (ie. £322,000 plus 50% to mother, rest to us), what will the IHT liability be when our mother passes away? Is there anything we can do before or after the administration of our father's estate to lessen IHT liabilities due when our mother passes away?

Final question - by not making a will, has our father inadvertently increased our IHT liabilities?

I hope all of the above makes sense and hope I'm not asking too much. If any futher info is needed please ask. Thanks in advance of any help.

I will make 2 posts to keep things simple. 

If you are looking for a route with no IHT I would suggest you and your brother "disclaim" your inheritance. That will leave your mother as the only person with a right of inheritance, and she will pay no IHT as a Spouse.  This would also enable her Executor to claim your father's Allowances when dealing with her Estate, giving an Allowance of £1m.  

You cannot though take as much as a dirty sock from your father's Estate.

gjcody

Second Post

Though you have not listed them separately, mother also gets - all of the personal possessions of the deceased.

Whilst the Joint property must pass to mother under survivorship, 50% of its value must be included in your IHT calculation or mother may be saddled with the bill later. Google: Tax on Property you inherit Joint Ownership .gov and it would be wise to look at IHT 404 Form.

Were any of the bank accounts, etc Joint?

Are you positive there no Will, everyone would be home and dry if one was found.

The calculation for the Estate incl 50% of Joint Tenancy Property is 775000, minus IHT Allowance of 325000 = 450000 @ 40% 180000. This is calculated with no consideration of Gifts in the last 7 years, deductible expenses such as the funeral, etc.  I can think of no other Allowances that could be applied, rental properties are not liable for Business Relief.

Mothers future IHT Allowances would be £325k, Nill Rate Band: £175k, RNRB for the family home, plus the Executor should claim your fathers £175k RNRB.

 

Yes, sadly it does seem your father made a blunder, but the end is undecided (re-read Post 1 again)! Had he handed everything to mother she would have had zero liability and a £1m IHT Allowance on her demise.

Seriously, get professional advice, you can never cover the ins and outs of everything this complex on here. There will also be his Income tax to deal with along with probable CGT from the second property.  

Keep_pedalling

gjcody said:

woodbine66 said:

My father has just died without making a will. He is married to my mother and I have one brother. His assets are;

Marital home owned with mother as joint tenants - £450,000

Rental property owned in his sole name               - £425,000

Savings and cash in bank                                      - £125,000

TOTAL                                                                   - £1,000,000

My questions are;

As an intestacy, I understand that £322,000 of his estate plus 50 per cent of the remaining estate goes to our mother? As the marital home is owned by our parents as joint tenants, is it's total value excluded from this calculation?

Can anyone tell me what the immediate IHT liability will be on this estate please? What reliefs and exemptions are available?

Also, if the estate is divided between the three of us according to the intestacy rules (ie. £322,000 plus 50% to mother, rest to us), what will the IHT liability be when our mother passes away? Is there anything we can do before or after the administration of our father's estate to lessen IHT liabilities due when our mother passes away?

Final question - by not making a will, has our father inadvertently increased our IHT liabilities?

I hope all of the above makes sense and hope I'm not asking too much. If any futher info is needed please ask. Thanks in advance of any help.

I will make 2 posts to keep things simple. 

If you are looking for a route with no IHT I would suggest you and your brother "disclaim" your inheritance. That will leave your mother as the only person with a right of inheritance, and she will pay no IHT as a Spouse.  This would also enable her Executor to claim your father's Allowances when dealing with her Estate, giving an Allowance of £1m.  

You cannot though take as much as a dirty sock from your father's Estate.

Doing that might make things simpler, but it makes no difference to any IHT payable on her estate, her allowances might be higher, but the size of her estate will be lower.

If the OPs mother wants to distribute small personal items to friends and family as mementos they don’t really come into the equation. 

gjcody

Keep_pedalling said:

gjcody said:

woodbine66 said:

My father has just died without making a will. He is married to my mother and I have one brother. His assets are;

Marital home owned with mother as joint tenants - £450,000

Rental property owned in his sole name               - £425,000

Savings and cash in bank                                      - £125,000

TOTAL                                                                   - £1,000,000

My questions are;

As an intestacy, I understand that £322,000 of his estate plus 50 per cent of the remaining estate goes to our mother? As the marital home is owned by our parents as joint tenants, is it's total value excluded from this calculation?

Can anyone tell me what the immediate IHT liability will be on this estate please? What reliefs and exemptions are available?

Also, if the estate is divided between the three of us according to the intestacy rules (ie. £322,000 plus 50% to mother, rest to us), what will the IHT liability be when our mother passes away? Is there anything we can do before or after the administration of our father's estate to lessen IHT liabilities due when our mother passes away?

Final question - by not making a will, has our father inadvertently increased our IHT liabilities?

I hope all of the above makes sense and hope I'm not asking too much. If any futher info is needed please ask. Thanks in advance of any help.

I will make 2 posts to keep things simple. 

If you are looking for a route with no IHT I would suggest you and your brother "disclaim" your inheritance. That will leave your mother as the only person with a right of inheritance, and she will pay no IHT as a Spouse.  This would also enable her Executor to claim your father's Allowances when dealing with her Estate, giving an Allowance of £1m.  

You cannot though take as much as a dirty sock from your father's Estate.

Doing that might make things simpler, but it makes no difference to any IHT payable on her estate, her allowances might be higher, but the size of her estate will be lower.

If the OPs mother wants to distribute small personal items to friends and family as mementos they don’t really come into the equation. 

It is not her Estate that he is worried about, and we do not know mothers worth save 50% of the family home, plus and she is still around to mitigate her own IHT. They are looking at 450000 @ 40%, when they could be looking at 0 and 40%.  Indeed she could be left with more allowances, which would be wasted.

Mother is not permitted to give anything from the Estate until Probate is granted, it is not hers to give!

The point of that comment was though, if they take anything from the Estate all they cannot be considered to have disclaimed the inheritance. Once it is in mothers hands, she can of course given anything she wishes away, subject of course to her allowances.

Keep_pedalling

gjcody said:

Keep_pedalling said:

gjcody said:

woodbine66 said:

My father has just died without making a will. He is married to my mother and I have one brother. His assets are;

Marital home owned with mother as joint tenants - £450,000

Rental property owned in his sole name               - £425,000

Savings and cash in bank                                      - £125,000

TOTAL                                                                   - £1,000,000

My questions are;

As an intestacy, I understand that £322,000 of his estate plus 50 per cent of the remaining estate goes to our mother? As the marital home is owned by our parents as joint tenants, is it's total value excluded from this calculation?

Can anyone tell me what the immediate IHT liability will be on this estate please? What reliefs and exemptions are available?

Also, if the estate is divided between the three of us according to the intestacy rules (ie. £322,000 plus 50% to mother, rest to us), what will the IHT liability be when our mother passes away? Is there anything we can do before or after the administration of our father's estate to lessen IHT liabilities due when our mother passes away?

Final question - by not making a will, has our father inadvertently increased our IHT liabilities?

I hope all of the above makes sense and hope I'm not asking too much. If any futher info is needed please ask. Thanks in advance of any help.

I will make 2 posts to keep things simple. 

If you are looking for a route with no IHT I would suggest you and your brother "disclaim" your inheritance. That will leave your mother as the only person with a right of inheritance, and she will pay no IHT as a Spouse.  This would also enable her Executor to claim your father's Allowances when dealing with her Estate, giving an Allowance of £1m.  

You cannot though take as much as a dirty sock from your father's Estate.

Doing that might make things simpler, but it makes no difference to any IHT payable on her estate, her allowances might be higher, but the size of her estate will be lower.

If the OPs mother wants to distribute small personal items to friends and family as mementos they don’t really come into the equation. 

It is not her Estate that he is worried about, and we do not know mothers worth save 50% of the family home, plus and she is still around to mitigate her own IHT. They are looking at 450000 @ 40%, when they could be looking at 0 and 40%.  Indeed she could be left with more allowances, which would be wasted.

Based on their previous thread, their mother has little in the way of her own assets. The marital home was owned as JT therefore she is now the sole owner. Under intestacy rules she also inherits the bulk of the heritable estate, so whether the children do a DoV or not there is no IHT payable on his estate as most of it is covered by spousal exemption and what is not is way under the NRB.

Mother is not permitted to give anything from the Estate until Probate is granted, it is not hers to give!

The point of that comment was though, if they take anything from the Estate all they cannot be considered to have disclaimed the inheritance. Once it is in mothers hands, she can of course given anything she wishes away, subject of course to her allowances.

The only assets that require letters of administration are the rental property and the saving, Like the marrital home his chattels are inherited by his spouse (these are in addition the £322k + 50% of the remaining estate) and she is entirely within her rights to gift those to who ever she wishes and does not need the authority of letters of administration to do so. Saying that she can’t do this is nonsense and if you are talking about her  IHT allowances there is no such thing, anyone can give away as much as they like, the £3k pa is an exemption not an allowance. 

gjcody

Keep_pedalling said:

gjcody said:

Keep_pedalling said:

gjcody said:

woodbine66 said:

My father has just died without making a will. He is married to my mother and I have one brother. His assets are;

Marital home owned with mother as joint tenants - £450,000

Rental property owned in his sole name               - £425,000

Savings and cash in bank                                      - £125,000

TOTAL                                                                   - £1,000,000

My questions are;

As an intestacy, I understand that £322,000 of his estate plus 50 per cent of the remaining estate goes to our mother? As the marital home is owned by our parents as joint tenants, is it's total value excluded from this calculation?

Can anyone tell me what the immediate IHT liability will be on this estate please? What reliefs and exemptions are available?

Also, if the estate is divided between the three of us according to the intestacy rules (ie. £322,000 plus 50% to mother, rest to us), what will the IHT liability be when our mother passes away? Is there anything we can do before or after the administration of our father's estate to lessen IHT liabilities due when our mother passes away?

Final question - by not making a will, has our father inadvertently increased our IHT liabilities?

I hope all of the above makes sense and hope I'm not asking too much. If any futher info is needed please ask. Thanks in advance of any help.

I will make 2 posts to keep things simple. 

If you are looking for a route with no IHT I would suggest you and your brother "disclaim" your inheritance. That will leave your mother as the only person with a right of inheritance, and she will pay no IHT as a Spouse.  This would also enable her Executor to claim your father's Allowances when dealing with her Estate, giving an Allowance of £1m.  

You cannot though take as much as a dirty sock from your father's Estate.

Doing that might make things simpler, but it makes no difference to any IHT payable on her estate, her allowances might be higher, but the size of her estate will be lower.

If the OPs mother wants to distribute small personal items to friends and family as mementos they don’t really come into the equation. 

It is not her Estate that he is worried about, and we do not know mothers worth save 50% of the family home, plus and she is still around to mitigate her own IHT. They are looking at 450000 @ 40%, when they could be looking at 0 and 40%.  Indeed she could be left with more allowances, which would be wasted.

Based on their previous thread, their mother has little in the way of her own assets. The marital home was owned as JT therefore she is now the sole owner. Under intestacy rules she also inherits the bulk of the heritable estate, so whether the children do a DoV or not there is no IHT payable on his estate as most of it is covered by spousal exemption and what is not is way under the NRB.

Mother is not permitted to give anything from the Estate until Probate is granted, it is not hers to give!

The point of that comment was though, if they take anything from the Estate all they cannot be considered to have disclaimed the inheritance. Once it is in mothers hands, she can of course given anything she wishes away, subject of course to her allowances.

The only assets that require letters of administration are the rental property and the saving, Like the marrital home his chattels are inherited by his spouse (these are in addition the £322k + 50% of the remaining estate) and she is entirely within her rights to gift those to who ever she wishes and does not need the authority of letters of administration to do so. Saying that she can’t do this is nonsense and if you are talking about her  IHT allowances there is no such thing, anyone can give away as much as they like, the £3k pa is an exemption not an allowance. 

No, nothing in the Estate should be passed on until Probate is granted and everything is included in those figures, including Chattels and Goods, even for an excepted estate you will still require to submit the figures, particularly given there is a property in the deceased name and a large amount in the bank. The marital hone is still subject to IHT as it is a Joint asset.

She cannot give anything to the sons whilst the Estate is going through Probate, all the items are still within the Estate until that is granted and the sons cannot accept anything and claim to have disclaimed their inheritance?! Do tell me, where did you read Law?

Of course she will have IHT Allowances, that was a question from the OP.

I was talking about gifting, not £3k, you can gift a great deal more than that measly sum, and given the rental property income she would be well advised to!

Keep_pedalling

Sorry but you are talking nonsense. If it was the case that nothing could be released to any beneficiary before obtaining probate / letters of administration then it would have to be applied for every estate however small and it is not. A widowed spouse of in intestate estate is automatically entitled to the chattels of that estate.  Yes the amount should be included in the figured submitted in the probate application and IHT returns if one is being made (not needed in this case), but it is normal to lump all the chattels together as a nominal sum so distributing it early is not an issue.

This happens in countless cases where the surviving spouse will gift things to friends and family (often around the time of the funeral) as a memento of their spouse. The administrator can actually release other assets such as cash (banks will release quite large sums without probate) as an intermediate distribution without fear of breaking any laws if for instance a surviving spouse had been left with a mortgage they could not afford on their own.

The marital home is not subject to IHT in this case because it is covered by spousal exemption and only becomes subject to IHT on the death of the surviving spouse.