Intestacy, Joint Tenants & IHT Liabilities?

NorthYorkie

Woodbine; my earlier comment about you 'not bothering' to respond was a trifle harsh, for which I apologise. It is sometimes the case that someone posts a query and then takes no part in the ensuing discussion. It can be frustrating.

There have been so many postings that, as you have said, it would be a good idea to have a re-cap. As things stand at present;

1. There is no IHT liability on your fathers estate, which is covered by the inter-spouse exemption and £114K of his nil rate band (thus leaving £211K of that band and his £175 residence nil rate band unused and therefore wasted, totalling £386K.

2. Your mother's estate now comprises; the house £450K, her savings £70K and her inheritance from your father, £322K + £114K, making a grand total of £956K. Against this can be claimed her own nil rate band and residence nil rate band, totalling £500K, plus £386K of the unused nil rate bands from your father's estate. On these figures there will be £70K liable to IHT which at 40% is a £28K liability.

In your post of yesterday at 12.18AM you set out 3 options;

1. Leave things as they are. You were thinking this would proved impractical and perhaps leave your mother with insufficient liquid capital.

2. You and your brother 'disclaim' your inheritance of £57K each. This is an 'all or nothing' option and is totally inflexible. You would have to disclaim your entire inheritance; it is not possible to effect a partial disclaimer. It would however have no effect on your mother's future IHT liability for, although the whole of your father's nil rate bands (£325K+£175K) would be available (becasue the whole of his estate would be covered by the inter-spouse exemption), her estate would be increased by the inheritances disclaimed (£114), bring her total up to £1,070K. After deducting the maximum nil rate bands there would still be £70K liable to IHT.

3. You and your brother enter into a Deed of Variation (also known as an Instrument of Variation) to divert some or all of your inheritance to your mother. (gjcody, in his/her post of 3.25 AM today, said “You cannot use a Deed of Variation as there is no Will to make a variation too. (sic)”. This is wrong, section 142 of the IHT Act permits the variation of "any of the dispositions (whether effected by will, under the law relating to intestacy or otherwise)" of the property comprised in a person's estate.) As mentioned, the Deed can enabled an inheritance to be reduced, increased or eliminated altogether. It therefore offers the flexibility that is lacking with a simple disclaimer. However, as in the case of a disclaimer, it will not alter the future IHT liability on your mother's estate for the same reasons given above. Nevertheless it might be a better course of action if it was appropriate for you or your brother to take part of your inheritances.

Mention has been made of the possibility of taking some inheritance and then loaning it to your mother. I suggest you approach this with care and study IHTM28031 - Liabilities: restricted deductions: investigation of liabilities deducted against the estate on death - HMRC internal manual - GOV.UK especially the paragraph referring to loans from family members.

NorthYorkie

Keep_pedalling said:

Savvy_Sue said:

gjcody said:

You cannot use a Deed of Variation as there is no Will to make a variation too.

You CAN use a Deed of Variation to redirect where assets would go in an intestacy situation. Google provides various reputable links. 

Absolutely correct, and I am now concerned that we now have a poster on this board dishing out misinformation that is highly misleading to anyone looking for advice on this board. 

I am with you Keep pedalling