Estate planning - confused about what I am entitled to

tonycable

Hi All
Firstly, I know that i might need some professional advice on this, but I also like to have a bit of an idea as to what I am talking about first, so hoping some of you can help me and give me some advice.
First some context - My dad unfortunately passed away last month, and me and my mum are trying to sort out the estate, but we are getting totally confused into what I am legally entitled to, and don't want to do something wrong and be hit with a big IHT bill, or do we want to do something that is lawfully wrong.  My mum and dad were married at the time of passing.

There was a will.

They owned the family house (which i lived in) as tenants in common in a 50/50 split.  This has been passed onto me in the will, and is valued at £275,000.

Also the will said that i am to be left £325,000.

This is where I am now getting confused.

Does the value of the house count towards the £325,000 that I have been left, so I only have £50,000 that is mine from the estate?

I'm also reading that as the house was left to me, the allowance goes up to £500,000.  Is this the case, and as the will says £325,000 can I not go over that? Does the house value still come out of this?
What am I legally entitled to claim from the estate without being hit by a IHT bill?

From a family point of view, my mum (and dad if he was alive) would be saying maximize whatever you can from the estate to put into my name, regardless of the will - just don't be hit by any IHT down the line, but i just don't know what I can legally do.

Is someone able to explain it in simple terms to me please?

Also, when it comes to savings, how are these passed on?  I know he had bonds, ISAs, Premium bonds and shares, but i don't know if they get transferred as is, or they go into a savings account?  Are ISA's still tax free or does everything count?

Apologies for the long post, but this is new to both me and my mum, and we want to make sure we get it right, and also if we do get professional advice we know what we are going in with in case there are questions or we want to do something different.

Thanks in advance.

bobster2

tonycable said:

There was a will.

They owned the family house (which i lived in) as tenants in common in a 50/50 split.  This has been passed onto me in the will, and is valued at £275,000.

If your parents owned the house 50/50 as tenants in common - presumably your father would only have been able to leave you his share of the house in his will - and your mother still owns the other 50%.

p00hsticks

tonycable said:

There was a will.

first things first - who is named as executor ? And what do you think is the total value of his estate ? 

tonycable said:

They owned the family house (which i lived in) as tenants in common in a 50/50 split.  This has been passed onto me in the will, and is valued at £275,000.

Also the will said that i am to be left £325,000.

What exactly is the wording of the will ?

tonycable said:

From a family point of view, my mum (and dad if he was alive) would be saying maximize whatever you can from the estate to put into my name, regardless of the will - just don't be hit by any IHT down the line, but i just don't know what I can legally do.

You (or rather the executor if that's not you) can't ignore what the will says - it's legally binding on them to follow the instructions. However it is possible for one beneficiary to give up part of their inheritance to someone else via a 'Deed of Variation' if they wish

tonycable said:

Also, when it comes to savings, how are these passed on?  I know he had bonds, ISAs, Premium bonds and shares, but i don't know if they get transferred as is, or they go into a savings account?  Are ISA's still tax free or does everything count?

It depends. Premium bonds can only stay in the draw for up to a year after the death I think. Shares can either be sold by the estate or transferred to a beneficiary.  
An ISA retains its tax free status until cashed in or until three years after the death. If left to spouse then they can inherit the ISA and retain its tax free status - the ISA provider can arrange this. 

tonycable

That is correct - I have been left his share of the house, so I own 50%, and my mum owns 50%.  His share was valued at £275,000 so the value of the house is £550,000.

p00hsticks

tonycable said:

That is correct - I have been left his share of the house, so I own 50%, and my mum owns 50%.  His share was valued at £275,000 so the value of the house is £550,000.

What is the value of his whole estate - bonds, shares, ISA, half the house etc ?
And who apart from you inherits ? You first need to get an idea of that before you can decide if IHT needs to be considered. 

NorthYorkie

You say;
 "There was a will.
They owned the family house (which i lived in) as tenants in common in a 50/50 split.  This has been passed onto me in the will, and is valued at £275,000.
Also the will said that i am to be left £325,000.
This is where I am now getting confused.
Does the value of the house count towards the £325,000 that I have been left, so I only have £50,000 that is mine from the estate?"

No one can answer this question without knowing the exact  wording of the will.

To determine whether there is any IHT liability on your father's estate we also need to know the value of all his other assets.

The objective behind the will seems to have been to use father's nil rate band and his residence nil rate band. However the residence nil rate band is limited  to £175k so that the total of those bands is ££500K and, if what you say is correct, you will have received £600K, so there will be an IHT liability of £40k (£100K @ 40%).Therefore there may be some merit in using a Deed of Variation to change the dispositions in the will to leave father's half-share in the house to your mother rather than to you. This will be covered by the inter-spouse exemption and your father's residence nil rate band will be available to set against your mother's estate in due course. This possibility needs to be discussed with a professionally qualified adviser.

tonycable

I don't have the figures to hand, but when I put it through the government calculator, it says there is no IHT to pay.
I get the share in the house and £325,000 as outlined in the will, the rest goes to my Mum.
I think the bonds, shares etc came to around £400k - £500k if I remember rightly. I seem to remember the whole estate coming to about £700k with the house included.

What I am confused with is what is my share - is it £325k minus the house value, is it £325k and that doesn't include the house, of is it some form of of £500k as the house has been left to me (either minus or ignoring the value of the house).

We are trying to plan the estate and how it is distributed, but I have no idea what I am entitled to from the will and what totals are so i can't start to work out what comes to me, and what goes to my mum.

What i don't want to do is transfer £325k worth of bonds and shares to me, only to find out that i should have taken the house value off and therefore I have transferred to much into my name.  i.e. i should have only transferred £50k of savings to my name as that plus the house comes to £325k.

tonycable

Me and my mum are executors of the will.
The wording in the will is something like: Me will be left £325,000 absolutely.  (this isn't the exact wording, but i know absolutely (or a similar word) is used.  I don't have the will on me to check the exact wording more than this.

NorthYorkie

tonycable said:

That is correct - I have been left his share of the house, so I own 50%, and my mum owns 50%.  His share was valued at £275,000 so the value of the house is £550,000.

See, however, section 18.4 of the Valuation Office Agency's technical manual relating to Inheritance Tax at Inheritance Tax Manual - Section 18: undivided shares - Guidance - GOV.UK. You should be able to deduct 15% from the £275K.

tonycable

The only part that have to hand is the money part, which says:
'I give to my said son ME the amount of £325,000 (THREE HUNDRED AND TWENTY FIVE THOUSAND) absolutely'.  This is in a section called legacies.
I don't have the page on me about the house share coming to me - i'll have to pick that up later tonight.  The share of the house is definitely going into my name, that I do know.  This is in a section called Life Interest'.  It does say that the trustees (me and mum) shall hold any interest in the property.  I then don't have the further parts of this where it talks about distribution.

poseidon1

tonycable said:

The only part that have to hand is the money part, which says:
'I give to my said son ME the amount of £325,000 (THREE HUNDRED AND TWENTY FIVE THOUSAND) absolutely'.  This is in a section called legacies.
I don't have the page on me about the house share coming to me - i'll have to pick that up later tonight.  The share of the house is definitely going into my name, that I do know.  This is in a section called Life Interest'.  It does say that the trustees (me and mum) shall hold any interest in the property.  I then don't have the further parts of this where it talks about distribution.

Absolutely no point quoting extracts of the will out of context. That is misleading to us and clearly you are unsure of the totality of the will meaning especially now you indicate a life interest of a share of the  house has been incorporated.

If you can, provide a redacted copy of the will so we can see the totality and advise accurately.

In the meantime total up your parents  joint assets ( including the house and your mother's personal assets separate from what your father left). Need to see to whether this total breaches the  £1 million threshold where IHT may be an issue when your mother eventually passes.

Finally, confirm what personal assets and income your mother has to live on now your father has passed. I am concerned you maybe of the view that much of your father's liquid capital passes to you, to the potential detriment of your mother's financial security if she is not otherwise adequately provided for. I cannot think it would be your father's intention to leave your mother financially compromised even where IHT mitigation might be a consideration.