Inheritance tax help

GillyB26

Keep_pedalling said:

GillyB26 said:

She appointed a Solicitor as Executors but they have renounced the executorship, won't explain why.

The rest of the estate is about £25k, she has left £5k to my son, her partner, her best friend and the new owners of her dog. 

Her and partner are not married, she never has been and had no children. I don't think he has ever been married but has several children. I will add he took Tunisian residency a few years ago as he has a factory out there, so he only wants to use the house when he is visiting England, and plans to move back here permanently when he retires I think. He is adamant that the house isn't being sold though. 

I think the reason the executors have renounced is that she has left a major financial mess behind her and they don’t want to be involved. Her partner is going to have little choice in the house being sold because of the IHT liability.

You almost certainly need professional help here from a STEP solicitor who is qualified to deal with trusts, but if you can provide the details of those clauses we can hopefully help with how to proceed.

One more question, do those cash bequests say anything about being free of IHT?

Yes, it's says they are free of IHT. 

Keep_pedalling

GillyB26 said:

Keep_pedalling said:

GillyB26 said:

She appointed a Solicitor as Executors but they have renounced the executorship, won't explain why.

The rest of the estate is about £25k, she has left £5k to my son, her partner, her best friend and the new owners of her dog. 

Her and partner are not married, she never has been and had no children. I don't think he has ever been married but has several children. I will add he took Tunisian residency a few years ago as he has a factory out there, so he only wants to use the house when he is visiting England, and plans to move back here permanently when he retires I think. He is adamant that the house isn't being sold though. 

I think the reason the executors have renounced is that she has left a major financial mess behind her and they don’t want to be involved. Her partner is going to have little choice in the house being sold because of the IHT liability.

You almost certainly need professional help here from a STEP solicitor who is qualified to deal with trusts, but if you can provide the details of those clauses we can hopefully help with how to proceed.

One more question, do those cash bequests say anything about being free of IHT?

Yes, it's says they are free of IHT. 

In which case the IHT liability falls entirely on the house.

poseidon1

Keep_pedalling said:

poseidon1 said:

GillyB26 said:

My son (15) has inherited his Aunty's house, but it's in trust until he's 25. Her partner (early 70's) has life tenancy. Who will be liable for paying the IHT (approx 60k)? My Solicitor has told me it's the partner with the life tenancy, but that doesn't seem correct to me. The life tenant has been told by his legal helper (not a Solicitor) that it's my son who is liable but I will need to pay it on his behalf? I'm really worried as there is no way I can afford to pay it. The house is worth approx £450k.

This sounds like a complete an utter mess.

Taking most of what you say at face value, there appears to be a £475k estate split £450k the house and £25k cash.

The unmarried Aunt purportedly left the house on life interest to partner, with small pecuniary cash legacies in respect of the £25k.

Problem here there is only a £325k nil rate band, so the remaining £150k estate carries a tax burden of £60k at 40%.

If it was not for that fact the solicitors were the original executors, this had all the hallmarks of a DIY will made by someone who had no idea what they were doing.

However, this appears to be a solicitor drafted will, with the firm concerned looking to back out of a mess they appear to be responsible for.

Right now if the will is entirely silent on the issue of IHT, then tax is payable by each recipient in proportion to the amount they immediately inherited. However the majority of the IHT bill is payable on the house, which clearly should be sold unless the surviving partner wants to pay from his own resources. Neither your son or yourself have any IHT exposure beyond the small amount due on his £5k legacy.

Returning to the firm that drafted the will and  who were supposed to be executors, there is a possibility that they could have been negligent in not realising the  IHT consequences of what they had drafted given the unmarried status of their client.

 It seems to me the life interest beneficiary should be taking legal advice on the possibility of suing the firm for damages for what appears to faulty advice, since he stands to lose the most at this stage.

However, this will be of no concern to HMRC who will want their £60k 6 months after death, so the life tenant ( especially ) will need to get his head around the fact that the lion's share of the tax needs to be raised from the property or himself ( HMRC are not concerned which). Worse case scenario HMRC raise an assessment, place a legal charge on the house and force a sale to recover. The partner can't bury his head in the sand.

At this moment in time, and with the solicitors having renounced, who are the replacement executors/trustees?

As for the age 25 vesting age for your son, that is a confusing provision and it would be helpful to have sight of a redacted copy of the will to determine exactly to what that relates.

Would it be possible, depending on the wording of the will, that the bequest that create the IPDI trust could actually fail if the house has to be sold?

Need to see the redacted will in its entirety.

If it is as really badly drafted as it sounds then it could  state all bequests IHT free including the house trust, so back to square one with regard to  proportionate IHT charges across the board.

IPDI trust would normal provide for replacement property and downsizing scenarios. If so probably still a valid trust after paying relevant tax and ( forced)  downsizing accordingly.

OP can you confirm that solicitor who renounced executorship actually drafted the will?  I remain of  the mind there could be  professional negligence with regard to seemingly drafting a tax inefficient will without warning the client of the obvious consequences. Although  its possible solicitor was not overtly  told the parties were not married,  but that is not something a professional is entitled to assume when taking instructions. 

GillyB26

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Sorry I had to do it on seperate posts, couldn't get it to get load properly and other way. Thanks for all your help