Estate Disclaimers

Typhoonqoc1

Hi have a question re Disclaimers on inheritance in following situation:

Sister passed away suddenly last year, never married, no children no will - survived by myself & our elderly Mum. So under intestacy rule all her estate would pass to Mum. Mum was in hospital(Broken Leg) at this time & I had PoA for her, so sorted sisters estate, paid the IHT & applied for LoA(still waiting so have not yet collected all the assets).
Mum said she did not want to be beneficiary as had plenty to see her through rest of life & we were going to get deed of variation once out of hospital. She came out four months later, but then contracted infections & passed away, now I am dealing with her estate as well - As Sister already passed I am only beneficiary.  Mums estate if including my sisters will be above threshold, so having to pay IHT again.

Question is, can a disclaimer be made for Mum even though she has passed away(did not receive anything from sisters estate) - I thought I read somewhere this was possible, but cannot find where.

Any help would be much appreciated.

Keep_pedalling

Sorry for your double loss. 

A couple of sanity checks first are you sure the inheritance puts your mother’s estate in IHT territory? If she was a widow and owning (or previously owned) a home her estate could have up to £1M in assets and not pay IHT.

If your sister died less than two years ago it is still possible to do a deed of variation to bypass your mother’s estate 

Typhoonqoc1

Father passed away many years ago, he never owned a home, they were council tenants.  Mum bought after he passed away. So will not get full allowances.

Keep_pedalling

Typhoonqoc1 said:

Father passed away many years ago, he never owned a home, they were council tenants.  Mum bought after he passed away. So will not get full allowances.

That does not matter, regardless of when a spouse died or if they owned a house at the time or not, his residential NRB is transferable to her estate as any of his unused NRB unless he died a very long time age what year did he die? What is the value of her home? 

poseidon1

Typhoonqoc1 said:

Hi have a question re Disclaimers on inheritance in following situation:

Sister passed away suddenly last year, never married, no children no will - survived by myself & our elderly Mum. So under intestacy rule all her estate would pass to Mum. Mum was in hospital(Broken Leg) at this time & I had PoA for her, so sorted sisters estate, paid the IHT & applied for LoA(still waiting so have not yet collected all the assets).
Mum said she did not want to be beneficiary as had plenty to see her through rest of life & we were going to get deed of variation once out of hospital. She came out four months later, but then contracted infections & passed away, now I am dealing with her estate as well - As Sister already passed I am only beneficiary.  Mums estate if including my sisters will be above threshold, so having to pay IHT again.

Question is, can a disclaimer be made for Mum even though she has passed away(did not receive anything from sisters estate) - I thought I read somewhere this was possible, but cannot find where.

Any help would be much appreciated.

To answer your intial question, yes a disclaimer can be applied on behalf of a deceased beneficiary- see below

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm35164#:~:text=The personal representatives of the,either to accept or disclaim.

 However a deed of variation is also a  possibility and there is something called quick succession relief that  may also assist in mitigating IHT, but  only if any of these mechanisms are necessary in view of the values involved.

So some numbers would be helpful as follows:

1) What was the net value of your sister's taxable estate on death ( exclude any DC pension pots)?

2) What was the value of your mother's personal estate at death?  Did it include a home above £175k in value? Again, exclude any DC pension pot at death.

What Keep_pedalling is saying is that it is irrelevant whether your father owned a property before he died. All that it is necessary to know is whether he left his entire estate to your mother on death and had made no substantial gifts to anyone else within 7 years of his death.  

If this is the case , then minimally your mother has two lots of NRBs ( £650k) and at least one residence nil rate band of £175k  ( but possibly two depending on house value) to give a grand total of £1 million in NRBs to shelter her enlarged estate.

Answers to these questions will dictate whether it is necessary to consider a disclaimer, deed of variation or look into the basis of quick succession relief.

Typhoonqoc1

Father passed in 1985.

Keep_pedalling

Typhoonqoc1 said:

Father passed in 1985.

So if he left everything to your mother you definitely have 2x NRBs and if the house is worth £350k or more 2 RNRBs . 

Typhoonqoc1

Mums House has been valued at £160K, (would be closer to £220K, but it is lower due to short lease).  Does this make difference to RNRBs?

Typhoonqoc1

If was to go down disclaim route

Are there specific forms for disclaiming, cannot seem to find anything?

Also where would the form go once completed?

Keep_pedalling

Typhoonqoc1 said:

Mums House has been valued at £160K, (would be closer to £220K, but it is lower due to short lease).  Does this make difference to RNRBs?

That would mean only part (£160k) of her RNRB could be claimed so her total exemptions would be £810k. Does her inheritance take her above that value? If not does it take it over £650k? The answer to these questions would help in suggesting the best way forward. 

Typhoonqoc1

Hi, her inheritance would be above the £810K.