Inheritance Tax Question

Elladan

I have an IHT question that I would appreciate some input on…

My father-in-law died in Dec 2020 during covid. His assets were all jointly held with his wife and all were transferred into her sole name after his death (as per his will). Probate was not required as all assets were jointly held. No IHT would have been due as all going to his spouse. Approx estate value (his 50% share) ~ house £350k, Savings £200k.

Because no probate was needed there was no probate application. Because there was no probate application there was no reminder to fill in IHT returns, so no IHT form was ever submitted. I think that the assumption was made as there was no IHT due, there was no form needed. This appears to be true for deaths after 1/1/22 but not for Dec 2020.

Question ~ Do we now try and submit a really late form or deal with it when my mother-in-law passes, when we're applying for his IHT allowance (£325k) and residential property allowance (£175k) to be transferred? Has anyone else had this sort of scenario? I can see why simple estates being transferred between spouses without probate would fall into this trap. It is only because we're looking at my mother-in-law's will that this has come to light.

Any input greatly appreciated as I'm at a loss what we should do!

poseidon1

This situation is anticipated when completing the IHT 402 at questions 6 to 8, when claiming the transferable NRB on the surviving spouse's death - see below

https://assets.publishing.service.gov.uk/media/67eba2faba01abac8e9fe9af/IHT402.pdf

What is required is an estimate of the value of the joint assets inherited, and confirmation that the 1st deceased spouse made no substantial gifts to non exempt persons within the 7 years prior to death.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81972195#Comment_81972195

Out of interest why would HMRC be interested in an estimate of the assets transferred, as it would have no impact on the IHT calculation on the second death?

Also would you include 50% of the family home, if the home was held as Joint Tenants, as the value would transfer automatically due to the co ownership, regardless of any will?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81972205#Comment_81972205

Good question, and I agree if no IHT in point why do HMRC need that information.

Problem is they do ask for it at question 7 of the IHT 402 so leaving that box empty could be problematic in getting HMRC to process the return if IHT400 is necessary for probate.

That said if MIL's estate meets the excepted estate criteria ( under £650k etc) then can possibly utilise the simplified online probate application process and bypass needing to complete IHT 402 since IHT 400 not required.

However if the estate is above £650k and transferable residential nil rate bands are also required to avoid IHT, then a full blown IHT 400 with all the supporting ancillary forms ( inclusive of IHT402) becomes unavoidable.