Probate expenses and Inheritance

Broke_N_Down

Following the recent death of my mother the issue of Inheritance tax has raised its head. There was no will. I am the eldest of 6 children and am acting as executor (my father died some years ago). We believe the Law of Intestacy decrees the estate to be split 6 equal ways. The estate amounts to about 6-7000 of savings and the family home (my mother was sole occupant). Estimated value 350,000.
As there was no will I have applied for letter of administration via probate.
As the estate is likely to be over the 312,000 threshold my question is what expenses are we entitled to claim from the estate? (eg funeral expenses, flowers, memorial, ongoing house insurance until property is sold, estate agents fees etc). Are we able to operate an executor’s account dealing with such transactions and expenses which would, when all expenses are paid and the house sale completed, give a remaining balance which would be subject to inheritance tax before being split 6 ways?

localhero

Hi Broke n Down,

First of all my condolences to you and your family.

Yes, you are quite right about opening a separate account to deal with the estate. Funeral, Probate fees and selling costs are all allowable expenses that can be deducted from the estate.

You seem to be concerned about IHT, but if your mother was a widow then she can claim the unused nil rate band from your dad.

Depending on what his estate consisted of and who it was left to, then potentially your mother could leave £624,000 free of IHT. For example if he left his estate to your mother, then he will have a 100% unused nil rate band. This needs to be claimed by the executors (or the administrators in your case) on the death of the second spouse and supporting documents are required.

Here's the link to Revenue and Customs that explains it: http://www.hmrc.gov.uk/cto/iht/tnrb-faqs.pdf

If your mother was not a widow (ie she had divorced your dad) then you will have to estimate the allowable expenses and pay the IHT prior to the Court issuing you with the Grant of Representation. If you overpay or underpay you can submit an amended account later.

The estate will be split between all her blood children or their children if any of them had died before her.

Broke_N_Down

Hi localhero,

Thank you for the information, I am still waiting for return of the Grant so was perhaps getting ahead of myself. However I do believe it is wise to have as much relevant information as possible. At least then its easy to do things 'right first time'.

jonesMUFCforever

Normally you won't get the Letters of Administration or Probate until any tax has been paid.
So it does look like what Localhero has said is true - the probate office would have returned the forms by now if there was any queries.

han_and_rose

Hello,

I am in a similar situation. 4 years ago my mother died and everything went to my father as the house was in both names and she didn't leave a will (they were married). My father died 2 months ago and his assetes come to £325,000 (the house is £265,000 and savings of £60,000). Is the nil-rate threshold £312,000 or £624,000? If it is the latter then I dont need to pay inheritance tax? Why cant anybody write it in lay terms?!

sloughflint

Ok, I'll try.
Each person has an IHT allowance ( £300 000 before 06/04/08, £312 000 now).

There was an announcement last October stating that within a married couple, if the first to die passed the whole of their estate to their spouse then the second to die's allowance would be double the single allowance.( I know you said that there was no Will but same principle- also post 2 words it better mentioning 'unused NRB')

So depending when exactly your Dad died two months ago, his allowance will either be £600 000 or £624 000 so definitely no IHT to pay.

I've explained it that way as everything passed to your Dad but otherwise look here:
http://forums.moneysavingexpert.com/showpost.html?p=10703477&postcount=2