Inheritance tax and trusts
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Lulucat
Posts: 2 Newbie
hi I would really appreciate some advice/ tips
I am acting as executor for my dads estate and I’ve never done this before
My dad died in in January. He left the majority of his estate to my mum (his wife) but he left his share of the house in trust to his 4 children with conditions that mum can live in it or use any proceeds to buy any future property should it be sold
Has anyone had a similar situation? Does anyone know how I declare this on inheritance tax form and also how it is dealt with after probate is granted. There is no intention to sell the property at present. Will we need to get a solicitor to set up the trust? Or can this be done DIY? And what do we do about house deeds
I am acting as executor for my dads estate and I’ve never done this before
My dad died in in January. He left the majority of his estate to my mum (his wife) but he left his share of the house in trust to his 4 children with conditions that mum can live in it or use any proceeds to buy any future property should it be sold
Has anyone had a similar situation? Does anyone know how I declare this on inheritance tax form and also how it is dealt with after probate is granted. There is no intention to sell the property at present. Will we need to get a solicitor to set up the trust? Or can this be done DIY? And what do we do about house deeds
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You say 'his share' of the house - this indicates it was held as tenants in common (or that he thought it was, which isn't always the same thing!). Check the deeds.
Anything left to a spouse is tax free, so there may be nothing to declare on the IHT form depending on the value of the remainder of the estate and whether it has been left to someone other than his wife. Keep a careful note of this, because any unused part of his IHT allowance can be transferred to your mum's estate when she dies.
Given you are new to all this, half an hour with a solicitor would be time and money well spent. What you describe will be an everyday scenario to a professional and would do much to help you through a difficult time.Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
Fine up make sure you use a solicitor who really understands trusts.You say 'his share' of the house - this indicates it was held as tenants in common (or that he thought it was, which isn't always the same thing!). Check the deeds.
Anything left to a spouse is tax free, so there may be nothing to declare on the IHT form depending on the value of the remainder of the estate and whether it has been left to someone other than his wife. Keep a careful note of this, because any unused part of his IHT allowance can be transferred to your mum's estate when she dies.
Given you are new to all this, half an hour with a solicitor would be time and money well spent. What you describe will be an everyday scenario to a professional and would do much to help you through a difficult time.0 -
Thanks for your help. Have spoken to solicitor- same firm as drew up the will - originally was planning to ask her to deal with probate but she wasn’t very helpful and wanted me to do all the legwork and then charge a significant amount for filing the probate paperwork. I think I will manage the probate paperwork. Does something need drawn up in terms of the trust?0
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Beware solicitors that are not STEP qualified where Trusts are concerned. A similar question has recently been asked so you can look that up for answers.
As far as Inheritance Tax is concerned, that does not come into effect util the second death as long as the value of the home that has been left in Trust does not exceed the individual Nil Rate Band allowance. However, depending on how long it has been since the Wills were set up, have the solicitors discussed the situation regarding the additional House allowance. That is available in addition to the nil rate band provided any gifting from the first to die has only gifted to direct family. Unfortunately this is NOT so with the Discretionary Trust. The gifts to such a Trust could lead to the additional housing allowance not being available. Check with your solicitors IF they are STEP qualified.
SamI'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, but my comments here and on Legal Beagles as Sam101 are just meant to be helpful. Do ask questions from the Members who are here to help.0 -
Research IPDI trusts. Often know as life interest trusts or interest in possession trust
It will become clear quite quickly.
Fairly standard way to leave a property to spouse but protected fom care fees and for most practical(tax) purposes it is as if the property was left to the spouse.
The contents of the trust gets the spouse exemption like all other assets passsed to a spouse and for future it stays part of of the spouse estate for their death.
It also gets the residention nil rate band transferable for future use as it has not been used on the first death0 -
Have spoken to solicitor- same firm as drew up the will - originally was planning to ask her to deal with probate but she wasn’t very helpful and wanted me to do all the legwork and then charge a significant amount for filing the probate paperwork.
She may have been more helpful than you feel - her approach is designed to keep costs down for clients and is entirely sensible. How much was the 'significant amount', bearing in mind this would need to cover the filing fee itself?Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
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It is my understanding that if ownership of your part of your residential home is placed into a Discretionary Trust for the children on the second death, It will NOT qualify for the new residential relief.
Depending on the value of the estate, it may not be a concern, but in a Discretionary Trust, the gift is to the Trustees for the children. An Income in Possession Trust would qualify.
I am not sure if in this circumstance, your Mother's ownership of the home would qualify and its best to ask a STEP qualified solicitor on thisI'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, but my comments here and on Legal Beagles as Sam101 are just meant to be helpful. Do ask questions from the Members who are here to help.0 -
Th crucial thing is she STEP qualified. She my be willing but not able. You may well be. Able to do a lot of the work yourself. Getting the work done professionally could cost a couple of thousand or more but could be much higher. It depends on how long the work takes.She may have been more helpful than you feel - her approach is designed to keep costs down for clients and is entirely sensible. How much was the 'significant amount', bearing in mind this would need to cover the filing fee itself?0
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