How to value the Estate

Asher · 6 July 2017 at 11:11AM

Can somebody explain how an Estate is valued if the main asset is a house and it is owned by a father (now dead) and his two adult children?

One of the children had Power of Attorney and was on a joint bank account, that's me. Father had dementia hence the Power of Attorney and joint bank account but I did not want to bear the burden of it all and so the house was put in all 3 names. If only 33% of the house has to be declared then it is under the threshold for IT. How do you say that when all you have is a little box to fill in.

Yorkshireman99 · 6 July 2017 at 11:27AM

Asher wrote: »

Can somebody explain how an Estate is valued if the main asset is a house and it is owned by a father (now dead) and his two adult children?

One of the children had Power of Attorney and was on a joint bank account, that's me. Father had dementia hence the Power of Attorney and joint bank account but I did not want to bear the burden of it all and so the house was put in all 3 names. If only 33% of the house has to be declared then it is under the threshold for IT. How do you say that when all you have is a little box to fill in.

When was the house transferred? If it was done under the POA it is questionable if the transfer was legal since attorneys are not supposed to make any transactions that do not directly benefit the donor. In any case if the gift was made less than seven years before the death the value would be added back to the estate value for IHT purposes.

TonyMMM · 6 July 2017 at 11:50AM

Were the two children's shares willed to them from the mother - or was it transferred to them by the father or by the POA ? - when, why and how the ownership was split is very important.

As above - if done under the POA it may be open to challenge.

Asher · 6 July 2017 at 12:28PM

No not done under the Power of Attorney and it is less that 7 years since we did it. When mother died everything went to dad and we did not have to do anything with probate. She died almost two years ago.

So am I right in thinking there will be some taper relief for a gift? Are we able to use mum's portion of IH tax allowance?

So we have to use form 404 along side 400 am I right?

I will have a look at all the paperwork and answer when I can but at work now so it is not handy.

Yorkshireman99 · 6 July 2017 at 1:23PM

Asher wrote: »

No not done under the Power of Attorney and it is less that 7 years since we did it. When mother died everything went to dad and we did not have to do anything with probate. She died almost two years ago.

So am I right in thinking there will be some taper relief for a gift? Are we able to use mum's portion of IH tax allowance?

So we have to use form 404 along side 400 am I right?

I will have a look at all the paperwork and answer when I can but at work now so it is not handy.

It depends on exactly when the gift was done and to whom.You will need to sort probate or LOA for both parents. Without that information nobody can advise. AFAIK there is no taper relief in the circumstances. I thnk you need some paid for professional advice to unscamble things. In particular a professional valaution at the date of the gift and maybe at the dates of death as well.

Brighty · 6 July 2017 at 3:54PM

If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

There is taper relief on the 7yr rule regarding gifts
https://www.gov.uk/inheritance-tax/gifts

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.

Yorkshireman99 · 6 July 2017 at 4:30PM

Brighty wrote: »

If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

There is taper relief on the 7yr rule regarding gifts
https://www.gov.uk/inheritance-tax/gifts

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.

Please can someone giv me a definitive answer re taper relief? I have been given conflicting answers. For example if A give B £85,000 in 2013 and dies in 2017 what taper relief if, any is given? TIA.

Brighty · 6 July 2017 at 4:38PM

Yorkshireman99 wrote: »

Please can someone giv me a definitive answer re taper relief? I have been given conflicting answers. For example if A give B £85,000 in 2013 and dies in 2017 what taper relief if, any is given? TIA.

From the link above

If IHT needs to be paid on the whole gift (i.e the estate is already at or over the IHT limit without including the gift) then in your example, rather than having to pay the full 40% IHT on the £85k, so £34k, as it's been 4 years you only pay 24%, so £20.4k. I assume it gets a bit trickier if the estate is under the limit without the gift, but the gift takes it over, i assume you would just pay 24% on whatever part of the gift was over the limit

Asher · 6 July 2017 at 4:43PM

Brighty wrote: »

If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

There is taper relief on the 7yr rule regarding gifts
https://www.gov.uk/inheritance-tax/gifts

Years between gift and death Tax paid
less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.

Many thanks BUT does the house have to be transferred fully into children's names? Can you just sell it as soon as the probate formalities are done and you get the grant of whatever it is called.

What I mean is does the executor have to take ownership or can they just sell it without that interim step?

Brighty · 6 July 2017 at 4:47PM

If selling, then no, you don't need to put it in your name, your conveyancing solicitor will just need the probate stuff

Yorkshireman99 · 6 July 2017 at 8:07PM

Brighty wrote: »

From the link above

If IHT needs to be paid on the whole gift (i.e the estate is already at or over the IHT limit without including the gift) then in your example, rather than having to pay the full 40% IHT on the £85k, so £34k, as it's been 4 years you only pay 24%, so £20.4k. I assume it gets a bit trickier if the estate is under the limit without the gift, but the gift takes it over, i assume you would just pay 24% on whatever part of the gift was over the limit

Thanks. I got two totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA

How to value the Estate

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free