How to pay IHT if estate is in property

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bompey
bompey Posts: 38 Forumite
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in Cutting tax
I hope this is the right place but I want to understand whether I am being given a straight answer to a problem.
An estate will be over the IHT threshold on death however the assets are all property, both main residence and investment property but with no debt. The advice being given is to sell the investment properties for 2 reasons:
1) to have liquid assets to pay the IHT. (Ignore CGT implications).
2) because you can’t sell the property to pay IHT as you don’t own it. Or it is very difficult to sell it.

I get 1) however I am struggling with 2). This is coming from a professional so does anyone agree re 2), or know where I can go to get a definitive answer?

Thanks

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  • noh
    noh Posts: 5,799 Forumite
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    edited 15 December 2018 at 10:43AM
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    An executor does not have the legal power to sell a property until probate has been granted. Probate is not granted until IHT has been paid.
    IHT on property can be paid in 10 annual installments. Executors can take out a loan or use cash from the estate to pay the first installment after which probate will be granted and the property can be sold.

    https://www.gov.uk/paying-inheritance-tax/yearly-instalments
  • bompey
    bompey Posts: 38 Forumite
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    Thanks for the quick response. If say some of the properties were sold and turned into liquid investments, such as equities and bonds, does the executor still have to go through probate before being able to sell them?
    I’m just trying to figure out how best to prepare for having to pay an IHT bill.
  • noh
    noh Posts: 5,799 Forumite
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    Probate will be needed before the executor can sell shares or bonds.

    Are you sure IHT will be due? Potentially, this tax year, £900K is free from IHT if the estate is left to direct descendants and the spouses nil rate band is transferred rising to £1m in 2020/21.

    https://www.gov.uk/inheritance-tax
  • bompey
    bompey Posts: 38 Forumite
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    Yes IHT is due. Property prices in the south east mean asset rich and cash poor.
    There's worse problems to have.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    If there is a will and named executors that are acting

    The executors power to administer an estate comes from the will

    Selling is a problem as no one can complete without a grant.

    You investigate if you can get a Limited grant to sell just one property.
    https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm05101
    a lot don't know about the other types.

    Another alternative is for the executor to raise funds against the property this may be cheaper than other executor based loans to cover IHT.
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