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Confused about inheritance(18 Posts)
My father died 18 months ago, he and my mother owned their house as 'tenants in common', and he left half of his estate to be divided between me and my two sisters at such time as my mother chose to sell the house (plus a small legacy to each grandchild).
fast forward to now - my mother has sold her house and bought herself a sheltered apartment. My mother got her half of the house price plus half of my Dad's estate as his widow.
I have just received my share of Dad's money - but it came with a very strange letter from my mother's solicitor which stated that my mother has decided to gift me some money to the value of (my share of the inheritance). To me this seems very odd, and I don't know why it has been worded this way - my Mother is being very vague - and said 'Oh well my solicitor thought it would be best to do it that way.'
I feel (as does my sister who got the same odd letter) that we should have received a letter saying we had been left this money in our father's will, not as a gift from my mother.
Can anyone explain why the letter should have been worded in this way? It feels wrong.
In case it's relevant my mother's solicitor is has been handling my parents legal matter for years with varying degrees of competence He is now semi retired but seems to still be dealing with Mum's legal stuff.
It is an attempt to avoid inheritance tax. If she survives 7 years you won't be liable for it as a "gift" , if not it reverts to the estate and is taken into account for IHT purposes using your df's and your dm's allowances combined
Thank you for answering LIZS I did wonder if it was something to do with IT. Although my Dad's half of the estate is under the allowance for IT I believe (and that is the reason they did the tenants in common thing originally)
I don't quite understand about the surviving seven years bit, - if my mother dies within seven years (she is in her early nineties) what happens to the money we have been 'gifted'? - Sorry for being dense, I find these sort of things hard to grasp.
If she dies within 7 years the value of the "gift" is taken into account when calculating the overall value of the estate, also including any investments, chattels, her flat etc with both allowances deducted. If after 7 years it isn't included . Could the amount you have received perhaps exceed the 1/6 of the proceeds you were due ?
I hope some legal person will reply later, as I was surprised to learn that in cases where the spouse is the "*sole heir*, when the surviving spouse dies the Tax allowance is doubled for the next heirs.
It could be that reason?
It's possible LIZS - I'm not sure what the actual amount was (well I knew roughly obv.) its possible my Mum rounded the figure up to give us a little bit more - she is quite likely to do something like that - I will check so I can thank her if that is the case!
Thank you for explaining the seven years thing - I understand now, and feel reassured that nothing strange is happening.
digerd - that is interesting - as far as I understand things, my Mother was not the sole heir, - they owned the property as tenants in common and half of Dad's was left to us, if they are trying to increase the allowance by making Mother sole heir, - then that is surely too late to change, or can it be changed after someone dies?
This was all done in your Dad's Will, so he cannot change it now.
Can't remember which legal person posted, but I looked it up on Google and that is what it said. Joint Tenants or Tenants in Common I don't think was mentioned.
Digerd. The will could be changed by way of a deed of variation, up to 24 months after death.
The inheritance tax threshold is £325 but a married couple can pass their unused portion to their spouse so £325 x 2 = £650 inheritance tax free.
If your mother is in her 90's and does not survive 7 years, you will pay some tax on her gift when she passes.
Thank you for further replies.
Reading your post Alwayscheerful - I am still slightly confused, - if the money from my father (which was left to me in his will, - and his half of the estate was less than £325) has now been sent to me as a 'gift' then why was that done if it means we will have to pay inheritance tax if mum dies within seven years? It seems an odd thing to do. And is actually not correct because the money is not a gift form my mother, it is a legacy from my Dad.
A I say - I have very little faith in my mother's solicitor - he has sent money to wrong addresses, got names wrong etc etc - it has led to a lot of faffing around sorting things out and getting cheques re-done.
OP - unless the gift is in addition to your DFs inherritance it doesn't make sense.
Am I correct in assuming the total your DF left to his 3 children and various grandchildren is within the £325 threshold?
If your DF left close to the £325 threshold your DM may have gifted additional monies to avoid inheritance tax when she passes. If she expects to leave less than £325, it would be free of inheritance tax. If she leaves more than £325 it will be subject to tax at 40% unless your DF did not use all his allowance.
The deed of probate will state the value of your fathers estate, find out the figure stated on the deed of probate and stamped by the probate office.
Yes the total that my father left is under £325K - half of what he left went to Mum and half divided between children and grandchildren.
So when my Mum dies - her estate is likely to come to more than £325 (because she has her half of the house sale, plus half of Dad's estate - approx £400K in total)
It is possible that my Mother put a small amount onto each of us three sisters legacies to 'round it up', but the majority was an inheritance from my Dad.
It probably sounds very stupid, and if there's a legal reason for it then I am OK with that, but I actually wanted a letter saying that my Dad had left me money, - because he did, and for sentimental reasons I would like to have a document to that effect.
You will find that when you bank a cheque over a certain amount, the bank will ask you whether it is from ( earnings/gift, etc) and so you need to say it is a gift at that point to avoid potential IT in future. Keep that letter!
Thank you yegods - the letter was very specific in saying it was a gift (and also that it wasn't anything to do with money laundering). I will keep the letter.
All this stuff is very confusing, - I worry that it hasn't been done correctly (see my above comments re the solicitor)but on the other hand I don't want to be questioning everything and making a fuss and bothering mum when she is trying to settle into a new home.
The executors should have sent you a copy of the will. To avoid conflict, in practice they often copy the paragraph of the will pertaining to your legacy and send it with your cheque.
Any member of the public can obtain a copy of a will for a few pounds think it might be £6 ish. I would write to the executor and ask for a copy, it is not unreasonable considering any member of the public may do so. The executor must answer any reasonable questions. Explain you are putting your affairs in order for the Inland Revenue, money laundering and inheritance tax reasons.
Your Mum had probably made the gift in addition to your inheritance from your Dad in order to reduce inheritance tax when she passes.
Having sorted out my mum's will recently I thought :
Your dad's estate would have been converted into money once the house was sold. Your mum gets her share, and you get your share. The value is likely less than any limits for inheritance tax (paid before the legacies are distributed anyway I think). No idea why it would be given as a gift from your mother. I would check with the solicitor, and the executor - you should get a copy of the will with your legacy and a statement of accounts as to how the values were allocated.
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