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Wondering if this article from Nationwide about IHT is actually complete scaremongering cr*p?!

(14 Posts)
Bramshott Fri 30-Jan-15 12:22:09

I was surprised to read in an email from Nationwide this week about inheritance tax that beneficiaries have to pay it BEFORE they inherit anything - i.e. before any assets are sold. Having previously been rather unsympathetic to people trying to avoid IHT, I thought "blimey no wonder people get their knickers in a twist about it, that sounds really unfair (not to mention financially ruinous for a lot of families)".

But reading online today seems to imply that this is in fact complete bollocks that Nationwide are spouting, and that assets can be sold in order to pay the inheritance tax bill.

Does anyone know??

letsplayscrabble Fri 30-Jan-15 13:42:47

Not an expert but my understanding is that you get a period of time to sell assets - maybe 6 months? - before it has to be paid.

Bramshott Fri 30-Jan-15 14:17:59

That was my understanding as well from reading online Scrabble - but the Nationwide item seems to state categorically that the IHT HAS to be paid before probate can be granted (and therefore before anything can be sold), and that the only way to do that if you don't have the cash spare is to take out a loan....

TalkinPeace Fri 30-Jan-15 14:33:15

it is factually correct but very skewed towards bouncing people into paying big fees for setting up trusts.

Bramshott Fri 30-Jan-15 16:33:13

I knew someone would know! So if, for example, my DM left a house worth over the IHT threshold but very few other assets, would the tax have to be paid before the house was able to be sold?

TalkinPeace Fri 30-Jan-15 16:36:27

On death, the estate takes ownership of the assets.
The executors have access so that things like funeral and solicitors fees can be paid.
Any assets that are sold get paid into the estate fund - that includes the house.
Once the estate has been turned into cash or liquid assets like shares, the IHT is paid.
Then the balance of the estate is distributed.

The house would have to be sold to settle the IHT bill but its bilge to say that the inheritors would have to pay IHT on a non crystallised asset.

PerditaXDream Fri 30-Jan-15 16:39:19

For property only the first 10% of IHT has to be paid up front. The rest can be paid in instalments. Tax due on other assets should be paid before the grant issues but it is possible for deceased's bank accounts to be accessed to pay the tax.

Bramshott Fri 30-Jan-15 16:50:25

Thank you. So when it says in the NW article "Let’s take the example of a divorced lady who lives in a home worth £500,000 with no mortgage, and has £60,000 in investments. When she dies, her family won’t have the right to inherit any of those assets until they have first paid an IHT bill of £94,000. Many families don’t have that amount of spare cash lying around, so in some cases may have to take out a loan in order to inherit." that's not true?

TalkinPeace Fri 30-Jan-15 16:51:07

the loan bit is indeed untrue

Bramshott Fri 30-Jan-15 18:03:24

Thank you. I expected better from Nationwide.

1Q Fri 30-Jan-15 21:05:27

For liquid assets, you pay the tax when applying for Probate.

For some illiquid assets (real property, interests in businesses - but not jewellery), you can apply for the instalment option.

See IHTA 1984 - s227(1) "....the tax so attributable (to real property) may, if the person elects in writing...be paid by ten equal yearly instalments." This gives you breathing space, to pay 10% and hang on to the property until you can sell it. Interest is payable at 3% on the unpaid amounts, but it may be worth paying the 10% each year until you are ready to sell. Or hang on to the property if you think you can pay that off over time and want to keep it.

Talk to the tax officers (Nottingham IHT office?). They are incredibly well trained and very human and doing a difficult job as are the whole tax office (and NHS and other Govt departments) at the moment. I am not a civil servant, I hasten to add, just respect what they do them. Full stop.

1Q Fri 30-Jan-15 21:06:13

Oh, and Nationwide are good at lending money and investing deposits.

But they are not tax experts.

Full stop.

Bramshott Mon 02-Feb-15 10:24:04

grin!

pinkfrocks Mon 02-Feb-15 11:56:26

I think it's bollocks.
Yes when you complete probate forms etc you will be sent an IHT bill- and then you will have to sell the house to pay it. I don't see how anyone can pay IHT without realising the assets in hard cash first.
We have just gone through this personally. We were close to the wire with IHT threshold and there is no way we'd have been able to pay IHT ahead of the house sale. You also need to bear in mind there is often more than one beneficiary from an estate so what happens - according to NW- if one sibling can find their half of tax due but the other(s) can't? I think you are given a year or more to pay- it's not on completion of probate.

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