Paying IHT

I did, 13 years ago when we moved to our current house with a 10 year old and realised that if we were both to die in an accident then DS would be left with a large IHT liability at a very vulnerable age. So we took out a whole of life policy, wrote it into trust so that it doesn’t count as part of your taxable estate and this will pay out immediately upon the second death - you have your funds available to pay tax, and nobody has to sell assets in a rush to avoid interest charge.

When we did this, it was a bit niche but these products have become more popular with the changes to rules on IHT and pension pots. Evey financial product has its day in the sun I suppose.

A single person that has a house of just over £325k and a small dc pension is not really rich. They are generally very average, average house price is probably quite near the IHT threshold for a single person

Not 1 million. In the UK, the inheritance tax threshold is £325,000, meaning that estates valued below this amount do not incur any inheritance tax. If you leave your home to direct descendants, this threshold can increase to £500,000. Just because they have inherited does mean they are rich before it is paid out. They could be on UC for all you know. How are they supposed to pay instalments if on a low income. Estate could also be split among multiple siblings so the amount each gets is relatively low even if it is in the inheritance tax bracket

Probate won't be granted until IHT is paid.

In England probate can be granted before IHT is paid.

We got probate after 8 months.
House took a further 2 years to sell.
IHT was paid in full after the sale of the house.

Why bother to ask such a stupid question in the first place, when everyone has the power of knowledge at their fingertips ?

All they need to do is type in the question (sometimes in a few different ways) and google will tell the answer.

And once you have taught someone to do that, they can get an answer to pretty much anything they want.

The difference between just telling someone the answer, and giving them the power to find an answer to any question they might have.

Many houses are worth over £1m therse days. And if the person is single(without a deceased spouse) or divorced the allowance is only £500k.

Probate won't be granted until IHT is paid.

You can sell the house.

HMRC will let you pay IHT in installments (but they charge interest). Once the house is sold you pay off the balance.

My Dad’s estate incurred IHT and the total value of his estate was just over 100k, most of which was tied up in the house he lived in.

It was because the he lived in was subject to a deed of trust where he had a quarter share but because he was able to live in it for the rest of his life the full value of the house was taken for his estate. It was all a bit of a nightmare getting the money to pay for it after 6 months but thankfully I was able to manage it .

The sale of the house then fell through as another family member died and it ended up selling for a fair bit less than had been put on the probate form as the solicitor used the original sale price which was a fair bit higher than when he died but we were going to run with it. We had to apply for a refund of the IHT which took 10 months. It was all a nightmare and made worse by the other members of the family not understanding why any IHT was due, I am estranged from most of the family now.

Thank you, my Dad has been creating drama about this, but I knew there must be a solution, it's hardly a rare occurance

You can arrange for cash to be paid directly to HMRC before probate is granted.

The tax owing on the proportion of the estate that is the house can be paid in 10 annual installments and you only need to pay the 1st installment before probate is granted. (The unpaid fraction accrues interest from 6 months after the death as mentioned by PPs)

I did this all a couple of years ago and the main issue was the bank taking 6 weeks and lots of chasing to actually hand the cash over.

Can I ask a question about the £1m combined threshold for a married couple?

If a married couple between them own a £1m home that they intend to pass onto their children, one of the couple dies and "their £500k" relief is transferred to their surviving spouse. If they then remarry, what happens to the IHT relief pot? Could someone potentially wind up with £1.5m of IHT free relief if they were transferred 2 lots of £500k plus their own £500k relief?

If there is a common problem in life there is always a solution. Someone will of course will make some money out of providing that solution.

Google is your friend.

That has always struck me as insane

Had my parents or grandparents owned their homes we couldnt have afforded to pay before selling. I would have presumed there's some mechanism to get around it, but this suggests a lack of that kind of logical legislation

Life insurance (lump sum) written in trust

In trust so that it is outside the estate of the deceased

pays out to the beneficiary (singular or plural) pretty fast once provided with death certificate

the earlier it is purchased the lower the cost.

really really simple, does require planning ahead

I don't have any problem with the tax being paid, fwiw I think if there's that much money, tax should be paid, but I don't know how to do it at a practical level.

As PP says you can't sell the house until probate is granted, and you can't get probate until the tax is paid, so practically you can't use the house proceeds, or anything else from the estate, even if there's cash, to pay the tax.

So, what is the process? You have to borrow to pay the tax? Where from?

Especially those parents with dementia.

That’s not correct. Only so if the residence tax expansion comes into play.

Yanbu for thinking that more time should be given. I support the idea of IHT but people shouldn't have to worry about this while they are grieving, and the practicalities often take so much longer to sort out.

Insurance taken out to pay interest or tax on an event that will definitely happen is…a challenge. Insurance taken out by an over 80 year old to cover tax or interest that will definitely be payable in the event of their death is…a challenge.