Paying IHT

Your situation re your mum was similar to mine. When she died the market had peaked, by the time probate had been granted the interest free period had passed, the market had dropped, i am struggling to sell. Instead of any empathy from my “case worker” (because this is a bereavement, I’ve had a baby in an unplanned nicu stay for 8 weeks) I should look to selling my home and making my children homeless as a result! If I could back in time I would get her to sell, enjoy more on herself etc. Good luck.

This is not true for everyone.

The £1m is for a married couple with a home worth more than £350k and who have DC who inherit.

A single person with no DC pays IHT on everything over £325k.

I'm guessing if she is asset rich and cash poor the pension is DB (final salary) which die with the person or get paid to a spouse and are not subject to IHT. Also if it is an annuity from a DC pension it may also just end when a person dies, my DF's did. So the pension may not be included at all

@Toastandbutterand can you and mum sit down and talk this through? Then you will know exactly what assets she's got and what you eventually will deal with. Much easier to get the info from her now then have to sift through her paperwork after she's died and you are grieving and can't think straight.

Review the will. May need updating?

The point about immigrants... Presume mum is uk citizen so UK law applies to her estate and tax allowances mentioned in this thread are available?

Check if she owns assets abroad.

First consult a solicitor or tax advisor and get professional advice
to confirm if there may actually be an IHT bill and what allowances are available. There is a lot of misinformation evidenced by reading just this thread and each person's circumstances are different.

Don't appoint a bank or solicitor as an executor, their fees can be high but if you are an executor and the estate is paying IHT, make sure you get professional advice to check the calculation is right and you haven't paid too much or too little tax. It's a complex area and people using the Internet or worse, chat gpt, to help them makes me shudder.
If an estate is paying IHT it can afford proper advice!!!

Thankyou. I honestly thought it was the best thing to just let the bank deal with it!

I'm very glad I asked!

We’ve used a solicitor for handling probate. It was a set fee of £2,500. It was worth every penny.

I agree with @DancingFerret that appointing a bank or solicitor as executor is very unwise as their fees are absolutely horrendous. Your mother can appoint you as executor. There are books that help people deal with winding up estates, and if you were to get stuck you could always seek ad hoc legal advice for specific issues.

By the way, I believe MSE has a forum about financial matters which is highly rated. If you have further questions, why not ask there.

Ok, more thanks!

Theres nothing but one sprawling house that she's added to over time in a very expensive location so theoretically it should be simple. I love it, but I couldn't afford to live there. God knows how she does!

There's no way I could pay the iht and stay there.

The plan is that IHT on the pension value can be paid direct from the pension prior to probate.

Even more concerning re pensions coming into IHT in April 2027 is that currently there is tax relief on the contributions going in and then tax paid (after the 25% tax-free drawdown) on the payments to the beneficiary. Under the proposals, the remaining pension will be subject to IHT (assuming all IHT allowances have been used), AND then the beneficiaries will also pay tax as they draw from the scheme, so essentially it is double taxed.

I appreciate many will not be affected by this but for years we've been encouraged to save into pensions but this money potentially disappears in tax.

In real & simple numbers: say you leave £250k in a pension and your estate is subject to IHT - 40% (£100k) goes in IHT so £250k is now £150k left. If the beneficiaries are basic rate taxpayers they pay tax at 20% (£30k) as they draw the money so from the £250k in your estate they receive under half - £120k (based on current tax rates & assuming no pension growth).

Unless the estate is very complicated (trusts, overseas assets, offshore accounts, etc), the received wisdom is not to appoint banks or solicitors (or, indeed, any third party professional) as an executor. Their fees tend to be on the heavy side, and the time taken to obtain probate is often a lot longer than the DIY option.

I'm tempted to just hand it over to my adult kids and let them deal with it, but that seems equally bad!

I just don't really want it, I don't want to think about it!

At the moment the will is with the bank, so I guess unless I can convince my mum to look at other options, at least they'll tell me what to do when the time comes.

Ok, thankyou. It's a very awkward thing to think about isn't it?!

The original post mentioned 1 mil. I was responding to that.

The was no mention of anyone being a single parent etc etc.

I'll leave the thread as it looks like people just want a moan. Crack on.

Exactly!

Sweet Jesus.

Not necessarily, my estate will likely be subject to IHT and it is prob worth just over half that amount but I am a single parent and my house is my only asset. It is not only estates of over 1M, it depends on circumstances.

Consult a financial advisor. I suggested up thread about taking out an insurance policy which will cover the interest. You can do that. My suggestion didn’t go well for another poster, I have no idea why.

The executor will be a bank if that makes a difference.

How does this work with property?

My mum's asset rich but cash poor. Shes 80 next month, and horribly, this is something I've started to think about. Her properties are just over a million (or just under) but her pension is £30,000 a year. She'll leave no cash. She occupies all properties.

I have no issues paying iht. I'd happily pay more. But I have a minimum wage job and live in a council house, they can't get anything until the estate is sold!

I have suggested she should leave it to someone else but she's horrified by this. We are immigrants if this makes a difference. There's just not enough money for a solicitor.

Sorry to hijack, we were talking about it earlier and then I saw this thread! Any advice would be gratefully received. I wondered if I should try and donate it?

Banks will make payments from a deceased's account directly to HMRC to pay IHT on the executors instructions. They obviously won't release any funds to an executor without a grant of probate unless the sum is relatively modest.