Inheritance tax

[Gcdryj344]

My dear Mum died recently. She owns a house worth £800,000. She has left her entire estate to be split 3 ways between myself, my sister and my son. She was divorced and had no debts.

How much of the 800k will be left after inheritance tax?

How do we pay inheritance tax when none of us have any savings?

Potentially yes unless your will states otherwise. If she inherits then dies you have no control, Might be worth stating your own thread.

Where you have an illiquid asset, you can elect to defer the payment of IHT at a rate of 10% per year. You will be charged interest. Can you afford to pay the first instalment and then clear the 90% once you sell. IHT falls due 6 months after the death.

I think the threshold is higher when the assets are going to children.
I recently signed off a cheque of about 70k for an estate worth about 800k give or take.
I think that’s right! Trying to remember all the figures now 🫠
The money was in the estate to pay it so I didn’t end up having to pay anything upfront.

Sorry, the estate is around 1 million rather than 800k.

If she dies before you, then no, he won't if he's not in your will.

It depends on which bank. MIL’s account was with Nat West and they refused to release funds towards paying the IHT and we had to come up with £200k before probate was granted.

Get a solicitor!

You sell the house and pay the tax from the proceeds

This is absolutely wrong!

Today’s budget has announced a change to that. It was in the full document but is an improvement.

Probate solicitor can advise (when they have caught up with details.)

OP - Nil rate band is £325,000 and if a home property is being left to children, a further £175,000 is added. The estate pays tax before assets are distributed.

Make sure you get a probate valuation of the house, not an estate agent inflating the value to persuade you to use their services. Anything over £500K is taxed at 40%, so £120K IHT owed. The executor for the estate ( you and your sister if no one else has been appointed) will need to speak to her bank about the estate borrowing the money to pay IHT. They are used to this, even though, I agree with you: it is outrageous.

The worst thing about IHT is that all this intrusion happens while you are grieving. My aunt was the sole beneficiary of her husband’s estate and HMRC had the audacity to visit and poke around her house to value her ornaments and other precious mementos of a shared life. She won’t have to pay IHT, as it is her husband who died, but they will have a record to check against in future. Absolutely disgusting.

@Meowandthen that’s interesting. Thanks.

The worst thing about IHT is that all this intrusion happens while you are grieving. My aunt was the sole beneficiary of her husband’s estate and HMRC had the audacity to visit and poke around her house to value her ornaments and other precious mementos of a shared life. She won’t have to pay IHT, as it is her husband who died, but they will have a record to check against in future

Really? When my husband died I simply had to get a valuation and the EA knew it was for probate not a sale (I didn't have to pay a fee but I understand that you may have to).
But HMRC definitely didn't poke around my house? I simply had to give them a figure relating to value.
Is this a common thing or are a random percentage of estates selected for a 'check'?

Sorry, should have said re value of the contents (not including the value of the house) in relation to HMRC

This is from gov.uk website re changes announced today.

From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay Inheritance Tax before applying to obtain a ‘grant on credit’ from HMRC.

Op - I am sure some digging will give you the low down in understandable English! Does it mean nothing will be paid before Probate, or only if cash is available in the estate?

This is very useful to explain the situation with IHT and estates and raising the cash to pay IHT James Shack on IHT