Inheritance tax because of one person

[Cookiemonstersnana15]

Mil died last week. The proceeds are split between DH and his 2 brothers.
It's come to light that mil had been giving the youngest son over £25k over the last 5 years. Mil was very secretive about her money which was her right.
This means IHT needs to be paid.
DH and one Bil have only received Christmas and birthday money (£50 per event)
Now to my question is the IHT spilt between the 3 as younger Bil won't or can't pay beforehand.

25k won’t entail IT. Think it’s £325,000 per person that means it has to be paid.

The executor needs to sort out what (if any) IHT is due. Regardless of what your brother in law thinks, it is deducted before the estate is distributed.

IHT is payable by the estate not the beneficiaries so unless the brothers work out a different split they would each pay equally (assuming they have been left an equal share).

Who is the executor? Is there a probate solicitor involved?

I suggest you move this to Legal Matters

The £125k in addition to what she's left presumably takes the figure over the IHT threshold

wierdly in the same situation.

il’s had been giving one child and their children very big sums of money. It’s at least 150k in the last year, probably far more over the last 7.

inheritance tax is paid from the estate, before assets are distributed. So unfortunately it will be assets - IHT, then divided by 3.

You have not said what the size of the estate is. And was she to giving away £25k a year or £25k over five years. And other posters are right inheritance comes out of the estate and not paid by individuals AFAIK.

Surely the iht is paid before they go for probate.
The estate is worth £315k. The 3 are executors.
Dh is thinking that they should involve a solicitor
as this is turning unpleasant.
Fortunately there is no house to sell just isas and bonds.

Which country are you in?

The IHT is paid by the estate and the beneficiaries get the remainder

This means the youngest will receive £125,000 more than everyone else after tax.

Get a solicitor in. This sounds a lot like favouritism and toxic family relationships will sour an already fraught process

IHT is paid from the estate BEFORE it is distributed and after probate so they'll each have their share reduced by the same amount.

Get a solicitor to sort it out if it's getting nasty.

She had a right to give her money away as she deemed fit in her lifetime. Follow the law and pay from the estate before distribution; the will must be followed.

You should definitely get a solicitor!!! Now. Otherwise there will be things said and done that can’t be undone and they are all grieving.

Will be better if you can resolve the matter without the need for a solicitor tbh. You are likely to run up a substantial bill otherwise, most solicitors will want money on account before they start. Good luck.

Do you mean £25k every year for 5 years or in total over the 5 years?

Any IHT comes off the estate first, then whatever is left is split. The executor should sort it all out and use a solicitor (paid out of the estate) if needed. £25k over 5y isn't likely to be hugely relevant.

Though if the estate is only worth £315k there won't be much, if any IHT to pay.

This means the youngest will receive £125,000 more than everyone else after tax.

Not necessarily - there may be an equalising clause in the Will or in a codicil (properly attested) which takes into account lifetime gifts to another beneficiary.

It also all depends on where the estate is? England/Wales, Scotland, elsewhere?

IHT would have been payable whether she gave the money away or not, the estate would be £125k larger if she hadn't "spent" it.

The estate pays the tax.

So if I've understood correctly the estate is:
£315k left now
£125k gifted over 5 years, minus annual gifting allowance of £3k per year = 110k
Total £425k, of which £325k is tax free. IHT will be due on £100k of it, but some of the gifts will be at a lower rate of IHT because of taper relief.

No house, so IHT threshold is £325k.

BUT: were MIL and FIL together, and did FIL leave his entire estate to MIL? If so, his IHT allowance would also pass to her. Did she own a house previously which she sold after 2015? in that case, the estate might still qualify for the residential nil rate band, taking the total up to £500k.

was it 25k in total or 25k per year? a parent is allowed to gift each child 3k per year without incurring tax. if the total inheritance at this point is 315 plus 10k surplus which has been given to BIL then inheritance tax may very well be due on remainder. bil might be asked to pay back 10k. let the solicitor sort it out but whatever happens i would make sure that dh and your other bil receives the equivalent bil received before estate is divided into 3!

The tax free element of £325,000 will be partially used up against the gifts your MIL gave to your BIL. However depending on the circumstances, the estate might able to use the nil rate band from a previously deceased spouse ( taking the “tax free” element to £650,000). Also if there’s a house being left to the children, then there will be an additional £175,000 tax “free”. Again the 175,000 could be increased if MIL had inherited the house from her spouse

@BarnacleBeasley has it right.

If IHT is payable then you have to start paying it 6 months after the person has died, whether you've received probate or not.

You need to get the full picture of her estate and the gifts before you start panicking and/or getting pissed off. You may not need to pay IHT at all.

On £315k there will be no Inheritance tax that needs to be paid anyway

Fil died in 2001.
Mil went into a nursing home and her home was sold.
It was £25k every year for 5 years.
She had all her faculties just couldn't walk and other ailments.

Who has said there is inheritance tax to pay?
The gift is taxed separately. It is not added to the estate.
Read this carefully and take advice.Do not complete the probate forms until you take advice. https://www.gov.uk/inheritance-tax/gifts. Your BIL will need to pay tax on tge £25k - sliding scale suggests 16%.