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Inheritance tax because of one person

67 replies

Cookiemonstersnana15 · 10/10/2023 09:15

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.

OP posts:
WaitingfortheTardis · 10/10/2023 10:35

She wanted to give money to her youngest son, I really don't think you need to get a solicitor involved. She made that choice willingly and wanted the remainder to be equally split, whether or not inheritance tax was due. I don't think you should all get too hung up on who did what or who was more helpful , that will only breed more resentment. Just split what there is after everything else (funeral costs, bills, tax if due) by 3.

Finteq · 10/10/2023 10:37

SlipSlidinAway · 10/10/2023 10:09

Is there a reason why you think your FIL's IHT allowance wouldn't pass to your MIL making the tax threshold £650k?

This.

I don't think any tax is due

Softnatural · 10/10/2023 10:56

user1497207191 · 10/10/2023 10:34

No, but a solicitor can tell the beneficiaries the proper, full, facts about the IHT due, who gets what, etc etc., and more importantly check that the numbers are correct on the IHT return.

It sounds as if the brothers don't really understand what's going on, and could well end up arguing and making mistakes. Sometimes, you need someone like a solicitor to act as a kind of referee to stop the squabbling and half-baked opinions etc.

Me and my sister don't get on. Mother knows this, and despite either of us being perfectly capable of acting as her executors (I studied executorship and trust law as part of my professional qualification), she's appointed her solicitor to do it, just so that we don't fall out any more. She knows that it will cost a few thousand and accepts that as the path of least resistance. I had no wish to act as executor on my own as I know sister will dispute/argue about everything. I also wouldn't want to act as joint executor with her as we can't work together on anything. So, mother appointing the solicitor is a much better solution. Sister and I will get our share of her estate (if anything left after care home costs), no hassle, no arguments and minimal amount of contact between us. It's well worth the cost!!

But with a simple estate like this it's very easy to do using the .gov online calculator.

It's up to you if you can't be adult enough to do it yourselves, but having a solicitor act as executor for a high worth but not complex estate is money down the drain. You might think differently when you find out what their fees will be.

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user1497207191 · 10/10/2023 11:11

Softnatural · 10/10/2023 10:56

But with a simple estate like this it's very easy to do using the .gov online calculator.

It's up to you if you can't be adult enough to do it yourselves, but having a solicitor act as executor for a high worth but not complex estate is money down the drain. You might think differently when you find out what their fees will be.

Nope, I know exactly what their fees will be. It's more than worth it for peace of mind of not having to deal with my sister. I'm an accountant and have seen, far too often, the fallout from family arguments about money, especially on death, and especially when one or more beneficiaries simply won't listen to what the law/will says, or don't understand it, claiming the will means something completely different. Unless you've been involved in some of these disputes, it's hard to understand how much conflict and argument they can cause. Even things clearly written in black and white can be argued by some people who simply won't accept it because they've been told by "a bloke down the pub" or read something on facecloth or twatter, something completely different.

I've seen disputes with clients, some going to court, where an aggrieved relative has tried to claim all kinds of things, i.e. not of sound mind when making the will, mistakes in the drafting, claims of executors making mistakes, and of course procedural errors when making the will, i.e. not getting it witnessed or getting it witnessed by a beneficiary, or it not being dated, etc etc. I'd never either write a will nor be the executor, without engaging a solicitor to ensure it's all done properly and to keep potential aggrieved family members at arm's length!

Horses for courses, you have your opinions, I have mine. Of course, lots of people can write their own wills successfully and act as executors without problems, but I can assure you, lots of others don't have an easy ride, even though in theory, it should be so simple!

Cookiemonstersnana15 · 10/10/2023 11:15

@user1497207191 I've read the information and we have got it wrong.
Thought the £125k had iht.

Panic over we misunderstood the whole process.
Thanks for your help everyone.

OP posts:
Chewbecca · 10/10/2023 11:16

'because of one person'
Don't lose sight of the fact that it is because of your MIL, not your BIL.

Inheritance tax is paid by the estate and the remainder is paid out to the beneficiaries.
I agree with using a solicitor, especially if the executors are not that clear on rules / calculations. It's not that expensive and brings a lot of peace of mind and removes the likelihood of ugly behaviour which easily emerges in such situations.

MikeRafone · 10/10/2023 11:17

BarnacleBeasley · 10/10/2023 09:31

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.

this is explaining it

and since we now know that FIL died in 2001 - his IHT threshold also passes on - so you've got £650k if FIL left everything to his wife

If you telephone the probate office - they were very helpful in what forms etc to fill in.

You may need to get the death certificate reference for FIL from the GRO indexes, to show that FaIl died and left his estate to MIL - if that is the case

user1497207191 · 10/10/2023 11:27

Chewbecca · 10/10/2023 11:16

'because of one person'
Don't lose sight of the fact that it is because of your MIL, not your BIL.

Inheritance tax is paid by the estate and the remainder is paid out to the beneficiaries.
I agree with using a solicitor, especially if the executors are not that clear on rules / calculations. It's not that expensive and brings a lot of peace of mind and removes the likelihood of ugly behaviour which easily emerges in such situations.

I agree about it not needing to be expensive. The key is for the deceased person to have made their estate easy for someone to deal with after their death. I.e. organise paperwork etc so that all relevant information is complete and in one place, preferable a large file, i.e. bank statements, share certificate, investment/pension statements, etc., and preferably an up to date list of all assets, i.e. bank accounts, pension schemes, life insurance policies, investments, etc. Solicitors costs are mostly in doing pretty basic "fact finding" work, often taking days to wade through boxes of paperwork going back years, if not decades to try to work out what's what, all of that time could be avoided if they're presented with a file of relevant information/documents in the first place. It can knock thousands off their costs!

Silvers11 · 10/10/2023 11:28

@Cookiemonstersnana15 I seriously agree with your DH - get a solicitor who can work out whether Inheritance Tax is actually due. It's much too complicated for him and his brothers to sort out given what you have already said. There may end up being no IHT due

SheilaFentiman · 10/10/2023 11:33

Glad it’s sorted and there is no iht, op.

WhistPie · 10/10/2023 11:38

I would seriously suggest that you get someone involved who understands IHT because it seems that the executors don't!

Abovemypaygrade · 10/10/2023 11:52

Get a decent solicitor to handle probate and use the solicitors recommendation of an accountant to handle the tax
it’s worth the professional fees to lessen the cost of family fall out
the fees and tax ( unlikely in this instance ) will come from the Estate before distributing it amongst the brothers

RB68 · 10/10/2023 11:55

If the 25k is part of the estate it is calculated into distribution as well as IHT

so if the total of the estate is 350 inheritance is paid on the amount that falls into that ie 25k at 40% I think it is so total payable is 10k, this has to be paid before probate or letters of Admin are granted. Once granted the total of the estate is 340 that is then split 3 ways BUT obviously the youngest child has received 25k already so he gets 88,330 the rest split between the others. Might be worth paying a solicitor to sort properly so there is no argument

RB68 · 10/10/2023 11:56

ahh yes different given death was so long ago for FIL

Bellyblueboy · 10/10/2023 11:57

Heavens you can see why families fall out over money! Turning nasty and no one even had the facts! Finger pointing about who visited most and who this lady gave her money to! Daughter in law talking about getting solicitors involved to fight over money.

very Sad for this family.

user1497207191 · 10/10/2023 11:57

RB68 · 10/10/2023 11:55

If the 25k is part of the estate it is calculated into distribution as well as IHT

so if the total of the estate is 350 inheritance is paid on the amount that falls into that ie 25k at 40% I think it is so total payable is 10k, this has to be paid before probate or letters of Admin are granted. Once granted the total of the estate is 340 that is then split 3 ways BUT obviously the youngest child has received 25k already so he gets 88,330 the rest split between the others. Might be worth paying a solicitor to sort properly so there is no argument

So much of that is completely wrong, hence why the advice from so many posters to use someone who knows what they're doing, i.e. a solicitor!

SheilaFentiman · 10/10/2023 12:00

People, no need… the OP has confirmed no IHT after all

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