Paying IHT

[waitingforpost]

The pension changes means more people will get pulled into the IHT threshold & on here a lot of people talk about their 1m plus homes.

Should the 6 month limit to pay free of interest be increased? Surely most can't pay it until a house is sold?

It will likely go on care anyway so as you say no point worrying about it. I was just wondering what other people thought as the pension changes will pull more people in.

If you’re single with no children the IHT limit is £325k.
There is a £175k main residence relief if your estate is going to your direct descendants.
so this can mean a single parent can have IHT relief up to £500k.

The mythical £1 million IHT limit only applies to a a widow/civil partner leaving their residence to children or grand children
ie 2 x £325k IHT relief & 2 x £175k main residence relief = £1 million.

For the rest of us singles with no children, IHT starts at £325k…

Not correct. If you are single with no direct descendants it’s £325k

Sod off. Take your own insurance policy out in anticipation of your parents death and see how that feels.

I know. I was talking about a couple, who both use the nil rate allowance. So there CAN be 1 million inheritance without IHT, as much as as some CAN get hit if over £325, if they are single.

Maybe call it a range. Between £325 (for the single folk with no property/ decendents) and 1 mill (for the couple with property/ decendents).

I have no idea why you are telling me to sod off. Would you care to explain?

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.

So there CAN be 1 million inheritance without IHT, as much as as some

But that isn't what you said

"If an estate is large enough for IHT, then it's over 1 mil."

You missed out some...

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?

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

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.

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.

Won't an insurance policy be expensive though? Many older people are cash poor.

Sweet Jesus.

Exactly!

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.

Sweet Jesus.

Indeed! 😆

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

@Toastandbutterand I think so, I was interested to hear how others handled it.

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.

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.

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).

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.

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.

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