Funding Inheritance Tax

[midnightservant]

If cash in estate doesn't cover IHT, I understand banks will lend against estate equity. But what are the terms, does anyone know? And how long would it likely to be for?

I don't know about bank lending terms, but you can pay IHT on certain assets (certainly property) in instalments over 10 years. Interest is payable, but not at a commercial rate. There is information about this on the HMRC website. It might be worth looking at whether you could do this as it may be cheaper than taking out a loan.

Can't do it for equity. as I understand it.

Who also should pay IHT - is the beneficiaries or the estate?

I'm interested as dh's Dad is dying and has left a mess - marital property held as tenants in common - dh and his db have been left dfil's half of the property, whilst mil keeps her half. We may have to pay IHT on an asset we can't realise as mil will still live there, plus we will have to pay CGT eventually.

Can see me selling my house to do this!

The IHT threshold is £325k, so there will be no IHT to pay unless the property is worth more than £650k (assuming there are no other significant assets). IHT will then be charged at 40% on the amount over the threshold. So if the estate is worth, say, £400k the tax payable will be £30k.

Who pays IHT depends on the circumstances but usually it is paid by the executors using money from the deceased's estate. However, there are some circumstances in which the beneficiaries may have to pay IHT if it cannot be met from the estate.

If there is a problem your husband and his brother may be able to use a deed of variation to alter your father in law's will in order to minimise or eliminate IHT and CGT problems.

House worth about £550-600k, fil also has cash/investment assets and chattels which roll over to mil so I presume spouse exempt transfer on those. Difficult to sort out what chattels are his as they have been married 52 years and most things are joint iyswim.

The CGT problem will not go away as far as I can see, and given the way things are with mil at the moment, neither dh nor his brother are inclined to sign the house completely over to her.

there is a free cgt uplift on death. sounds like there's no tax to pay, though i might be confused as there are 2 stories on one thread.

Happy to run with scary's scenario - phew, sounds like you could do with it.

As Collab says, CGT is kind of reset when the half house passes to you, and is payable on the increase in value from then to when you dispose of it, not the amount you get for it.

So depending on much fil leaves to mil, the IHT question will mainly arise at her death.

Sorry, use of 'so' is confusing there. I meant it's a separate issue, further down the line.

I know that the CGT clock doesn't start ticking until dh and his brother own their Dad's half of the house, but given that mil could go on for another 23 years (as her Mum died at 98), that's a hell of a long time for property to be rising!

Fil has left his share in the property to dh and dbil, everything else to mil, according to the will, free of inheritance or any other tax, and the same wording applies to the house for dh and dbil. I hope that means any tax due should come from the estate. At least with CGT we can sell the house and then pay the tax. It was the thought of having to pay IHT before we can get probate, and mil refusing to pay it from the estate that has me in a sweat.

You just need to speak to a solicitor or accountant. They will be able to get the salient information from you and then tell you if there are taxes to be paid. They can also advise you on any way inwhich you can minimise your eventual cgt bill.