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Legal matters

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Flip

Original poster

Inheritance and Residence Nil Rate Band

14 replies

Enko · 29/03/2018 09:40

Mil passed away this week. DH and his sister and executes of the will.

We are obviously all over the place right now due to it being so recent but a quick google today to find out what the Inheritance Tax might be also threw up the " residence nil rate band" I can't work out exactly what this is? It says direct ascendance so children/grandchildren but do they have to have lived with the person or how? MIL has left her estate to her 3 children and estate will be over £325,000,

OP posts:

Helpmeplan · 29/03/2018 09:43

That comes into effect April 6th 2018 for direct descendents or spouse's and takes the main residence out of the inheritance threshold.

Sophiesdog11 · 29/03/2018 11:18

Helpmeplan - where did you get that info from, it is totally at odds with the official info on the increased IHT band and is very misleading. The main residence is not taken out totally, it just allows for a higher IHT relief band.

My understanding is that if there is a main residence within estate, and the proceeds are left to children or grandchildren, they get a higher inheritence tax relief.

So for 17/18, there was a 100k extra allowance, beinging total relief to 425k. This goes up 25k/year, so it should be 450k for 18/19, although I am not sure if it is based on when they died or when probate is applied for? So, in Ops case, will it be this tax years rate or next tax years rate?

The link below explains it better, under "How does the new 'main residence' band work?"

www.moneysavingexpert.com/family/inheritance-tax-planning-iht

Dont forget that if your MIL was married to FIL when/if he died and was his beneficiary, then she will have his £325k allowance too.

Helpmeplan · 29/03/2018 11:47

My compliance manager yesterday. Good to know they have no idea what they are talking about. Just googled it and pulled up the HMRC website. Think I'll send her the link. Ffs.

Helpmeplan · 29/03/2018 11:49

Apologies OP. Thank you 11

Original poster

Enko · 29/03/2018 13:43

Thank you everyone. Yes mil was married to Fil when he died and his main beneficiary

OP posts:

Ladyflip · 29/03/2018 13:51

If FIL inherits everything then he will also acquire deceased MIL's RNRB. Then when he dies, he can utilise MIL's nil rate band and RNRB at the current rate when he dies. If they are married and leaving their joint estate incluing a property to their "lineal descendants" i.e. children, grandchildren etc, then their joint IHT allowance will be £1,000,000 by 2021.

The rate is calculated at the date of death, rather than when probate is applied for.

Original poster

Enko · 29/03/2018 13:56

Fil is dead died 14 years ago MIL was his main beneficiary..

OP posts:

Ang69 · 29/03/2018 17:36

There will be a Nil Rate Band of £650,000 (£325,000 from MIL and FIL). There will also be a Residential Nil Rate Band of £200,000 (£100,000 each) this will go up to £125,000 in April 2018. So, as it stands, there will be no IHT due on the estate if it is valued at £850,000 or under. The estate comprises of all assets both in the UK and abroad, also any gifts in the past 7 years will be counted back in.

Ang69 · 29/03/2018 17:37

Children don't have to have lived with the parents.

Original poster

Enko · 29/03/2018 19:02

Thank you that i understand estimate it is just under 800K so good news

OP posts:

Sophiesdog11 · 31/03/2018 08:23

Ang69 / Enko - I may be wrong, but my understanding is that the Residential Nil rate band is only applicable to deaths AFTER it was first brought in (April 2017) - it wasn't backdated as far as I can tell - so there won't be an extra allowance for the FIL, only for the MIL.

ie 325k from FIL, then 325k plus 100 or 125k from MIL - thus 750 or 775 in total.

Sophiesdog11 · 31/03/2018 08:25

I've just read Ladyflip's comment - The rate is calculated at the date of death, rather than when probate is applied for

So if this is correct, then there will be an IHT allowance of 750k for your MIL.

Ang69 · 01/04/2018 23:49

Sophiesdog11, it will be backdated. Even though it didn't exist when the husband died the estate will have his full RNRB to use. So there will be £850,000 to use against the estate. It is confusing and it took me a while to get to grips with it and I'm a financial advisor so deal with this everyday.

Original poster

Enko · 02/04/2018 14:52

Thank you everyone. We will have a solicitor deal with a lot of it (as MIL set it up that way and its a family friend) so I am sure we will get it explained in time, however we were discussing it and trying to find out.

Right now our focus is the funeral and where to scatter their ashes. Saying goodbye I guess.. (my MIL was a wonderful woman)

OP posts:

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