Inheritance of house only child

[OrangeCinnamon1]

I've been talking to DH and very worried he doesn't fully realise the implications of Inheritance Tax. At present if we ever have to pay it he is thinking sell our house and pay it with that. Problem is I don't think sales from our three bed semi going to cut it. He is an only child, we have one child , , ,parent on their own. We think assets are 2.5 to 3 x the value of our house.
The.house was bought cheaply in a gorgeous location and his Stepdad worked nights for years to renovate it, this would be the main reason he wants to keep in the family regardless of value. The issue is it is in one of those places where house prices have risen so much. Would we be able to get a mortgage to help pay off the cost of the tax?

I am worried DMIL is not very elderly (75) but they just don't talk about the mechanics. DMIL also has money put aside for care home fees.
Where on earth do we start getting advice or even practical tips how to talk about it? This worries me as we bought our house later in life , have a long expensive mortgage and ourselves have few assets.

@daisypond

How do you pay inheritance tax, though, if you have to pay it before probate and before you’ve received any assets? Do you have to get a bank loan?

This was exactly what I was thinking. It all seems a minefield.

Op, it makes perfect sense.

The executor has to get a valuation before probate is granted. It can be at the bottom end of the market, the estate agents understand, and will have done it before. It needs to be sensible rather than 'lets see what we can get for it'.

@OrangeCinnamon1It was; it was the family home and it meant a lot to other members of the family. Whilst it would have made more financial sense to keep it (London property mortgage free), in the end I didn't want the financial responsibility of owing the tax man every year. The tax bill was pretty big and it was a relief when it was paid in one chunk. I bought my own house with some of the money and gave the rest to family members. Unless the house has sentimental value and you're willing to live in it as your main home, I'd suggest selling it. I have no regrets.

This seems such a non problem to me. You might (only might) inherit a really valuable property but you might (only might) not be able to keep it.

Come on OP, this is a bit ‘my diamond shoes are too tight’, isn’t it?

Yes. What if you even haven’t got a house to sell? Or any savings? If you’re unemployed, with no assets or savings, in rented accommodation, but you inherit a mansion from some distant uncle, what do you do? Obviously, in the long term it’s great, but what about the short term?

I think you need to get proper legal/tax advice. For all it's virtue random advice on Mumsnet won't cut it. If the estate value is as high as you seem to suggest professional advice will be cheap in comparison.

@HeddaGarbled

This seems such a non problem to me. You might (only might) inherit a really valuable property but you might (only might) not be able to keep it.

Come on OP, this is a bit ‘my diamond shoes are too tight’, isn’t it?

No, that missing the point. The point is, how do you pay inheritance tax before you have inherited? Because that is often what you have to do.

@daisypond

Yes. What if you even haven’t got a house to sell? Or any savings? If you’re unemployed, with no assets or savings, in rented accommodation, but you inherit a mansion from some distant uncle, what do you do? Obviously, in the long term it’s great, but what about the short term?

You sell the inherited house and pocket the cash!

You sell the inherited house and pocket the cash

You can’t. You haven’t inherited the house yet, so you can’t sell it. You have to pay the bill first.

@heddagarbled Nope no Diamond shoes here am afraid. Much as I crave validation from those that hang around the legal board.

@SirGawain

I think you need to get proper legal/tax advice. For all it's virtue random advice on Mumsnet won't cut it. If the estate value is as high as you seem to suggest professional advice will be cheap in comparison.

Thanks @SirGawain am I looking too far ahead , just get the advice at time as another poster said?

@daisypond

You sell the inherited house and pocket the cash

You can’t. You haven’t inherited the house yet, so you can’t sell it. You have to pay the bill first.

Of course you can sell the house to pay inheritance tax

Agree with others, this is a non-problem because it may never happen.

But you can't keep a valuable house just for sentimental reasons.

Simple google, first result:

www.gov.uk/paying-inheritance-tax/yearly-instalments

[quote PearlHeart3]@OrangeCinnamon1It was; it was the family home and it meant a lot to other members of the family. Whilst it would have made more financial sense to keep it (London property mortgage free), in the end I didn't want the financial responsibility of owing the tax man every year. The tax bill was pretty big and it was a relief when it was paid in one chunk. I bought my own house with some of the money and gave the rest to family members. Unless the house has sentimental value and you're willing to live in it as your main home, I'd suggest selling it. I have no regrets.[/quote]
Yes , DH would want to live there. There was so much work put in the house, literally as StepDad was trades. I can see the decision might be taken out of our hands though.

Of course you can sell the house to pay inheritance tax
How can you sell what doesn’t legally belong to you? You can’t produce any deeds with your name on.

You would have to get a bridging loan and if you couldn’t afford to pay it back, you surely would have to sell the house or sell something to pay it back

Can you get it transferred into your name straight away? If so that will help reduce the inheritance tax - this goes on a sliding scale over the next 7 years. It may also help protect the inheritance if they need nursing later.

A lot will depend on the government at the time especially with the Covid bill to pay back

@daisypond

Of course you can sell the house to pay inheritance tax How can you sell what doesn’t legally belong to you? You can’t produce any deeds with your name on.

Because the house becomes yours on the death of the owner, once probate has been completed. IHT is not due immediately. See link: www.gov.uk/paying-inheritance-tax/yearly-instalments

The title deeds would be assented to the person(s) who inherit the house according to the Will at point of sale. Probate will need to be granted but the estate doesn't need to have been wrapped up yet (including settling any tax that might be owed). Probate just confirms the Will is valid and formally appoints an executor(s)/administrator(s).

[quote RhymesWithOrange]Simple google, first result:

www.gov.uk/paying-inheritance-tax/yearly-instalments[/quote]
Yes if you know about yearly installments. I had been through all the stuff on gov uk about Inheritance itself.

@WitchDancer

Can you get it transferred into your name straight away? If so that will help reduce the inheritance tax - this goes on a sliding scale over the next 7 years. It may also help protect the inheritance if they need nursing later.

This absolutely does not work. It's a gift with reservation of benefit and is ineffective for inheritance tax unless the former owner pays you full market rent for their occupation for the rest of their life.

Yes , once probate is completed. Precisely. You have six months to pay up. But probate can take much, much longer than that. A friend is going through it now, and it’s a year on and probate still hasn’t come through.

It would be easy to get a loan if probate was taking ages though as the house would be security for it, it must be quite common, well perhaps not that common for someone with no spare money to inherit and have to pay this

Try googling care home fees before you assume your husband’s heartbreak at having a huge inheritance tax bill. Never assume you’ll get anything.