Inheritance tax question

[MrsSchadenfreude]

My Mum has just died, and has left me an overwhelming amount of paperwork and bits of money all over the place. When my Dad died, she said that the inheritance tax allowance was rolled forward so that I would have double the usual threshold amount. Is this the case? He died in 1999, so presumably the threshold was different then. Do I need a lawyer to sort this out?

www.gov.uk/guidance/transferring-unused-basic-threshold-for-inheritance-tax

I think if your father’s IHT allowance was unused (passed straight to your mum and not down a generation) then your mum has £650k allowance. Remember if family home forms part of the estate it can be up to £1 million.

This link I think confirms what you suggest OP - also says best consult a lawyer, which will be money well spent if a large estate is involved.

www.ghplegal.com/ghp-insights/2014/03/qa-can-my-late-fathers-unused-iht-threshold-be-transferred-to-my-late-mothers-estate/

You don't "Need" a lawyer, but if you're struggling it may be a good idea.

As for the transfer of your father's IHT allowance, no you don't need to worry about what the threshold was back then. It works on percentages. If none of his "nil rate band" was used at the time (i.e. all assets transferred to your Mother) then there is still 100% of his nil rate band available to you, at today's amounts, so it's £325k for your mother and £325k for your father, so a total of £650k plus another £175k (total £350k) if the asset includes the family home, so potentially up to £1m IHT free.

You'll need to find all the paperwork re your Father's death, i.e. his will, probate if done, documents showing "equal" ownership of assets etc that passed to your mother exempt from IHT and "proof" that all assets were transferred to her, i.e. that the valid will showed no assets transferred to anyone else (which would have used some of his nil rate band leaving a smaller proportion for you).

Sorry for your loss @MrsSchadenfreude

Obviously get professional help if you need it, but I found it relatively straightforward to deal with my Mum's estate, and like you, incorporated the unused element of my Dad's inheritance tax allowance.

I found the people at the Probate Office really helpful, and they were happy to assist with any queries I had.

It's time consuming - but you would be the one sorting out all of the paperwork for the different accounts/investments etc. even if you did employ a professional to pull it all together.

Please accept the sympathies of an internet stranger. You can use a lawyer or you can do it yourself. Take a few days to settle yourself before you decide, it's a hard time and there isn't a need to rush.

Your starting point for your question is probably here

www.gov.uk/guidance/transferring-unused-basic-threshold-for-inheritance-tax

The threshold was different when your father died, it was either £223k or £231k depending on when in the year he died:

www.gov.uk/government/publications/rates-and-allowances-inheritance-tax-thresholds-and-interest-rates/inheritance-tax-thresholds-and-interest-rates

You can also transfer your father's unused residence nil rate band.

I would suggest getting a filing box to keep all the paperwork in because otherwise it takes over the house and sorting through all that you have isn't going to be a two minute job. I went through probate earlier this year, if there had been a chance of an inheritance tax liability I might have called in a lawyer but there wasn't so I didn't. I went old school with paper letters and stamps to the people with the bits of money because it avoided spending hours in a phone queue. They will give you a value of the accounts at the date of death and either freeze them until probate is granted or (if small amounts) they may release the funds without seeing the grant of probate.

Thank you all for your kindness and help. I think I can probably manage to do it myself in slower time. I’ve sorted the papers into piles for now and will buy some boxes tomorrow. Neither of my parents threw any paperwork out, so I am confident that I will have everything I need.

Is there any possibility of the will being challenged or awkward beneficiaries?

If so, then best to use a lawyer, in fact, best to use the lawyer who drafted the will in the first place (or at least the same firm).

I'm an accountant and have twice had clients who've experienced contested wills or "PITA" beneficiaries arguing/challenging everything. In both cases, it was the original solicitor (or their colleagues) who dealt very satisfactorily with the complainants. In one case, a "wronged" family member contested the will, but the solicitor had notes on his file of meetings with the deceased explaining why that family member was being excluded, which formed an affidavit filed in the court to prove intend of the deceased and that he'd not just "forgotten" to include that family member!

Apart from two bequests to my children, I am the sole beneficiary, so any challenge unlikely.

I sympathise with the feeling of being a bit overwhelmed with paperwork after someone's death... it is really hard. My feelings were that I'd need to provide a lot of the information to a lawyer (bank account numbers etc), and once I'd engaged a lawyer I'd lose control of how quickly things could be done. So I did it myself, and found it fairly straightforward. I wouldn't have done this if it was a complicated estate or a complicated family!

I wrote out the steps to share, in case this is useful for anyone. In our case we had to pay inheritance tax, but obviously everyone is different. I've included some dates to show how it worked out for us. Hope this is helpful!
Good luck with it!

Background - my mother died in April 2022 in England, with a very straightforward will and estate. She was divorced, and had a house and some savings which took her a little over the inheritance tax boundary. She had 3 executors, who were also the beneficiaries.

Step 1a - Value assets. Draw up list of all assets and any debts. Inform banks etc of death. Accounts will be frozen. Ask each bank for "date of death" balance and inform them of change of address for post. Get estate agents to value property.

Step 1b - Apply for the IHT Reference number (you need this on your IHT forms, so need to send off for it at least 3 weeks before sending off IHT form) - use Schedule IHT422.
Sent off 28/4/22; received 20/5/22 [3 weeks]

Step 2 - Fill in Inheritance tax forms and pay IHT - IHT 400 and associated Schedules. These are paper forms (as of July 2022). You need to fill in about half of IHT400, then the additional Schedules, then the rest of IHT400. Once IHT400 is complete you will also need to fill in IHT421 (the Summary form) and I also had to do IHT435 (the Residence Nil Rate Band claim form). You will also need various attachments (eg estate agent valuations of property, copy of the will, etc, and I sent a covering letter detailing what I enclosed). There is a helpline (0300 123 1072) which generally was excellent (although on one occasion their advice was incorrect).
Sent off 10/6/22. I then received IHT301 and IHT302 on 18/6/22
[1 week - this is exceptionally fast, I think we were lucky]. These told me what IHT I had to pay (I opted to pay in instalments, because we had to sell the house first.)I paid IHT online on 18/6/22. IHT421 (the stamped Summary form) was sent by IHT to the Probate office.

Step 3 - Apply for Grant of Probate. This can be done online (and note that the online form asks slightly different questions compared to the paper one). The Probate office says you should only apply 20 working days after having sent your IHT forms to HMRC. After you submit it you are told what you need to send them by post (the original will etc) and given a Probate Reference number. And you have to pay for it (£280).
The Probate people have a "target" of dealing with cases within 8 weeks and you cannot follow up with the Probate Office until at least 8 weeks from the time of application. There is a helpline Probate info line: 0300303 0648 and a webchat facility (www.apply-for-probate.service.gov.uk/avaya-webchat). I used the webchat facility to check my documents had arrived, as was concerned when I hadn't heard anything. I found both excellent.
Applied online 26/6/22; and sent off attachments on 27/6/22
Received email confirming probate granted on 25/7/22 [4 weeks], and hard copy arrived in post about 3 days later. [Again, this seems to be fast compared to others - maybe we were lucky]

Step 4 - Collect the assets. Many bank accounts will transfer balances of a few thousand without grant of probate, so we had begun this process earlier. Larger sums need the probate granted, and of course if you are selling a house. We were advised by our estate agent to only market the house once we had applied for probate. We had everything ready to go, so that once grant of probate came through it could be marketed. I initially thought we'd set up an Executor account to collect the assets, but most banks do not have them anymore, and I couldn't see the point. Other beneficiaries trusted me, so we used a dormant bank account of mine as the account for anything related to her Estate.

Step 5 - Prepare final estate accounts - STILL TO DO
Step 6 - Report estate to HMRC - STILL TO DO
Step 7 - Pay out - STILL TO DO

Good luck, I did my parents paperwork myself, my Dad's allowance rolled to my Mum, and it was fairly simple after she passed. HMRC were very helpful. All the banks, utilities etc I spoke to had a bereavement department and were all helpful. Just make lots of notes of what you are doing and be as organised as possible. I just did a bit every day, you don't have to fo it all in one go.

@QuestionsOnAPostcard, thank you so much for this. Also, to you and to @MrsSchadenfreude and condolences to both of you. It's a tough time.

This is one of the most helpful posts I've ever seen on Mumsnet. My parents are very elderly and my father's health is deteriorating so I am contemplating having to tackle this at some point. It's very useful to have an idea of what's involved, and it's reassuring to see that one of the big things that will have to be done at a difficult and emotional time is actually manageable and help is there if needed.

@QuestionsOnAPostcard thank you so much - you are an absolute star. So helpful. I don’t actually live in U.K. so I’m going to do what I can this week, come back for the funeral and add on some leave to do some more then.

Do I need to fill in the inheritance tax paperwork even if I don’t think any is due, or do I fill it in and then they either confirm or tell me what I have to pay?

@MrsSchadenfreude I'm afraid I don't know as it depends on various things. Have you found this website, which I found useful: www.gov.uk/valuing-estate-of-someone-who-died/check-type-of-estate

It is part of the govt website "What to do when someone dies" which is here

Hope these help.

The other website I found very useful is the Deaths and Probates part of moneysavingexpert - here, as lots of my questions had been asked by others before. And it has q a good search function.

Another tip - make an excel sheet, with each row being a "thing" that needs sorting (gas bill, bank account A etc etc); put all account numbers onto the excel and the phone number for bereavement dept of each organisation. Then each time you ring them make a note in the next column of what was done, and what next steps are. As things were closed or sorted I moved them down to the bottom of the table, and so I could see my to-do list getting smaller. And it helps you keep track.

Hope that helps and good luck with it all.

You do need to fill in the inheritance tax paperwork anyway, so that HMRC know that there's no tax to pay.