A few inheritance questions

[JoggingRoundProvincialTowns]

My dad very sadly died very unexpectedly a couple of months ago. I wonder if anyone would be able to help us with some inheritance questions. In the last 7 years there have been gifts given to my siblings totalling about 500k to help with purchasing their homes.
In the will he has left me 300k and my sister 75k as he was making the gifts to us all fair and even. Everything else will go to my mum (a fairly substantial amount of money and a house). Their money has always been split fairly evenly, some in joint account and some separate accounts and shares.

We're not really clear if the gifts count as solely from him or from both my parents, we've found at least one payment from a joint account, but some may have been from his personal account.

At the moment we're having a lot of problems getting through to the solicitors he made the will with. We are wondering what to expect regarding inheritance tax.

Will all the money he has given to my siblings now be taxable (above the 325k threshold)? Plus the amount left to my sister and me in his will?
Or is it more nuanced because it was a gift from both my parents?
We know at least some of the money went straight from my dad to eg my brothers solicitor, I don't know if this will be included as well?

Really appreciate if anyone has any ideas as the more we read the more confused we are getting! Thank you so much in advance.

I am starting with the assumption your Dad lived in England.

IANAL the first thing you need is a spreadsheet or table showing amounts gifted and when.

You need legal advice about the gifts. If your parents had joint finances it is likely you can deem the gifts to be from both of them. At worst the gifts from the joint account should be 50:50.

There is an IHT taper on gifts which may apply, but again you need legal advice.

Anything left to your Mum should be exempt. Your Dad has an IHT tax free amount of £325 but this may be used up by the gifts already given Anything over this amount not given to your Mum will be liable for IHT at 40%.

There is also the RNRB of £175k if your Dad left property worth at least this to his children. Given what you have said about being left cash it is unlikely you can use this. However, when your Mum dies, unless the rules change, you can use it then.

The executors really do need to get legal advice and to move this forward asap. There is a time limit of 6 months to sort out IHT and make the first payment, and you have already lost 2 months.

You need legal advice asap.

OP, can I kindly suggest you post this on the MSE Deaths, Funerals & Probate forum as there are some very knowledgeable posters there.

But, talking to a solicitor (Private Client/Estate Planning) would be sensible as it sounds like this could be complicated.

This is quite complicated and without full knowledge of the transactions it is difficult to advise. I'll give you some information and you can try and make sense of it:

1. Both your mother and father would have had an annual allowance of around £3k each to gift. This would be aggregated (i.e. £3k total, not £3k per recipient). They would have been allowed to use their full allowance in the year plus any unused allowance from the year prior (but no more than one year).

2. They would have been allowed to give their children up to something like £5k as a wedding gift and any grandchildren something like £2.5k as a wedding gift.

3. Transfers to spouses are exempt from IHT;

4. Each of your parents would be allowed lifetime transfers of up to the threshold of £325k. Depending on what account it came from, you might be able to decide the most tax efficient way that £500k went from your parents to your siblings. Amounts in excess of £325k in a person's lifetime may either be a chargeable, potentially exempt or exempt transaction. Yours sound chargeable to me and would be taxed at 20% over the threshold.

5. There is also offsets and tapering. Where chargeable amounts have been paid in the past and are still taxable on death, you can offset the 20% tax paid already and also calculate what IHT payment is left to pay. If the gift was made at least 4 years ago only 80% of the gift is considered up to 7 years when none of the gift remains taxable to IHT.

6. Whether the transaction materially affected the value of the testators estate. If you are a billionnaire, you can gift someone £500k once a year without it being chargeable. The impact on the estate is tiny. If you are only worth £1m you can't as the impact is huge (very unfair in my opinion by the way).

I think there will be some IHT payable but it is going to depend on the timing of that £500k being gifted, use of annual allowances, any weddings in the family, who is deemed to have paid and whether it materially impacted the value of the estate.

Once you've written it all down so you have it clearly laid out in front of you, the HMRC helpline are actually pretty good at giving answers.

In your case I'd start there given you know your specific questions. I wouldn't be paying a solicitor to advise on this.

Thanks so much everyone for such detailed, helpful advice. It has helped me get my head around it a bit more.

We will be using a solicitor moving forward as there's a lot to consider and none of us have any experience or feel confident in this area.

Really appreciate everyone's advice which has given be a bit more of an idea of what to expect.

I'm a trainee solicitor and I still haven't fully got my head around IHT computations! The timing of the transactions will be key. I suggest you draw a table with seven lines representing seven years and two columns, one for your mother and one for your father. Add an annual allowance of £3k each to each year and another £3k each in the first year assuming they used no allowance 8 years ago. Next consider any weddings in those years and add allowances for those gifts. Then add in the transactions plus any tax already paid. That will give you a clear picture that you can hand to someone who understands the computations.

You say this is a quite large estate with complications of large gifts. The deceased really should have done some estate planning to minimise inheritance tax but unfortuntely hasn't, and it's important that the tax liability is worked out right, both how much and who is liable to actually pay it.

Why scrimp and try to DIY it with advice from the internet? Whoever is the executor(s) should be seeing a solicitor ASAP to make sure that you/they get this right. You can still do most of the work yourself to minimise how much you need to pay them, and select on the basis of recommendations and those who don't seem to want to 'do it all' for a more-than-princely (rip-off) sum. But a good solicitor who will work with you on this will be worth their weight in gold.

There is a time limit on inheritance tax payments so you should crack on, but you can, I believe, overestimate and pay it on time and get a refund when it is finalised - some friends did this because their situation was complicated and taking too long.

Good luck, and I am very sorry for your loss.

Disclaimer: IANAL.

@ThePeachIsSoUnusual I think my dad was considering this when he gave away the gifts a few years ago. His death was very sudden and unexpected and at a relatively young age, and has come as a huge shock to us.

I thought the advice on here might clear up some of the questions I had, which it has, and give us a bit more of an idea of what will be owed IHT wise. We were always planning on using a solicitor as well as this, but appreciate the feedback as think this has given us a bit more sense of urgency with getting it sorted.

@FSTraining thank you, very sensible advice and glad to know even the experts find it tricky!