Who pays IHT in these circumstances?

[Nimbus1999]

No will, daughters are executors.

Property owned jointly with partner (not married / civil partners). Upon death, transferred 100% to partner (not tenants in common).

50% of property (now owned by partner) plus savings exceeds the nil band of £325,000.

Partner keeps the house. Daughters keep the savings.

Who pays the IHT bill?

The estate of the deceased person surely?

It depends on the precise wording of the will but probably the daughters if they were left the residue. Terribly inefficient way to do it: the nil rate would be 500k if the house went to the DDs, but under the circumstances probably unavoidable.

There is no will. So partner only receives property as joint tenant and other assets to daughters. Any iht is paid out of the remaining estate prior to assets being distributed.

The estate pays the IHT out of the savings, with whatever is left going to the daughters. So effectively the daughters suffer the IHT.

If there is no will then the rules of intestacy apply.

As you state the partner is not married/no civil partnership then my understanding is that in general they cannot inherit.

However this is impacted by the legal status of the house. Joint tenants or tenants in common?

IHT allowances change depending on who inherits what so this matters.

Was the parent previously married to someone who didn't use their IHT allowance fully? I think it can be carried forward and added to the surviving spouse's allowance. In which case you might have a larger allowance to work with. (Best to check though, just in case I'm confused.)

The OP is pretty clear on the ownership

Property owned jointly with partner (not married / civil partners). Upon death, transferred 100% to partner (not tenants in common).

I understood that to be joint tenants.

Sorry I see you say joint tenancy.

In that case the estate pays before the daughters get the non-property assets so effectively the daughters pay.

Oh of course, silly me, I missed the actual first two words. Yes, the daughters take the whole hit, unless their parent was a widow/er and there's some extra IHT allowance from the first parent to die.

you say that 50% of house and savings is above the IHT limit...

joint assets are calculated for IHT, so calculate both and the IHT gets taken out of the loose cash...

https://forums.moneysavingexpert.com/discussion/6184665/is-jointly-owned-property-included-in-the-value-of-an-estate-when-someone-dies-intestate has a good discussion...

jointly owned assets for IHT:
https://assets.publishing.service.gov.uk/media/5a7f5e53ed915d74e33f600f/IHT404.pdf

quote:
Survivorship assets
On the death of one of the joint owners, some joint assets pass by survivorship to the remaining joint owner(s). Assets which pass by survivorship do not pass under the terms of a person’s will or, if they did not make a will, by the rules
of intestacy. We need to know which assets pass by survivorship for
2 reasons:
• although they are included in the estate for the purpose
of Inheritance Tax they are not included for the purpose of
probate or Confirmation
etc.

so they are in the estate for IHT - but do not fall under intestacy rules...

(edited to correct misunderstanding)

Surely the house falls outside of the estate as it was owned as joint tenants?

The house value isn’t counted within the estate for IHT as it belongs to the partner on death.

If there are savings in excess of £325k the IHT will come off the estate.

Funeral costs and other reasonable expenses are deducted from the value of the estate.

It would be lovely if that was how it worked, but would make it quite easy to fiddle the system. The property absolutely does count for IHT.

Primary liability for the IHT attributable to the property falls on the joint tenant.

IHT attributable to the rest of the estate is a liability of the personal representatives.

The personal representatives however will need to pay all of the IHT to get letters of administration (which is basically the same as probate), but have a right of recovery of the IHT from the surviving joint tenant.

No sorry, that would be if it was a gift in lifetime.

In which case the personal representatives are liable for the tax on the whole estate up to the value of the assets they receive.

They have a right to recover the IHT attributable to the joint property from the survivor.

Do they? Can you point in the direction where I can verify this?

s.211(3) IHTA 1984. You could also ask hmrc to assess against the surving property owner.

This is wrong. Whilst the house does not form part of the deceased's estate as it passes automatically to their partner, 50% of its value is added to the deceased's estate for IHT purposes.

@Nimbus1999 are you meaning that the wife is still alive and that the daughters have inherited all the money from deceased?? if so then there is only the value of the house left and if that goes over the tax threshold then inheritance tax is liable.

It’s not the wife, it’s a partner. Definitely IHT to pay, just trying to work out who has to pay it all! Seems unfair on the daughters to pay 100% IHT when they don’t own the house nor will ever do so!

As @DeliverMeCoffee says, they can recover any IHT attributable to the property from the surviving partner. @kikilaw has given the reference to the relevant legislation.

Thank you! I’ll phone HMRC and see what they say.

Another point to bear in mind is that if the partner is going to stay in the house (ie not sell it) then the inheritance tax on the house (but not the rest of the assets) is payable in installments over 10 years (or until the house is sold) so it doesn't all need to be paid upfront which might make it a bit easier for the partner.

I did speak to HMRC earlier and they didn’t say anything about assessing the property IHT against the surviving partner…. They just said whoever completes the IHT return will be liable to pay the IHT. So how do you get HMRC assess the surviving partner?