Ball park inheritance tax?

[DisastersAbound]

My mum and dad were married, my dad died 3 years ago. Their home was a house worth £230k. My dad jointly owned a house with his sister worth £400k, I can't remember how it was owned but I established ages ago his half should go to my mum but nothing has been done to this affect. Dad had no will.

My grandparents died and left their house to my mum and uncle, house is worth £500k. My uncle died without a will so his estate is going to my mum so half my grandparents house and his flat worth £200k.

So now essentially my mum has £1.13million in property, we'll ignore the money in bank accounts and stuff because it's not that much and is messy. She has no will.

Does my mum get my dads tax free allowance added to hers? So is IHT due on £805k or £480k? There was something about the tax allowance going up to £1m in some circumstances but I don't understand this.

I'm trying to understand what we would be on the hook for if she died with things as they are.

Broadly, yes - a spouse’s unused tax allowance is transferred the surviving spouse. And if your mum is leaving her home to a direct relative (children or grandchildren) then she would essentially have £1million tax free. I’m by no means an expert, but this is my own family experience. There are calculators online.

Your mum should write a will, particularly if she remarries.

IF all your dad's assets passed to your mother on his death and he gave nothing away to anyone else, then your mother gets the benefit of your dad's nil rate band (NRB) and residence nil rate band (RNRB). The RNRB can only be used if the "family home" passes to your mother's children (ie you) or her grandchildren on her death.
If this is the case then on your mother's death she gets
2 x NRB = £325,000 x 2 = £650,000
2x RNRB = £175,000 x 2 = £350,000
TOTAL £1m @0%
The rest would be taxed at 40% so if your mum died with £1.13m in assets, £130,000 would be taxed at 40 % = £52,000 IHT to pay
However if your dad owned the house with his sister "jointly", then his share of the house passed automatically to the sister. You need to check whether the property was owned as joint tenants or tenants in common. If "jointly" your dad would have basically used up 200,000 of his NRB leaving only 125,000 NRB to give to your mum. SO instead of a combined NRB and RNRB of £1m it would be £875,000 taxed a 0%. The balance would be taxed at 40%

Your Uncle's estate may be liable for IHT. If your Mum inherited his flat and his half of their parents house.

I think you need to make sure your uncles estate has been through probate and finalised.

What has happened to your Grandparents house?

Thank you! That's at least better than we first thought.

A will is high on my list of priorities because my sibling isn't straight forward

@aliceinanwonderland I'm 99% sure I checked and my dads share of the other house goes to my mum but nothing was done with this. Not sure how we're going to work that out, my mum and my dads family down get on the best and the rent from it was/is going to another family member who's died but left a spouse. Mums ignoring that problem, not sure if it's going to cause a problem down the line

@Propertylover yes I believe my uncles estate has IHT due, probate I don't think has really started though he died months ago due to the circumstances of his death. My grandparents house was where my uncle lived for several years till he died but it is now empty, his flat was just empty for a long time. My mum has said she intends to give me my grandparents house but she can't give it to me till probate happens and it needs work ASAP so not sure what to there but separate issue.

Oh my uncles IHT bill would take down my mum's estate wouldn't it? I think his flat will be sold to pay the bill and then be spent partly by my mum so yeah probably under a million.

@DisastersAbound you need to get moving on your Uncles estate as there is a time limit ( 6 months from date of death) to notify HMRC of IHT and start paying. They charge interest if you don’t.

https://www.gov.uk/paying-inheritance-tax

Did your Uncle leave a will or die intestate? If there is no will and your Mum is his sole heir she is responsible for Administering his estate.

@DisastersAbound given the complexity get your Mum to a lawyer asap.

I think your Mum needs to establish her share of ownership of the house owned with the sister.

@Propertylover how does it work when the death wasnt discovered for a little while and then there's been not death very because there needed to be an inquest? Do you get a bit more time? 6 months since he was found is in a couple weeks.

And yes she needs dragging in front of a lawyer ASAP for so many reasons.

@TempleOfBloom yeah that's going to end up antagonistic, not looking forward to it.

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band#how-to-work-out-and-apply-the-residence-nil-rate-band

But honestly it sounds like your mum needs to see a solicitor.

@DisastersAbound there maybe some leeway but you need legal
advice asap.

I would focus on your uncle’s estate as the clock is ticking on that.

The solicitor can help with both estates.

Doesn’t the 1m threshold only apply to the family home?

Yes, the op is planning(running ahead) as it is only theoretical what her Mum may have until the other estates are finalised.

No. £350k of it only applies to the family home and is only available if it is left to the deceased's children or grandchildren. The other £650k is available for any assets.