Think solicitor may be wrong reIHT

[Whataweek1]

I have a question re: IHT and residential enhancement.

If one parent died before 2017 and
other parent has recently died, how much is the maximum amount before IHT kicks in, assuming an estate under 2million passed directly to children? I thought it was £1m. Solicitor is saying there’s a £100,000 cap on deaths pre-2017.

Can anyone help?

I am not a solicitor! But I think yours has interpreted the rules wrongly. When someone died before 6 April 2017, the Residence nil rate band did not yet exist. HMRC’s guidance says that for pre-2017 deaths, the deceased is deemed to have had a £100,000 RNRB and used none of it, meaning 100% of the RNRB is transferable, not merely £100,000. The transfer is a percentage, not a fixed amount. So if the surviving spouse dies now, the estate can generally claim 100% of today’s £175,000 RNRB in addition to the survivor’s own £175,000.
HMRC have a worked example in the attached link when the RNRB was £150k for the second person and that was what the 100% was applied to

https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

Edited to add - I am an ACA qualified accountant - Fully prepared to admit that I can misinterpret accounting rules so would not be surprised if your solicitor has done the same here.

We recently did probate for my mother. You are correct, it is £1 million. Please don’t pay this solicitor to do probate for you.

Agree with the previous poster that the solicitor is wrong. The second spouse to die has the nil rate band (£325k), their spouse's unused nil rate band (up to £325k), the residence nil rate band (RNRB) provided they leave their family home to their direct descendants (up to £175k) and their spouse's unused RNRB (up to £175k), giving a possible £1M. @Chocolateteabag is correct about how the RNRB passed on is calculated. Your solicitor needs to understand form IHT436 which guides you through the calculation to transfer unused RNRB.

It’s the current value of the transferable residential nil rate band (£175,000) but it is capped at the value of the property, so if the property is valued at £100,000 then you can only claim £100,000 exemption so you don’t get the full £1 million.

Thank you everyone. I wonder how many people have been hit with additional, unnecessary IHT.