Probate question

[Grievingheart]

My husband passed away recently and I am in the process of applying for probate.
In May, we sold our jointly owned property to release some equity as my husband had not been working for almost 2 years due to burn out.
The funds were paid in our joint account from which we bought a smaller property and my husband moved the rest of the funds to his sole account mainly to clear the overdraft balance and to get maintain the specific account with benefits he had.
After his passing, together with his life insurance, this has pushed us above the IHT threshold.
Is there any way to challenge that the funds though in his sole bank account were not solely his?

We have 2 young boys and though he's not worked for 2 years, never claimed for any single benefits and I feel frustrated that we are now going to have to pay IHT.

Is there any way for me to challenge this with probate? how do I go about to do that? Do I need a solicitor or is this straightforward. I've seen discussions about convenience joint accounts that are challenged by HMRC and this is the reverse. His sole account was used as joint account.

Grateful for any advice.

Did he have a Will? Assets normally pass to spouse IHT free.

Yes there’s no IHT between spouses.

There is no IHT between spouses or on his share of a property owned as a joint tenancy. So exactly how much cash are we talking about?

As others have said, if it is all coming to you there is no IHT to pay. Also, his life insurance may not form part of his estate. If it was written in trust, giving the trustees the power to decide who received it with your husband simply submitting an "expression of wish" saying who he wanted to get it, it is not part of his estate.

There is no will. He had a life insurance without any beneficiary and funds in his sole bank account which was actually money from our house sale. So even if the estate is above the IHT threshold, are you saying there is no IHT at all?

The rules are about to change but atm I don't believe life insurance counts as part of his estate for IHT either.

It is more complicated if no Will. Which is something a lot of people don't realise.

This is an AI explanation as I can't explain properly

When someone dies without a will (intestate) in England and Wales, leaving a surviving married spouse or civil partner and two children, the estate is divided according to the Administration of Estates Act 1925 rules: 1, 2]
Personal belongings: The surviving spouse or civil partner receives all of the deceased's personal chattels (possessions and movable property, excluding money). 1, 2]
Statutory legacy (first sum): The surviving spouse or civil partner receives the first £322,000 (plus interest from the date of death). 1, 2]
The remaining estate: Whatever is left over after the £322,000 and personal belongings are handed out is split 50/50:
50% goes to the surviving spouse or civil partner.
50% is shared equally between the 2 children (split 25% each). 1, 2]

Key Rules to Keep in Mind:
Children's share: If either of the children is under 18, their inheritance is held in a statutory trust until they reach 18. 1, 2]
Who qualifies as a child: Biological and legally adopted children inherit equally. Step-children who were not legally adopted do not inherit under these rules. 1, 2]
Survival period: The surviving spouse or civil partner must survive the deceased by 28 days to receive this statutory entitlement. 1, 2]
Jointly owned assets: Assets owned as joint tenants (such as a house held in joint names or joint bank accounts) pass directly to the surviving owner outside of the intestacy rules. 1, 2]
You can check further guidance via the Citizens Advice Guide on Intestacy or review official details via the GOV.UK Inheritance Tax Manual. 1, 2]

If it's all going to you, there is no IHT due now and you use his allowance when you die.

Is this correct @ prh47bridge
What i have pasted
I know it is complicated without a Will

@Thislittlepiggylikeschocolate - Yes, the information you've posted is correct.

@Grievingheart - Anything which was jointly owned is now yours and is not part of his estate, so all that matters is the money in his account. The life insurance may also matter if the policy was not written in trust.

As he did not make a will, the intestacy rules apply. Anything that comes to you under those rules is completely exempt from IHT. Anything that goes to the children is subject to IHT but, unless they get more than £325k, it will all fall within your husband's nil rate band, so there will be no IHT to pay.

Thank you @Thislittlepiggylikeschocolate. We have 2 children 11 and 9 years old. What I understood from your post is that they will get 25% after the first £322k. So if the estate was £400k, I'll get £322k and then out of the £78k, each child would get £19.5k with me getting a further £38 without IHT. Is that correct?

The life insurance was not in trust.

If the property or any accounts were jointly owned then they become solely owned by you and aren't included in his heritable estate I believe. An exception to this is if the house was owned as 'tenants in common' which then isn't jointly owned and half (or whatever percentage of the house was in DH name) the house is part of DH sole estate to be passed on.

Yes as Luckydog7 says, and prh47bridge mentioned earlier, you can discount the property you hold jointly.

It is only the proceeds of the life insurance and money in his sole account that you need to worry about.

If the money in his sole account and life insurance amount to £400k, then the figures you have quoted are correct and there will be no IHT (as anything that goes to you is free of IHT, and the part to your children is well under the threshold)
You poor thing have to deal with this at a hard time.

@prh47bridge is a lawyer (I think) so could maybe confirm this.

Sorry - should have thought about how the property is owned. If you are joint tenants, it is yours. If you are tenants in common, his share of the equity in the property (50% unless you've executed a deed of trust) is part of his estate.

Hopefully it is joint tenants 🤞🤞🤞

If assets are in joint names, you are correct. Any assets held in individual names are subject to probate and IHT. My dad kept his savings accounts in his name only. Even though he left everything to his wife, probate had to be applied for and IHT had to be paid and she had to wait 10 months for it all to go through and receive the funds. I don’t get on with her, at all, but my dad wasn’t the best at being on top of stuff and she had to wait needlessly imo.

So, worth double checking for all spouses out there to save yourself time, headaches and money.

How does it work if the previous property was owned as joint tenants but the excess after the 2nd property was bought was put into a bank account in a single name, just for convenience?

@Grievingheart Sorry for your loss

Are you sure this is right? If your Dad and stepmother were married, anything he left to her would fall outside inheritance tax. Probate is separate. Could you possibly be remembering that income tax was due to HMRC? (Going by my current experience sorting out my Mum's estate.)

What matters is the situation as it stands now, not how OP got here.

If everything was left to his wife, there should not have been any IHT to pay. Transfers of assets between spouses are 100% exempt from IHT and there is no upper limit. If IHT was paid, the executors messed up.

I shall bear that in mind when we downsize, thank you

Thank you all for taking the time to reply. So much to do on top of organizing the funeral service, supporting my boys in their loss and grieving for the love of my life. The IHT issue is less of a concern now. I'm very grateful to you all. Thank you again.

I am right - with limited exceptions about overseas spouses- if all is left to the spouse, whether or not assets are in sole or joint names.