Inheritance tax for dummies

[catfunk]

I have a young report at work who is sadly losing his (single) parent. He's the only beneficiary and has always lived in the family home with the parent. Not much else in the estate to speak of apart from the home. It is modest but due to gentrification of the area now worth over 700k.

He's pretty clueless and has no other family to support him. My understanding is IHT is payable above 500k so he would need to find 80k min so it won't be possible to keep the property. He doesn't even seem to have considered this.

How does it work - would he be be able to sell the house first then pay the 80k he owes? Is there a time limit to sell; what if the sale takes a while ?

Just trying to be get an understanding of his situation so I can support him.

The first 500000 on a family property is free of IHT. This doubles if the property is in the name of both parents - so massively unfair to children of single parents.

For a house he continues to live in he can opt to pay 10% on account and interest on the remainder over a 10 year period. If there is not enough cash with the estate to cover this he should be able to get a bank loan secured on the house.

www.gov.uk/paying-inheritance-tax

Is there no cash in the estate? That could be used to pay the IHT.
Otherwise I'd probably help him see options.
Remortgage the house to pay IHT
Sell the house and buy something smaller
Pay up the IHT with interest

Thanks for the info.
He says 'there's not much cash' as parent wasn't great with money and only really had the house of value. They were an alcoholic and hadn't worked for a while.
He hasn't given me any figures and I don't want to put him on the spot too much
He doesn't earn a lot and to be honest isn't the sharpest to isn't likely to get much of a mortgage but he could possibly borrow 40k on his salary which it what I'm estimating the IHT to be.
Poor kid I really feel for him. Losing your parent then possibly your home.

Sorry meant 80k mortgage not 40k.

I hope to goodness the house is owned outright or she has enough insurance to cover it
hopefully he can get a loan and pay back over time

Yes I believe it's owned outright. I'll try to gently talk to him next time it feels appropriate so he's a bit more informed.
Thanks all.

If the home is owned outright, then instead of keeping it he maybe better to put it up for sale immediately, then purchase a small place for himself and then pay the IHT

Understandably there is emotion with a family home and losing a parent

as pp states they can pay over 10 years Here is explination this would obviously be £8000 per year, working out at £666 per month

A 30 year, £80k repayment mortgage would cost him about £330 a month, an interest only mortgage for the same time £200.

If his parent hasn't died yet and has any form of pension, even from a long time ago, worth checking whether there is any kind of survivors pension/lump sum payout attached to that scheme and if so make sure s/he nominates the son as recipient - many schemes have this as a feature where someone dies young enough that they haven't had access to their 'pot', but there can be different rules about who can receive it, he may have to show he was her dependent. I know it's tough on a low income but I'd be recommending they see a solicitor to get affairs in order if at all possible, it may cost a few hundred pounds but could save thousands...

He urgently needs to find out if there are any pensions and if so, what type.

Yes this…and if parent was still working if any death benefits from company as well.
also get him to check any old, sleeping account parent may havehad…things like premium bonds….there a site on line somewhere you can log into to start a search for any old accounts …if parent hasn’t passed away yet then maybe he can gently ask them…

But big question…who is executor of will? Shouldn’t they be sorting this? Is there a will even? If not he’s going to have to apply for probate etc. if there’s an executor they’ll be ones to advise him …

@EmilyBolton seems to me that if there is a will then the son is probably the executor and sole beneficiary. And he will need probate whether there is a will or not.

It was a question for op.
you are speculating
fair point on probate application - you’re right …it was late

He needs to speak to a solicitor fast. Get his name on the deeds. He will have 9 years to pay inheritance tax so get a couple of flat mates in and pay it over the period

Sorry for the late reply.
He is the executor yes.
I've had a word with my overall boss and he's arranged a session with his financial advisor for him (paid for buy us) which will be a great help.

Thank you all x

@catfunk That is such a lovely thing for your boss to do, and it is so good of you to support him. He may or may not realise it, but it is such a good turn to really help someone out at a time like this. Heartwarming to see.