Inheritance tax if one parent dies soon after another

[IHTQ]

I’ve got a question about inheritance tax. It’s not for me but for a friend but for the sake of simplicity I’ll word it as if I’m the person inheriting.

DM died leaving everything to DF, including some antique furniture. DF sold the house after DM’s death and gave a lot of the furniture to me. The total value of the chattels was £25,000 and what I received was £20,000 (DF had everything professionally valued).

DF didn’t pay any inheritance tax as he was the spouse.

Two years after DM’s death, DF has died.

Do I need to pay IHT on the furniture DF gave me? Does it count as a “gift”? I suppose I’m answering my own question!

You need to ask someone with full knowledge but when this happened to me, everything that was first parent to die went to second parent then all that came to the DC through a long and arduous probate process. You'll need to figure out what the entire estate was worth. Gifts of cash and other items over a certain amount need to be declared. There's a quick form to fill in on HMRC website which tells you whether you need the full probate process or not and takes you through the steps.

Wouldn't it depend on the size of both estates?

Gifts are first ‘offset’ against the nil rate band. If the total of the gifts is below £350k, there is no IHT on the gift as such.

There are a few reliefs that 'you' can claim. Is there still a dwelling, albeit a different one, and is there a will leaving some of the money to the children?

If the furniture was gifted fewer than 7 years ago, a proportion of the value forms part of the Estate.

IHT is only payable on Estates over a certain value so we'd need to know the total value of the Estate to answer. If DM & DF were married and all DMs estate went to DF, then I think DM is deemed to have not used her IHT free allowance so this is added on to DFs allowance. I think there's a further allowance if the estate is all then passed to their children.

I know when we did our wills recently, the solicitor said we didn't need to worry about IT as our estate was under £1million - and it's all left to each other and then DC.

The first estate was over £3 million I believe.

Obviously this is complicated and needs proper advice. I’d hoped to help as I’ve been an executor in the past, but this estate is more complicated. Thanks all.

As PP have said, the executor of DF's estate will be able to answer this (or have the lawyer assisting answer). But my understanding is that gifts made within 7 years before the person does are caught up in inheritance tax, yes. It's to stop people getting out of inheritance tax by giving everything g to their loved ones on their death bed or as soon as they are diagnosed with something terminal.

Getting the furniture valued was a bit daft - otherwise the position would just have been that "you" got a bunch of old furniture that probably wasn't worth anything much. Ignorance would have been bliss. But now "you" know it actually has value, play by the rules.

You don't but the value of the gift is assessed as part of the estate.

Given the size of the estate IHT will be payable. And yes in that case the gift of furniture 2 years ago will also be subject to full IHT although you can deduct the annual allowance from the value of the gifts (3,000 plus the previous year's 3,000 if that wasn't used).
https://www.gov.uk/inheritance-tax/gifts