IHT - what thresholds are applicable?

[Mull]

I will preface this by saying that these are large sums of money and I am fully on board with paying whatever tax necessary. But FIL is getting in a state so need to try to reassure (where possible).

FIL is getting affairs in order and has realised that he will have to pay IHT and is now stressing. He has 50% of family home (£500k for 50%) and other assets of at least £600k. His wife (second marriage) has other 50% of family home.

My question is around the limits that late MIL would have had. Have they just disappeared? I’ve read that the £325k limit increases to £500k for passing on the main home, but also that that can increase to £1mill for 2 x limits (MIL and FIL) as the family home will
pass directly to children. Or is that rubbish as she died 10+ years ago and he has remarried?

FIL has had an appointment with someone so DH will ask to have a follow up appointment that DH will go to as well. We aren’t sure if FIL has fully understood and is getting worked up about this so any advice gratefully received.

As I said, if tax needs to be paid then that is absolutely fine (FIL thinks differently 😬) but just want to be 100% on what that looks like.

He definitely can use your late DMIL's basic £325,000 exempt amount if he leaves it directly to your DH, as well as his own £500,000 which includes the family house. So that makes 825,000 which isn't bad.
But the extra £175,000 of DMIL's family home add-on is trickier, I suspect it's been lost but IANAL.

You can call the inheritance tax phone line, they will tell you exactly. He will also be able to claim the unused £325,000 when MIL died, if it wasn’t used then, but you would have to get advice on the £500,000 for both of them when handing down a house to children, looking on gov.uk it’s not clear.

See https://www.peacock-law.co.uk/personal/inheritance-tax-nil-band-relief/ and various other articles online.

@SilverRingahBells thank you so much, that article is so useful. I looked on HMRC but couldn’t find much about MIL’s unused thresholds. FIL’s will does leave his half
of the house (and the other assets) to DH and his brother, rather than second wife (who has lifetime access to the house). So should be able to use MIL’s £325k.

I will report to DH and then he can ask the right questions at a follow up appointment.

Thanks so much