Inheritance Tax-Suspect I know the answer but any experts out there?

[whooosh]

My sister sadly committed suicide a few weeks ago and I am now in the process of sorting out her estate.
Due to a property,we will be over the threshold but I have 2 questions.
Firstly,she said in her note that her flat was to be left to my DD(aged 4.5)-is there any way,due to DD's age she could avoid the tax?

Secondly,my sister had savings which was money left by my Mother when she died 4yrs ago.My sister obviously paid inheritance tax on this at the time.

So,if I could prove that this money had already been subject to inheritance tax-could a second "hit" be avoided?

Sorry for your loss. First bit, no, everyone is subject to tax even minors. I think you can with the second one. You need this page on the HMRC site to check though.

Oh thank you....off to read the rivetting webpage

you want hulababy - her hubby is a solicitor specializing in probate and wills.

Oooh thank you....will hunt her down

ill email query to DH. He is at work. Not sure if he is at desk though, so will get back to you when I hear from him - might be after piano lesosn now thouh as have to get DD from school in a bit.

Have emailed him

I think the short answer is no and no.
I would have thought the property would have to be sold.
As for the second part the money belonged to your sister and not your mother hence the tax is due again.
However I may stand to be corrected.

Meant to say sorry about your sister. That is very sad.

If your sister just specified in a note, rather than a formally executed Will, that her property is left to your DD then it will probably not pass to her.

If she died without a valid Will then her assets will be distributed according to the laws of intestacy which specify which relatives receive the assets. You should speak to a solicitor, or the probate registry.

On the question of inheritance tax, the age of the recipient makes no difference. Only spouses pay no inheritance tax on assets which exceed the 'nil rate band'.

and no, unfortunately, the money which originated from your mother will be subject to IHT again, if her total assets exceed the IHT-free threshold

I should add that intestacies can be 'varied' in the same way that Wills can be - but the Deed of Variation needs to be signedd by the person legally entitled to the property, and they obviously can't be forced to give up their entitlement.

You really do need to speak to a solicitor about all the specifics, as it's very hard to give you much advice without all the facts.

How awful for you. I am so very sorry.

FWIW I have known a note to be legally binding.

There is no way of avoiding this tax after death. Another reason to get all of this sorted out before by making proper will/putting things in trust

Check you are up to date on the threshold. It does change every year. Also, if you sister had been widowed at any point that makes a difference.

You often need to get probate before you can sell assets. And you can't get probate until the IHT has been paid. It is a bastard system.

Is there enough in the savings to pay the tax? If so you may be able to get special dispensation to access it to pay the IHT bill so you can get probate.

Horrible situation. You can pay IHT in instalments - think it's over 10 years until estate settled.

From DH:

"Quick answer, there is no way she can reduce the IHT liability by gifting to DD

The second query, quick succession relief will be available and if the period is between 4 and 5 years, the estate will benefit from a tax credit equivalent to 20%, calculated as follows:

net gift/gross gift x tax paid on original transfer x %age available = tax credit.

Hope this helps. if she needs any help, tell her to give me a call"

Hulababy-thank you SO much and PLEASE say a big thank you to your DH....I am truly grateful and may well give him a call....

whooosh - you can CAT me (or email claire(dot)king13(at)btinternet(dot)com) for further contact details should you need to speak to him.