Would you reduce your offer on a house to avoid inheritance tax?

[LondonSuperTrooper]

We were in process of buying a house. Legal works was all completed and we FINALLY have got a mortgage offer. Unfortunately, our vendor sadly passed away rather unexpectedly.

The family still want to sell the property to us. My question is should I mention to the Estate Agent that we would like to reduce our offer and in doing so they will avoid paying the inheritance tax on the sale? Is this even legal? We were intending to reduce our offer as this survey pulled up a few nasty surprises. However, our reduced offer due to the anticipated works would not have dropped the offer price below the threshold of £325K. Also, I do appreciate that the family cannot sell the house until grant of probate is given.

Any advice?

Surely inheritance tax is paid on the estate as a whole? Aren't you assuming that the house is the only thing of any value?

Yes, you are right.... I am clutching at straws aren't I?!

IHT is only payable in the top slice anyway, so the family will be worse off if you reduce the price even if they do have to pay IHT. Apart from the fact that in the current climate we're all supposed to be going out of our way to pay all tax due, I think it would be really offensive to make a reduced offer and state this as your reason.

Also, you have no idea of the deceased other affairs, they could have other assets that would take the estate over the threshold anyway.

Reduce you offer ivo the survey if you want, But I hope think if you try to make (save) money out of the vendor's death you will be given very short shrift and lose the house, esp as they are probably in no rush to sell.

Thanks for the advice. I think that I will reduce the offer due to the building survey and take it from there. We are only prepared to wait for a maximum of 6-8 weeks anyway. If grant of probate is not given then we'll look elsewhere.... so we may not end up with that house anyway.

I think the problem with that approach would be that you are implying that you are doing them a favour by reducing your offer but you are costing them money . Probate generally takes longer than 6-8 weeks (unless affairs are in immaculate order and executors are very keen) so perhaps it would be best to walk away.

lalal forgive my ignorance, but how would a lower offer cost them money?

It's because you only pay the tax on the estate that's worth OVER 325K so for every pound over £325 they will still keep 60p.

If the vendor was a widow then the threshold is £650k.

Can the house not be sold before the grant of probate? I'm not sure, but harking back a few years to when my dad died we sold quite a bit of property to pay the inheritance tax. Probate took forever, and I'm sure the houses went very quickly (this was back in boom times).

I may well be wrong though - it is all a bit of a muddle now, I'm going back a while.

I think you can sell assets but the money can't be distributed yet?

I wouldn't accept your reduced price unless it was to do with the condition/value of the house TBH, I'd rather get more and pay a bit of tax on the extra

Also I am pretty sure that inheritance tax valuation is on open market value- there is a case that you trying to scam a lower price isn't market value as someone else (actually you even at one point) would pay more. So you would be doing the estate no favours.

You can't possibly know what other assets may form part fo the estate, or if they are claiming a second allowance or trust. Very unlikely your negotiation would make an iota of difference to them and somewhat tactless. How long is your mortgage offer good for , probate could take a while.

That would make sense baublesandbaileys.

London - term, because you're offering less money... IHT is 40% on anything above the £325k threshold. If you offer £325k (and there are no other assets) then the beneficiaries receive £325k but if you offer £335k, they receive £331k (£10k minus 40% IHT) so lowering an offer to be closer to the threshold is of no benefit to those who inherit and looks like you're finagling.

lalal thanks for the explanation. I need to reduce my offer anyway due to the requirements of work that needs to be done.

I understand about the IHT threshold now. Obviously it'll be best for the vendor's family and I to settle on a price at the threshold of £325K. But like other posters mentioned, I'm assuming that the vendor has no other assets.... and that's probably not the case!