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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Does your expertise cover inheritance tax and probate?

Customer Question

Does your expertise cover inheritance tax and probate?
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience.

I specialise in probate and inheritance tax and may be able to assist depending on the detail of your question. I look forward to hearing from you
Customer: replied 2 years ago.

My father passed away Dec 2014 leaving his entire estate to my mother. Everything that they own i.e. house, and bank accounts being in joint names. My mother has now been diagnosed with Cancer and given only months to live. What are the tax liabilities that I am due to face given the the estate is worth circa £450,000 (with the house value being valued at £350,000 and approx £170k in cash/bond. I have been made Executor of my Mother's Will and I am the sole beneficiary. The question that I want to know is to do with the possible IHT liability in the even that my mother passes on and I will then have to deal with the estate. Do I get the benefit of the Joint Allowance between my parents which I believe is up to £650k tax free and am I going to have to provide for any tax as a result of the inevitable happening and the estate having to be wound up?

I have read varlous articles on IHT but I would very much appreciate a simple and clear answer that will give me guidance on what I should be doing and what the possible liability for the estate be, as I likewise need to be aware of any potential liabilty.

Many thanks

Expert:  Joshua replied 2 years ago.

Thank you. Please accept my sympathies for the loss of your father and the sad news regarding your mother.
The legal position based on the above in relation to succession and tax is as follows (some of this at least you already will know from what you post above but I have included it all so you have the whole picture:

(I apologise for the formating - I did include numbered paragraphs but the numbering appears to have disappeared on my screen at least)

  • All assets held by your father and mother jointly at the time of his passing pass automatically to your mother irrespective of your fathers will.

 

  • From what you say your fathers will provides that everything is to go to your mother so anything that was not owned jointly (which passes automatically by survivorship as above) would also pass to your mother. If everything was held jointly then the only obvious thing would be any personal possessions of your father would be dealt with under his will. In any event the above distinction between para 1 and para 2 is largely academic in this case as from what you say everything is left to your mother in any event. Therefore the position following our fathers passing is that your mother is the sole legal owner of all their assets. It is unlikely probate would have been or would be required to deal with your fathers estate if everything was owned jointly.

 

  • No inheritance tax is due following the death of your father as you can leave as much as you wish to your spouse with no limit and no tax is due.

 

  • When your mother comes to pass away, her estate will benefit from an inheritance tax allowance (this is known as the "nil rate band" - "NRB"). The NRB is the allowance that is made to each persons estate before inheritance tax (IHT) is payable. I am sure you are familiar with this already. The current allowance is £325,000.

 

  • In addition to your mothers own NRB because your father elected to leave everything to her on his death he did not use any of his own £325K NRB. This is because you can leave as much as you want to your spouse and it does not eat into your NRB. Therefore based on what you say his NRB is intact.

 

  • Following changes introduced by the previous Labour government it has been possible for some years now for a surviving spouse to "inherit" a predeceased spouses unused nil rate band. Because your father did not use any of his NRB in leaving everything to your mother your mothers estate can use his unused NRB doubling her allowance to £650K

 

  • Accordingly when you come to adminsiter her estate you will have a £650K NRB before tax is due. Based on the valuations you provide, you will be well within this £650K allowance and therefore no IHT will be payable.

 

  • You need to ensure you claim your fathers extra NRB on the probte return form which is called IHT205 you will have to complete to obtain probate. If you don't claim it HMRC will not automatically apply it for you and will charge you tax on the estate.

 

  • Claiming it is easy enough - you just need to ensure you complete the relevant box on the IHT205 form but if you are in any way unsure it is best to retain a solicitor to assist you with completing the return which should not cost more than a few hundred pounds. However there is no reason you cannot complete the form yourself if you are happy doing so.

I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me I'd be very grateful

Customer: replied 2 years ago.

Thank you Joshua for your reply, it is very helpful. How do I obtain a IHT205 and is there a timeline after my father's passing to get it completed and submitted.

Finally as the sole beneficiary to my mother's will, does this in any way alter your views on the above?

Expert:  Joshua replied 2 years ago.
A pleasure. IHT205 from link below:https://www.gov.uk/government/publications/inheritance-tax-return-of-estate-information-iht205-2011If there were other beneficiaries involved they could start to get "legally upset" wih you if you had not completed administration by the 12 month anniversay of your mothers passing but as you are the sole beneficairy you can go at any speed you wish as there is only you involved. There is no other time restriction as no tax is due so HMRC will not be interested either way.Your being sole beneficiary does not change any of the above. I hope the above is helpful? Can I help you with anything else or has the above answered your questions satisfactorily? If you could drop me a quick message to let me know I'd be very grateful.
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
Joshua and other Law Specialists are ready to help you
Customer: replied 2 years ago.

Many thanks Joshua

Thanks for such a clear explanation and I hope that I can now settle down to concentrate on looking after my Mother and put all these worries and concerns behind me

Perhaps the only other question is to ask my Father had two Insurance Policies one by way of a Bond and that is not going to worry us and the other is an Annuity which I assume on the passing of my Mother closes off that Annuity and it would have no capital value is that correct

Thanks again so appreciated explaining it to me so clearly.

Expert:  Joshua replied 2 years ago.
Probably that is correct - it usually would be but it is important to contact the provider to ask for a copy of the annuity benefits so you can ensure you understand all the benefits. Some bonds include a lump sum death benefit as well as ongoing payments but private annuities normally do not. However it is important to be sure.

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