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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am going to be one of 4 beneficiaries on my father's estate

Resolved Question:

i am going to be one of 4 beneficiaries on my father's estate the IHT tax bill we have been told is £404,000 how much is the estate worth and how much will each beneficiary get?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
Was your father a widower when he died?
Customer: replied 1 year ago.
Yes he was the IHT threshold is £650,000
Expert:  TonyTax replied 1 year ago.
Thanks.
It's really not necessarily that simple a calculation and you should ask the executors given that you are a named beneficiary of the estate.
Where gifts are made in the seven years before death, they are included in the estate and depending how much they are and how close to your father's death they occurred, they may be subjected to a lower rate of Inheritance Tax than the standard rate of 40%. Take a look here for more information on taper relief:
http://taxaid.org.uk/guides/information/other-taxes-you-may-need-to-know-about/inheritance-tax/828-2/taper-relief-for-lifetime-gifts
For the purposes of my calculations, I've assumed that there will be no professional fees and that there were no gifts in the seven years before your father died.
The estate will be worth around £1.66 million. The first £650,000 will be charged to IHT at 0% and the balance of £1.01 million will be charged to IHT at 40% which gives an IHT liability of £404,000. The distributable estate will be £1,256,000 (£1,660,000 - £404,000).
How much each beneficiary will get depends in what proportions your father chose to share it out. If its an equal distribution, then each beneficiary will get £314,000 (£1,256,000 / 4).
I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Thank you , the bulk of the main estate is the family home which has just been sold for £1.45m , we can't complete the sale though just yet as we are still waiting for the Grant of application.
The following fees will apply , estate agent £21,750 , Solicitor acting on behalf Natwest Bank 2.5 % off gross estate capped at £15,000 , there is in the Will a £5000 gift payment being made a friend of my fathers. Do all these fees come off the gross estate or after IHT has been paid?
Expert:  TonyTax replied 1 year ago.
None of those reduce the estate value for IHT purposes. Take a look here for more information:
http://www.litrg.org.uk/tax-guides/bereavement/how-do-assess-estate-iht-purp
Customer: replied 1 year ago.
Thank you useful links can I just confirm as I am still not clear those last costs which total £41,750 would you expect that to be already taken off the estate so the £1.66m estate with £404k IHT bill is the final total, sorry I just need to be clear. The solicitors so far have been poor in their communication they have a paralegal legal dealing with the estate I have just asked for a solicitor to continue to manage the estate
Expert:  TonyTax replied 1 year ago.
As I said in my last post and as confirmed in the text behind the link I gave you, the items you mention will not be deducted from the estate value before the IHT charge is calculated.
I know of estates which still own a house years after IHT has been paid. A basic principle is that only debts which existed at the time of the deceased's death are taken into account in computing IHT.
Customer: replied 1 year ago.
Thank you all clear now
Expert:  TonyTax replied 1 year ago.
Thanks and good luck with your solicitor.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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