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Helen Hill
Helen Hill, Lawyer
Category: Law
Satisfied Customers: 174
Experience:  LLB Law, Licensed Conveyancer and Probate Practitioner, Fellow of CILEx, Trust and Estates Practitioner (STEP)
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Its an inheritance tax query. My father died 2 years ago and

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Hi,
Its an inheritance tax query.
My father died 2 years ago and left everything to my stepmother, including their residence held as joint tenants currently valued at £725000. My stepmother recently died leaving an estate of £1,200,000 including the house. I have a brother and two sisters so there are 4 direct descendants (step children). My stepmothers will simply leaves 2/3 of her entire estate to myself and brother and sister and 1/3 to others. The home is not specifically mentioned.
I have read the following on the government website https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-bandThe home doesn’t have to be specifically mentioned in the person’s will. It can be inherited as part of what’s left of the estate. .... Where the home is included in what’s left of the estate and that’s passed on to a number of different people, HMRC treat each of them as inheriting a proportion of the home.
Does this mean that me and my siblings can say 2/3 of £725000 is our proportion of the home = £483333 which is more than the threshold of £250000 (stepmother plus father). And therefore the estate gets the £250000 extra inheritance tax relief ie. £100000 to distribute in ratio 2/3 to 1/3 to direct descendants and others.?

Thanks for your question. The RNRB would only apply to you and your siblings as descendants. It would not apply to other beneficiaries. However, if all beneficiaries agree, the will could be varied by way of Deed of Variation (within 2 years of the death) so as to allocate the house to the descendants thus maximising the use of the full RNRB and minimising the amount of IHT that would have to be paid. I hope that helps. Please leave a positive rating so that I am credited for my time.

Customer: replied 2 months ago.
Why would the house have to be specifically allocated to the direct descendants? See Note 7 on IHT435 form:
"Percentage of residence passing to direct descendants
This is the share of the residence passing to direct descendants. For example, if a residence is included in the residue of the estate and it is left to two children and a nephew the percentage to enter here is 66.6667% (two thirds) Use 4 decimal places.".Also see taken from the .gov site referenced in my initial query::
"The home doesn’t have to be specifically mentioned in the person’s will. It can be inherited as part of what’s left of the estate (the residue) after specific legacies have been taken into account. The residue of the estate is what’s left after payment of:
debts such as mortgages and loans
funeral expenses
executor’s fees
taxes
other expenses from administering the estate
any specific gifts or legacies in the will
Where the home is included in what’s left of the estate and that’s passed on to a number of different people, HMRC treat each of them as inheriting a proportion of the home."Also run the "calculate the additional threshold" on the .gov site https://www.tax.service.gov.uk/calculate-additional-inheritance-tax-threshold with the figures I have given in my original query and it also comes up with the £250000 extra exemption.
I am aware about going down the deed of variation route but it seems to me that what I have said above means that is not necessary. What I want is to use your expertise as a qualified lawyer to either confirm my interpretation is correct or explain fully why it is not
Customer: replied 2 months ago.
No I dont want to call - I'd like the answer in writing so I can study it, because what I have looked at so far makes me 95% sure I'm correct in my interpretation - if I'm not I want the 'why not' in writing. Also I dont want to pay more - I dont want to be rude, but your original reply really didn't really answer my question, it simply stated the basic rules of inheritance tax, my query is in the detail of how HRMC treats this scenario.

Sorry, I stand corrected. I was thinking of another scenario where the values were different. In your situation the full RNRB can be claimed because the value exceeds the threshold.

Thank you for your question. My name is ***** ***** I specialise in estate administration and Inheritance Tax. I’m sorry the information you have received so far from the website hasn’t been helpful. Hopeful I will be able to assist.

Very simply, your research is correct. The property does not have to be specifically gifted or referred to within the Will to claim the new residence nil rare band allowance. The fact that two thirds of the estate is gifted to ‘qualifying beneficiaries’ (you and your siblings) and that two thirds of the value of the property is above the maximum RNRB available means that you will be able to claim the maximum allowance available for your step mother’s estate and also apply to transfer the unused allowance from your father’s estate.

I hope this clarification is helpful. Please let me know if you have any further queries.

With best regards

Helen

Helen Hill, Lawyer
Category: Law
Satisfied Customers: 174
Experience: LLB Law, Licensed Conveyancer and Probate Practitioner, Fellow of CILEx, Trust and Estates Practitioner (STEP)
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