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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 30007
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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My father has inherited a life interest. we are planning on

Customer Question

hi. my father has inherited a life interest. we are planning on selling the house and buying a smaller property and then receiving the income from the balance (interest would be on about £180k). however the solicitor dealing with the estate (and not on behalf of my father) has advised we need to seek legal advice regarding his assets as the valuation of the life interest trust would be taken into account on his passing for IHT purposes. Would that be the case? the value of the property in total is £350k, but he does not own it. he only has a life interest. Can you clarify please. It is not his asset. thank you.
Submitted: 10 days ago.
Category: Law
Customer: replied 10 days ago.
i realise this may relate to previous question
Expert:  Joshua replied 10 days ago.

Hello and thank you for your question. My name is ***** ***** I will be very pleased to assist you. I'm a practising lawyer in England with over 15 years’ experience. Please be aware that although I will endeavour to reply to you promptly, I am also in full time private practice and so I may not be available to respond immediately and it may also take me a few minutes to prepare a reply. The site will notify you as soon as I respond. I look forward to working with you to answer your question fully.

May I confirm who the remaindermen (i.e. the party is entitled to the property after your father's passing) are please? Is this you perhaps along with anyone else?

Customer: replied 10 days ago.
no. as far as i am aware it is the beneficiary….i believe that is the NHS. none of my family are inheriting.
Customer: replied 10 days ago.
my father has the right to live in or sell but does not inherit
Customer: replied 10 days ago.
i have attached a copy of the will detailing the life interest
Customer: replied 10 days ago.
Also once he passes i presume all responsibility for any property including related charges will also fall to the beneficiary. He is hoping to move to another property that has service charges so want to confirm on his death that the liabilities fall back to the estate. thank you
Customer: replied 10 days ago.
not fall to myself or my two brothers…none of us are the beneficiaries
Expert:  Joshua replied 10 days ago.

thank you. The remaindermen who in effect from the trust after your father's death are set out in clause 7(a) and (b). I cannot see they are is these clauses have been redacted but I assume you have access to an unredacted copy to confirm this.

The solicitor has advised correctly that the life interest value which would be the value of the property would in circumstances where your father decides to exercise his right to benefit from the life interest trust would be valued as an asset to his estate as if he owned it absolutely for the purposes of inheritance tax. Accordingly, it will accrue to the other assets that he owns when it comes to valuing his estate.

Customer: replied 10 days ago.
hi. i have only been sent this copy as are not allowed to see the other beneficiaries. none of us are the beneficiaries.
Customer: replied 10 days ago.
how can there be inheritance tax if he never owned it and we will not receive it?
Customer: replied 10 days ago.
who would be liable for inheritance tax….my father or his children on his death? But he has no other assets
Expert:  Joshua replied 10 days ago.

You can obtain your own copy of the unredacted will if you wish as it is a matter of public record after probate is obtained. You can ask the executive to send you a copy otherwise if they refuse you can obtain a copy from the registry office for a nominal fee:

https://www.gov.uk/search-will-probate

The Revenue treat life interests as if they were an asset on the basis that the life beneficiary has a right to use the asset and benefit from it. One can debate whether this is entirely fair as I agree it is not the same thing as owning it outright but it is the tax rule.

Customer: replied 10 days ago.
who would be liable for the tax. would that be his children. so even if he left us £5k each for example (there are 3 of us) that would be added to the £350k? so we would effectively pay tax at 40% on the £40k over the £325k. and what if he left us nothing….would we still be liable for 40% of £25k even tho getting nothing?
Customer: replied 10 days ago.
also on his death would all charges related to the property such as service charges then fall to the remainder man.
Customer: replied 10 days ago.
wouldn’t any IHT for the life interest fall back to remainderman
Expert:  Joshua replied 10 days ago.

inheritance tax is charged against an estate technically not a person though in terms of who actually feels the pain of the tax for want of a better expression, effectively this is the residuary beneficiaries of an estate because it inevitably reduces the value of the estate and as such, the size of potential inheritances.

after the death of your father, the property passes to the two presently and identified remaindermen who become absolute owners with responsibility for the liabilities for the property

Customer: replied 10 days ago.
IHT will be paid by the remainderman….ie the Trust benefitting?
Customer: replied 10 days ago.
potentially my father may also receive a pension from her estate…could that have a bearing. as yet unconfirmed amount.
Customer: replied 10 days ago.
thanks for help. is very complicated.
Customer: replied 10 days ago.
more i look into it…the more complicated it gets!
Expert:  Joshua replied 10 days ago.

IHT is apportioned as between your father's estate and the trustees of the trust with the trustees paying any IHT which arises in relation to the value of the property. if inheritance tax is likely to be payable in respect of your father's estate taking into account the above, it is likely you will need a solicitor or accountant to complete the IHT return as it is as you say a little involved.

Customer: replied 9 days ago.
Thanks...and good to know
Customer: replied 9 days ago.
declare it but not be impacted (as he has little to no assetts)
Customer: replied 9 days ago.
Can the life interest property be sold before probate is granted? Does probate determine if beneficiaries pay IHT? Is my Dad liable for IHT on the £20k cash gift he has been left in addition to the life tenancy?
Customer: replied 9 days ago.
if so...what woukd be the tax rate? Not sure if saw question....or should it be a new one....
Customer: replied 9 days ago.
Sorry....if is a new question...not saw
Expert:  Joshua replied 9 days ago.

there appears to be a power to sell in relation to the life interest trust and therefore, if your father is desirous of a smaller property that appears to be an option under the trust. In those circumstances, your father would benefit from any income derived from any excess remaining

Customer: replied 9 days ago.
woukd he get the full £20k or pay tax on it?
Customer: replied 9 days ago.
my understanding is the property move can happen before probate granted...s that correct?
Expert:  Joshua replied 9 days ago.

I cannot say whether inheritance tax would be due on the £20,000 because this will depend upon whether inheritance tax is due on the person who has died's estate. The solicitors acting as executor's will be able to confirm the position in this respect. The property sale would usually require a grant of probate. It may be possible to proceed with out probate depending upon the construction of the title but the solicitors may be unwilling to agree to this on grounds of liability risk

Expert:  Joshua replied 9 days ago.

I hope the above is of some assistance but if you have any further questions, please revert to me.

Customer: replied 9 days ago.
Thanks. Very helpful
Expert:  Joshua replied 9 days ago.

Thank you again for visiting JustAnswer and see you again in the future I hope.