Inheritance Tax - Can anyone 'legal' explain?

[MartinS]

After the recent death of my nan, the will has been released, and although I had a brief idea of what it contained, after reading the government website about Inheritance Tax, I'm more than a little confused .
The will states that person A will be left, free of tax, three quarters of the value of the house (worth about £420K), the remaining quarter, plus all other monies left (savings etc) will be divided between the 11 children and grand-children (including person A). How does the inheritance tax thing work in this instance? As I understood it, the entire estate was valued, the current £285K threshold knocked off, the the rest taxed at the apalling rate of 40%, but the will seems to state that that's not how it will work.
Any information on what this means in real terms gratefully received.
Regards
Martin

[Conor]

While waiting on the experts....I thought it was per inheritence, so each of the beneficiaries would be assessed independently.

I'm very interested to hear the response as well as I have a good friend who is similarly confused.

[Finless]

Martin,

Condolences over the death of your Nan.

I have no legal back ground and I apologise for butting in on your thread BUT I would just like to say that all I know about inheritance tax is that those thieving f*ck*ng b*st*rds, alternatively known as THE GOVERNMENT, want to to get their poxy money grubbing claws into everything and anything!!!

It isn't enough that we all pay taxes throughout our lives! Oh no, they want to tax people AFTER they're dead.

It's bloody obscene!!!

Bryan

ps: I predict that in the future dead people who are deemed to owe taxes will be cloned and made to work and pay their back taxes!!! If you want to be brought back to life in the future then die owing money to the tax (wo)man!!

[Adrian Kelland]

From being involved with this twice in the last 2 years, I would have said that it is the estate that is taxed, not the beneficiaries.

However your Nan may have been given advice to set up her estate in a certain way that may change this. I don't see how, but would like to hear how this works out.

Adrian

[Conor]

Originally Posted by Finless

Martin,

Condolences over the death of your Nan.

I have no legal back ground and I apologise for butting in on your thread BUT I would just like to say that all I know about inheritance tax is that those thieving f*ck*ng b*st*rds, alternatively known as THE GOVERNMENT want to to get their poxy money grubbing claws into everything and anything!!!

It isn't enough that we all pay taxes throughout our lives! Oh no, they want to tax people AFTER they're dead.

It's bloody obscene!!!

Bryan

Totally

[Finless]

I know that my parents (now in their early 80s) bequeathed their house to us (2 sons) a few years back. That way, inheritance tax should be avoided.

[rick]

I'm no expert either. But my understanding is they lump together all of your nan's assets, money, house, expenses etc etc. Subtract $285 (or whatever the current threshold is) plus solicitors expenses, & then the rest is taxed at 40% before it is split among the people mentioned in the will.
Your best bet is to speak to your solicitor.

[laterontoday]

No expert but would suggest the executors of the will seek some basic legal advice. The Probate office do provide a number of explainatary booklets etc to help executors with the applications for letter of administration which will be needed to access bank accounts, life insurances etc. I've only done this once and the estates was intestate.

My recollection is pretty much as you suggest namely 40% on everything over the threshold and that the tax has to be paid before anyone can claim the letter of administration. If your nan has set up something to avoid the tax or reduce liability then you definately need proper professional dvice , costs deductable from the estate if your the executor. On something like this proper paid for advice is probably best.

[chas49]

(IANAL so this advice is probably worth what you paid for it )

Your Nan's intention in the will was that person A would receive 75% of the value of the house - so person A is to be given £315,000.

(N.B. I don't know the value of the rest of the estate so these figures are just for illustration!) If the rest of the estate is worth £25,000:

The estate is subject to IHT (£445k - £285K) * 40% = £64,000.

So the residue of the estate is

£445,000 (gross value)
less £64,000 (IHT)
less £315,000 (specific bequest)

leaving £66,000 to be divided as specified in the will.

So everyone else gets £5,500, and person A gets £320,500

Official guidance is at HM Revenue & Customs:

Hope this helps.

[Gary K]

at a (good) guess

House £420,000
Other savings say £80k
Total £500k

Tax free = £285k
Taxed on £500k - £285k = £215k
Tax at 40% of £215k = £85k

Pretax £500k - tax £85k = £415k after tax paid

So either :

1)Person A gets 75% of house value £420k = £315k (tax free)
The rest get £415k - £315k = £100k

2) Person A gets a proportional share after tax
75% x 415/500 x 420 = £260k
The rest get £415k - £260k = £155k