My Uncle is a farmer and widower. He has lived on worked on his farm for all his life. He's currently writing his will and wants to split what he leaves between his three children. He wants one of his daughters to inherit part of the farm (the house and approximately 1/4 of the land - worth roughly 400K gbp) and wants the rest of the land, a cottage and some farm buildings possibly suitable for conversion (roughly worth 700K gbp) to be sold after he dies and the proceeds split between his other two daughters both of whom now live abroad but are planning to return to the uk at some point. We were wondering what the inheritance tax implications of this arrangement would be? He has his own 325K allowance and the allowance from his wife who was a partner in the farm business and left all her assets to him. Will the part that continues to be used for farming be excluded from IHT because of farm relief? Will the remaining 700K be subject to IHT at 40%?
Any insight would be much appreciated,