IHT Question on Property

[stumbleholt]

My Mother jointly owned (Tennants in Common) her house with my Aunt.
My Aunt has recently died.
Are the beneficiaries of my Aunt's will liable for IHT on the 1/2 share ?
Do they have to pay the IHT straight away, even though they cannot sell the house ?

[Arnold Aaro]

A few questions if I may...


1. What is the half share of the house worth?
2. Did your Aunt have any other assets, and if so how much?
3. Has your Aunt made any gifts in the last 7 years?

The picture should then be clearer, and we can then hopefully answer your questions.

reagrds,

Arnold Aaron
Investment and Inheritance Tax Planner
Zurich Advice Network
Contact no: 07957 440 724
e mail: arnold.aaron@zurichadvice.co.uk

[stumbleholt]

Many thanks for your help

1. What is the half share of the house worth?

Approx 120K

2. Did your Aunt have any other assets, and if so how much?

Yes, she had another "main" property, plus other assets. Do not know the total value, but it is certainly over the 275K threshold.

3. Has your Aunt made any gifts in the last 7 years?

Not as far as I know

[Arnold Aaro]

As half share is less than the nil rate band, there is no IHT on it.

However, as you have indicated with the other assets taking the total estate above £275k, there will be IHT at 40% on this excess.

Perhaps someone else with more experience on probate could advise you further on the time frame within which to pay the tax, and raising the funds to for it.

[trustman]

Does the undivided share pass under the residue of the estate . ie does the whole estate pass to the beneficiaries including the half share ?
If so the IHT attributable would be borne on the share at the estate rate unless there is some contrary indication in the will. This is the rate of IHT in relation to the whole estate as a fraction (will be less than 40%because of the threshold of £275000). Interest runs 6 months from the end of the month your aunt died. I understand that a share like this is instalment option property and so IHT can be paid by 10 yearly instalments.

[maths]

The persons responsible for iht on death depend upon the terms of the will.

For example, if gifts under a will are payable "free of iht" then in this case the residue bears the iht.

Alternatively gifts may be made under the will whereby "each gift is to bear the iht".Each beneficiary then bears its relevant share of the iht on the death estate.

Iht payable within 6 months of end of month of death.

As stated by "trustman" the instalment option can apply to land but note that notice must be given to the IR and the first instalment is due as above.