Where to put the figures on the IHT checker form

[stapler]

I am one of the executors for my late father and I am looking at the Inheritance Tax Checker form. I just wanted some advice on where to put certain figures.

My late father’s estate is well below the £650,000 threshold, my mother passed away a few years ago, however I have not yet seen the questions on the Probate application, ie whether or not it asks for a breakdown of the estate the same as on the checker form.

The estate consists of
1, A property.
2, Money in the bank.
3, A vehicle.
4, Personal items / house contents.
5, A loan of £50,000 given in 2007 to help my brother buy a property for which my brother has a Declaration of Trust connected to his property.
6, A loan of £7000 given this year to another sibling.

Where do we include the two loans?

Do we add the £50K loan to Property, buildings, land?
Or do we add it to the total amount under Money?
Or other assets?
Or somewhere else?

And the £7k loan do we add that figure to Money, or to Gifts? even though it was not technically a gift at the time.

Thank you

[AGoodman]

It's not answering your question (sorry!) but you sound a little ambiguous on the first loan.

You mention it was a loan (fine) but then say your brother has made a declaration of trust over his property. That suggests your father actually owned a share of the property. What does the declaration of trust say if not this?

[stapler]

Thank you, the loan was £50K on the purchase price of £91K, this is a portion of the document we have.

THIS DEED WITNESSES as follows

The Legal Owner declares that he holds the Property and the net proceeds of
sale (after deducting therefrom the costs of sale but not the balance of any
money due under the Mortgage) and the net rents and profits until sale UPON
TRUST for the Legal Owner and the Contributors as tenants in common
(a) as to 41/91ths for the Legal Owner absolutely
(b) as to 50/91ths for the Contributors absolutely

We recently met with the solicitor who held the will and we were told the loan simply needed to be repaid.

Any thoughts, help, comments would be much appreciated, thank you.

[AGoodman]

That declaration of trust is very clearly saying that your father beneficially owned 50/91ths of the property.

It doesn't appear to be a loan at all. Effectively, your father bought a share of the property.

You would record this on the IHT forms as a property interest rather than a loan and the value would be 50/91ths of the market value of the property when your father died (possibly subject to a discount for joint ownership - https://www.gov.uk/guidance/inheritance-tax-manual/section-18-undivided-shares). If your brother repays this in cash, this is a property transaction and he is buying the share of the property from the estate. It should be properly documented. In theory it might be necessary to file an SDLT return, although there should not be tax to pay.

[stapler]

Thank you your reply is much appreciated.

So we can get a valuation of my brothers property to get an accurate IHT estate value.

Can I ask, do I (as the executor) deal with the declaration of trust, SDLT, and land registry for my brothers property or is this a separate matter.

I feel I can deal with the probate application however I am less confident with the above.

Thank you

[AGoodman]

If you and your brother are on good terms then the only document that you will need will be a relatively (i.e. 2 pages) deed of assignment of the 50/91 equitable interest in the property for consideration (payment) of £x.

You should get a solicitor to draw this up but you could of course get your brother to obtain it.

There may not be any need to involve the land registry. If there is a Form A restriction on the title then your brother will need to apply to get it removed. If not, he may not need to do anything further other than pay you as executor (he may not need cash to the extent he will be receiving it back as his share of the estate). Any SDLT issues will be for your brother but he may not have anything to do either given the value.

The estate (i.e. you) will have to file a CGT on UK Land return within 60 days of the assignment because it is disposing of a property interest. There will only be CGT on any increase in value since the death and there should be an exemption of £6,000 therefore possibly no CGT to actually pay.


[A Form A restriction will be on the title you can download from HMLR and reads "No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court."]