paulr

Say the threshold is 300k. A father leaves two assets. A 300k house to his son and 300k cash to his daughter. Who would pay the tax. Say also the son didn't want to sell the house but wanted to live in it.

thanks
Paul.

mark engers

You want us to tell you that your sister will have to stump up the £140k?

PeteBrant

The total estate would be worth £600,000 - The first £300,000 is tax free - Under your rules. The tax would be on the remaining £300,000 @ 40% = £120,000


You would both be liable for it - In other words, who gets left what is irrelevant - You are taxed on the estate as a whole - not parts of it. The solution would be for either the son to pay the daughter the £60,000 difference (assuming the £120,000 comes out of the cash sum) or sell the house and split all proceeds 50/50.

Thats the way I read it anyway.

OllyK

My understanding, and I could be wrong, is it's more of a death tax than and inheritance tax, i.e. tax is payable on the total value of the estate.

paulr

Thanks. Who would be responsible for administering this?

PeteBrant

I would guess (and this is a guess) the executor of the will. Probate will value the estate and give the executor a tax bill, which will have to be settled.

CharlesW

I can confirm that the executors of the will are responsible, as I have acted as an executor for both my parents' estates. The executors are presented with the tax demand, which has to be paid from the estate. They then distribute what is left of the estate as set out in the will. Those who benefit from this distribution of the estate have no say in it.

OllyK

Presumably Mr executor could be a bit of a sod and use the cash to pay the bill, leaving the daughter with next to nothing and the son with the house?

Wurzel

iTrader: (1)

er but surely if the threshold is 300k and you get a 300k house and your sister gets 300k in cash neither of you are eligable for tax as you are 2 seperate people both gaining the threshold amount!!!

Or am I missing some big Gov con here?

David Lock

I am sure you will realise that there are tax experts out there who specialise in eliminating or reducing Inheritance Tax liability. I am sure there are all sorts of legal ways to reduce any future bills by say making some gifts now or establishing a trust fund or whatever. But do find an IT specialist not any old £100 per hour tax bod. dl

PeteBrant

The tax is paid on the estate as a whole, not on its constituant parts.

CharlesW

Only if that is what the will said. If the will left the estate equally to the son and daughter, either the house would have to be sold and the proceeds of the sale + the remaining cash would have to be divided equally, or the remainder of the cash could be divided equally, and the house could be left to both of them as Tenants in Common. They would then equally own half the house.

As this thread is about Inheritance tax, it is worth bearing in mind that being Tenants in Common has advantages over joint ownership.

Tenants in common | This is Money

Bakerman

Oh come on, there isn't a tax free allowance per person otherwise you would leave a bit to loads of family and nobody would pay tax !!

The estate is valued, tax is liable on it therefore the estate needs to pay tax, if that involves selling any assets so be it. The basics (and I stress the basics) of IHT are not difficult - IHT avoidance is extremely complicated.

To reduce or eliminate your exposure is usually something you do before death as opposed to trying to do it post death.

paulr

Okay, thanks.