Inheritance Tax forms

[morestout]

My wife has sadly passed away after a very long illness that meant that I have run the family finances for 10+ years. Aside from disability allowances she had little income so gifts to our children to establish ISAs in their names plus all the household furniture, car etc would have all come out of my income albeit they would have been paid from a joint account. Her illness meant that she had no interest in jewellery, fancy clothes etc so the value of her personal belongings are negligible. How should I treat the household assets and then the gifts as it will considerably complicate the fairly straightforward process of completing probate and tax forms on her behalf.

[PinkDalek]

My wife has sadly passed away after a very long illness that meant that I have run the family finances for 10+ years. Aside from disability allowances she had little income so gifts to our children to establish ISAs in their names plus all the household furniture, car etc would have all come out of my income albeit they would have been paid from a joint account. Her illness meant that she had no interest in jewellery, fancy clothes etc so the value of her personal belongings are negligible. How should I treat the household assets and then the gifts as it will considerably complicate the fairly straightforward process of completing probate and tax forms on her behalf.

Sorry for your loss.

As a starter before the experts join, in so far as the joint (bank?) account is concerned, does this assist?:

https://www.gov.uk/hmrc-internal-manual ... /ihtm15042

Extract only (best to read the entirety and the various links contained therein):

"You should normally regard each account holder as beneficially entitled to the proportion of the account which is attributable to their contributions. So - if the deceased provided the whole of the money, the whole of the account at death should be included in the IHT400"

From what you are saying, the gifts from the joint account were made by you out of your capital, unless there was already a substantial part in there from your wife, that enabled some of the gifts from, effectively, your wife's share.

Can you clarify about the household furniture and car. Are these yours or your childrens?

[morestout]

The household furniture, car ,disability hoists etc were all purchased by me. My wife's disability benefits covered the cost of her morning carers, additional heating bills etc but it was my income/savings that purchased everything else, albeit from a joint bank account.

[PinkDalek]

The household furniture, car ,disability hoists etc were all purchased by me. My wife's disability benefits covered the cost of her morning carers, additional heating bills etc but it was my income/savings that purchased everything else, albeit from a joint bank account.

Based on that I'd suggest there is no need to mention any of the "household furniture, car ,disability hoists etc" as an asset on any IHT return that may be needed for your Wife's Estate. Unless you gifted any of those items to her, which seems doubtful, but if you did then they would need to be included at market valuation.

Separately, even if they had been gifts to you from her, the schedule of Gifts and other transfers of value Schedule IHT403 https://www.gov.uk/government/uploads/s ... IHT403.pdf clearly states:

"Do not tell us about any gifts ... if the gifts were made to a spouse or civil partner".

More generally, what IHT forms and boxes are you looking at?

I ask in view of https://www.gov.uk/valuing-estate-of-so ... died/forms etc.

Is IHT 205 applicable https://www.gov.uk/government/uploads/s ... _2011_.pdf and are you concerned about Boxes 9.1 and 9.2?

I should also ask whether a Grant of Representation is actually required:

https://www.gov.uk/wills-probate-inheritance

Extract only:

"You don’t normally need a grant if the estate either:

passes to the surviving spouse or civil partner because it was held in joint names, for example a savings account

doesn’t include land, property or shares"

[supremetwo]

My wife's disability benefits covered the cost of her morning carers, additional heating bills etc but it was my income/savings that purchased everything else, albeit from a joint bank account.

I doubt disability benefits are mandated to be paid to anything in particular, therefore your wife had an income from which exempt gifts could be made.

https://www.gov.uk/inheritance-tax/gifts

Exempted gifts
You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year - but only for one year.

[Clitheroekid]

How should I treat the household assets and then the gifts as it will considerably complicate the fairly straightforward process of completing probate and tax forms on her behalf.

My sympathy for the loss of your wife. I imagine the last thing you want to deal with at a time like this are the tedious routines of applying for probate.

However, the first question you need to ask yourself is whether you need to bother about a grant of probate at all.

Assets that were in your joint names will automatically pass to you by the principle known as survivorship. You will therefore only need a grant if your wife owned assets in her own name that are of a value above the threshold that requires probate.

Most banks and financial institutions will allow an account to be closed and the proceeds transferred to the next of kin without probate, but rather annoyingly they all have different thresholds. Most are around the £15-20k mark though, which covers everyday current accounts and so on.

[morestout]

I believe that I need to fill in an IHT205 as I had financed an ISA in her name that had built up over a number of years. No income was withdrawn from her ISA as it was allowed to build up. In her will 100% is left to me so tracking back 7 years to log gifts to our two children is a real pain at this time and I can't see the value if it all comes to me.

[chas49]

I believe that I need to fill in an IHT205 as I had financed an ISA in her name that had built up over a number of years. No income was withdrawn from her ISA as it was allowed to build up. In her will 100% is left to me so tracking back 7 years to log gifts to our two children is a real pain at this time and I can't see the value if it all comes to me.

If the gifts to children fall under the exemptions - total less than £3000 per annum (other than normal birthday, festive, marriage, civil partnership) you don't need to list them I believe.

I can't see the point of listing any gifts (if there were any) if the entire estate is exempt because of spousal exemption. Can anyone say if you do actually have to list such gifts in this instance?

[PinkDalek]

I can't see the point of listing any gifts (if there were any) if the entire estate is exempt because of spousal exemption. Can anyone say if you do actually have to list such gifts in this instance?

We still don't know enough about the gifts, which may well have only been from the husband rather than his wife or, if the latter, under the various exemptions and reliefs.

However, if completion of the IHT205 is required and there are failed potentially exempt transfers then, even if the chargeable Estate is less than the £325,000 nil rate band, the percentage utilisation of the band would impact any future "Claim to transfer unused nil rate band" by the husband:

https://www.gov.uk/government/uploads/s ... IHT402.pdf

That assumes the husband's Estate will be liable to IHT.

[PinkDalek]

Returning to your latest reply:

I believe that I need to fill in an IHT205 as I had financed an ISA in her name that had built up over a number of years. No income was withdrawn from her ISA as it was allowed to build up. In her will 100% is left to me so tracking back 7 years to log gifts to our two children is a real pain at this time and I can't see the value if it all comes to me.

I think you were replying to me about the need to complete the IHT205 but have you read Clitheroekid's earlier reply and have you studied this?:

Notes to help you fill in form IHT205(2011)
https://www.gov.uk/government/uploads/s ... _2011_.pdf

In particular but not restricted to Estimating values and small estates (I'm not saying your wife's estate is small, as defined below, but you give little to go on), including this extract from page 9:

"Accurate values are not needed when the estate
is very small

If the gross value of the estate is likely to be
below £250,000, or the estate is exempt because
it is passing to a spouse or civil partner or to a
qualifying charity, you can estimate the value of
the assets. You should not guess at a value, but try
to work out an estimate based on the information
available to you. There is no need to use box 13 to
show the figures are estimates in such estates."


Overall, it is quite difficult to comment further (especially not having an inkling of the approximate amounts involved).

Additionally, as I said earlier, I'm still unsure your wife made any gifts to the children from what you've said so far, if the funds in it were all provided by you.

Incidentally, page 9 also talks about "Valuing joint bank accounts".

[Clitheroekid]

I believe that I need to fill in an IHT205 as I had financed an ISA in her name that had built up over a number of years. No income was withdrawn from her ISA as it was allowed to build up. In her will 100% is left to me so tracking back 7 years to log gifts to our two children is a real pain at this time and I can't see the value if it all comes to me.

Have you tried approaching the company with whom the ISA was taken out to see if they will allow it to be closed without a grant of probate?

If that's the only significant asset in your wife's sole name and you can close it without a grant then you don't need to bother about the IHT205 at all.

[Bouleversee]

I am in the same boat. If your wife owned half the house and had an ISA, even if all left to you, you will have to fill in a form and apply for the grant. But which form? Having read this in the preamble:

"Short form - if there’s no Inheritance Tax to pay
Fill in form IHT205. Read the notes with the form and include any other forms or supporting documents you’re asked for.
You can also fill in this form if everything over the Inheritance Tax threshold passes to:
the spouse or civil partner of the person who died
a charity with a charity reference number from HM Revenue and Customs (HMRC)"

I printed out the form but the first bit, which I don't seem to be able to copy, suggested that it could not be used if the estate was over £1m, even if there was no IHT to pay, so I rang HMRC and was told that if that was the case, it would have to be form 400 which was used. Depending on the value of our house, which I still haven't had formally valued and the value of the contents (he had no personal effects of any value and I can't remember who paid for what, very many years ago, and have no idea of their current value) and the 10 year old car which was in his name though I was the driver, my husband's estate may be slightly over £1m. It seems odd that if everything, or everything other than the exempt amount, is left to the spouse, there should be a different form to fill in. To be honest, I haven't yet read it all as I got into a bit of a state and put it aside for a while but I must now force myself to do so and sort out any queries which arise. It is, I now realise, important to read all the HMRC stuff right to the end as they often give a false impression at the beginning. The same applies to their document re the Residence Nil Rate Band which doesn't mention till further on the tapering which is applied at an estate value of £2m. By the way, please note that one has to apply for the RNRB within a certain time from the first death (I need to check that). I also need to go back and check that there were no gifts over £3k p.a. made by him during the past 7 years. If I can ever get my children together to discuss it, we may vary the will before doing the probate. It is all so time consuming and tedious and so difficult to remember what one has read. I seem to remember reading that one could knock l5% of the house valuation if jointly owned but again I need to check. How does one print out a single post from a thread?

Does everyone else find the bit about who can use 205 crystal clear? I find it somewhat ambiguous. Enough for now; I need a drink and a bite.

[Bouleversee]

I believe that I need to fill in an IHT205 as I had financed an ISA in her name that had built up over a number of years. No income was withdrawn from her ISA as it was allowed to build up. In her will 100% is left to me so tracking back 7 years to log gifts to our two children is a real pain at this time and I can't see the value if it all comes to me.

Have you tried approaching the company with whom the ISA was taken out to see if they will allow it to be closed without a grant of probate?

If that's the only significant asset in your wife's sole name and you can close it without a grant then you don't need to bother about the IHT205 at all.

I'm pretty sure the OP will not be able to get his hands on the ISA without going through the probate process and filling in the dreaded form. I had great difficulty in getting Virgin Money to pay out £63 from a savings account where interest had been added after he had withdrawn all his money ages ago but not closed the account.

A couple of my husband's ISAs are worth only £10k or so and the managers both insist on copies of the grant etc. And anyway, there is presumably a share of the house, even if held jointly, so the form can't be avoided.

[Clitheroekid]

And anyway, there is presumably a share of the house, even if held jointly, so the form can't be avoided.

If the only asset is a house owned as joint tenants this will pass to the surviving spouse automatically. There is therefore no need for probate and no need to fill in an IHT205.

[Bouleversee]

And anyway, there is presumably a share of the house, even if held jointly, so the form can't be avoided.

If the only asset is a house owned as joint tenants this will pass to the surviving spouse automatically. There is therefore no need for probate and no need to fill in an IHT205.

So what does this mean exactly:

"When a grant of representation may not be needed
You don’t normally need a grant if the estate either:
passes to the surviving spouse or civil partner because it was held in joint names, for example a savings account
doesn’t include land, property or shares
You should contact the organisation holding the money, for example the bank or building society. They may ask for proof of death, for example the death certificate after the death has been registered."

Very sloppy wording; where is the 'or'? Or does it mean if both were the case and there should be an 'and' in there somewhere?

If you are correct, Clitheroekid (I'm not saying you are not) and and one takes it literally, one could leave several million pounds in cash without having to apply for probate, which would clearly be idiotic, which suggests that it should be' and' rather than 'or' and the word 'either' is inappropriate/obsolete, in which case if there is a house involved a form needs to be filled in in order to obtain the grant.

And what about that £1m ceiling?

What do others think?

[Lootman]

If you are correct, Clitheroekid (I'm not saying you are not) and and one takes it literally, one could leave several million pounds in cash without having to apply for probate, which would clearly be idiotic, which suggests that it should be' and' rather than 'or' and the word 'either' is inappropriate/obsolete, in which case if there is a house involved a form needs to be filled in in order to obtain the grant.

And what about that £1m ceiling?

What do others think?

CK is correct. There is a distinction between needing probate and needing to account for inheritance tax. So it's quite possible and not at all unusual for an estate to be transferred without probate, even if it is worth millions.

That does not mean that IHT can be avoided, unless the recipient is a spouse. But it does mean that the beneficiaries can immediately enjoy their inheritance without delay, risk or cost. Likewise if you were to gift away your millions on your deathbed. then IHT can be worked out directly with HMRC, without probate.

So it is not "idiotic" to leave millions in cash to one's heirs at all. In fact, if I was given one month to live that is exactly I would do - liquidate all assets and give my kids all that cash. That doesn't mean that IHT is avoided, necessarily. But it does mean that my family gets my money independently of the approval of faceless bureaucrats.

[Bouleversee]

Lootman -

I take it that you would draw the cash, carried to the bank on a stretcher, and stash it under your deathbed. (What a pity mine goes down to the floor). Because, as I said previously, banks and building societies will only part with tiny sums without an original grant of representation.

[Bouleversee]

Lootman -

And how would HMRC know that you had given millions, on which IHT was due, to your sprogs if you didn't fill in the appropriate IHT form?

[Lootman]

Lootman -

I take it that you would draw the cash, carried to the bank on a stretcher, and stash it under your deathbed. (What a pity mine goes down to the floor). Because, as I said previously, banks and building societies will only part with tiny sums without an original grant of representation.

Ha. It is precisely because financial institutions are so resistant to releasing funds without a grant of probate that I would always choose, if given time, to liquidate my assets and directly convey them to my beneficiaries while alive, if I have the chance.

Not everyone has that chance but it is one of my aims to ensure that my kids have my assets before I expire. Maybe they will get chased after for IHT, and maybe not. Maybe creditors will pursue them or maybe not. But at least the default is that my heirs are in control. An old adage says that possession is nine points of the law.

[Bouleversee]

Lootman -

What about your house? Surely at some point your sprogs would have to fill in the form to get probate to sell that and then they would have to declare previous gifts. Better sell up now and go and live in a monastery.