Inheritance tax being levied against individual entitlements

[jetbrains]

I'm due to receive inheritance from my late father. He passed away Intestant and his wife who is also a residual beneficiary is administering his estate.


I requested to see the estate accounts, IHT and a breakdown of what all beneficiaries are to receive. This was all provided. With further inspection I noticed that mine and other beneficiaries entitlement was being reduced due to Inheritance Tax, whereas my fathers wife would receive her entitlement without any tax implications.


I am aware that as a surviving spouse, her entitlement is not taxed and as residuary beneficiaries we are not exempt to the tax, however I was under the impression that the estate as a whole is responsible for paying inheritance tax and this shouldn't be put against the entitlement of individuals. The financial repercussion of setting IHT against myself and the beneficiary is a loss of £70,000 each against what we should receive if it were put as a liability of the estate prior to the distribution.


Am I right to question this as the estate is liable for the tax, not the individual entitlments within the estate.

[des8]

IHT is payable on the gifts*above the threshold that are not eligible for relief.

If the spouse's inheritance is not taxed (as you rightly comment) how do you expect her share not to be taxed if the IHT is paid from the whole estate?
Her share is part of the whole estate.

[jetbrains]

Hi des8

Thanks for getting back to me. From what I read about IHT was calculated on taxable assets above the freshhold but the tax was paid by the Estate as whole before distribution. There's some further confusion on this matter where she has listed her Inheritance tax as an estate liability ( They had a property in Japan and she was taxed on inheriting that property ). Even on the goverments website https://www.gov.uk/inheritance-tax it infers that the funds from the estate are used to pay the tax and that beneficaries do not pay tax on things they inherit. Is there some resource online I could read on how the distribution should be calculated?

[des8]

and also read this link (https://www.gov.uk/guidance/work-out...nheritance-tax) the bit that mentions exempt assets.

Yes IHT is calculated*on taxable assets*and paid*before distribution. but the widow's share is not part of the taxable estate and so she receives it without deduction of IHT

Form IHT4000**https://assets.publishing.service.go...ion_101219.pdf* will*help you calculate the amount due.

Distribution is as per the order of priority on intestacy as set out in Section 46 of the Administration of Estates Act 1925
*The rules in relation to a surviving spouse changed* following the Inheritance and Trustee Powers Act 2014*I