I don't think we need probate/estate estimate???

[buzzbee]

Unfortunately, my mother is close to passing. With my father already deceased, all will go to me and my sister. Between us (my mum included), we have been looking into how things need to be handled and I am not sure if I need to apply for probate. I am not sure if I need to do an estimate or a full breakdown to HMRC. The value of the estate won't be enough to require inheritance tax

My mum owned a house, worth aprox £300K. About 3 years ago, this was transfereed into both her name and mine as joint tennants, so will pass to me when she passes, but for HMRC purposes, I am not sure if I need to declare the full value, as this was less than 7 years ago (Does it count as a gift?) or only my mum's share (i.e. 50%, minus 10% for the house passing to her son)

My mum has 3 bank accounts. Two are current accounts, which are joint accounts, along with me and my sister. The first is used only to pay bills by direct debit and the only money going in is from the second. The second, though in all three names, only has income from my mum's pensions. When she passes, would the money in those accounts be counted for inheritance tax reporting?

The third is an ISA. My mum has asked for the money from this to be split between me and my sister before she goes, so I guess this is more straightforward and will count as a gift. When she passes, there will be a zero balance

Appart from a car, worth about £5K, my mother owns little else of any real value. Other posessions would only amount to an odd few thousand pounds

Finally, there are two life insurance policies, which will just about cover the cost of the funeral (About £8K)

Overall, if the whole of the value of the house is included, the whole estate will be less than £400K, so there won't be inheritance tax to pay

I am unsure if this means I just need to do a summary (IHT205). Does the fact that life insuarance won't go to a spouse mean I need to do a full breakdown (IHT400)?

I then noticed today that these things are only needed if applying for probate and I am not sure if I have to apply for probate. Looking at the gov.uk website, I see that probate is not needed if my mum jointly owns land an property that will automatically pass to me (As will be the case with the house) and only had savings. Would probate only be needed if the bank or life insurance company say they want it? If not, with me and my sister as the only benificiaries in the will, are we free to discuss and devide without the need for probate or for reporting to HMRC?

Any advice would be greatly appreciated

[sederunt]

A small point only. IHT205 is no longer in use in respect of deaths from 1 Jan 2022.

[Sam101]

You have not mention about a Will. Has your mother made a Will and included the name of the Executors to administer the estate. An estate cannot just be handled by anyone. If no Will exists then the first step is applying for letters of administration to handle the estate and her full assets will need to be declared.

As you mother made a gift within the last 7 years, the the full value will need to be declared, but as you rightly say, no inheritance tax is likely to be paid after allowing for the nil rate band allowance of both your father and your mother and the residential allowances of £175,000 each would not be needed.

As mentioned, IHT205 will not be needed but a Probate application will be and form PA1P will be needed together with the original Will (if her is one) and original death certificate.

When the time comes, it would be wise to obtain several copies of the death certificate and bank, savings and insurance companies will require proof of death. You may also need copies of the Will (if there is one) and obtaining Certified Copies would be better.

Do please ask any other questions you may have,

[buzzbee]

Thank you both
There is a very basic will, naming me and my sister as executors and for everything to be split equally between us

[buzzbee]

One other thing I am not sure of...
I need to complete form PA1P and send with the original will and an original death certificate, but I am not actually sure who I need to send this to

[Sam101]

When you download the application form, or do the online version, it has the details there. Whatever you do, do not UNDERVALUE the house. So many people try and keep the value down and when they sell the house, the price is higher and capital gains tax is payable. You have plenty of space, so keep it realistic.

[buzzbee]

Thank you
As you say, I have room to spare. The house isn't in good repair. I intend to improve it (New doible glazing, work on damp etc) before any sale (though not really looking to sell), so I will value it at the higher end

[Sam101]

Were the property to be suitable to one of the beneficiaries who could 'buy out' the other by agreement, it could be an opportunity to move in as your only residence. If you are there a few years, and then sell, the CGT could be legally avoided. Just a thought. Good luck.

[buzzbee]

The house would not form part of the estate, as it is owned by my mum and me as joint tenants, so automatically passes to me. However, I would still need to include it when valuing for IHT.

That raises the question - As this was done less than 7 years ago, which of the following would I need to include in the estimate?...
1) The full value of the house
2) Half of the value, minus 10%
3) Half of the value, minus 10% and then (my) half of the value shown as a gift?
4) Something else?

[Sam101]

Any gift made within the last 7 years needs to be declared with the full value. However, with the estate being below the IHT liability, there should be no worries. Depending on how long ago the gift was made, an adjustment after 3 years may be made.

[buzzbee]

Thank you
In terms of just putting the house in both names, I am not sure how I would report that. Is it simplest just to ignore the joint ownership and simply report the full value of the house?

[Sam101]

Ownership of property can be in several ways. Single ownership, Joint ownership which means that when one of the owners dies the part owned by them is automatically past to the other owner, or the more common way as Tenants in Common. This latter way means that the ownership is held, usually but not limited to, 50% / 50%, but could be in any balance. When one owner dies, then their Will will pass their ownership to whoever they wish.

As an example, a married couple would own their home as Tenants in common and in their Will they may say that on my death I give my ownership of our home to my children, or whoever, but also giving a lifetime interest for the other owner so that they may live in the property (or other property if they moved) and only on their death or giving up their interest, does it then pas to the children.

All changes of ownership need to be dealt with at the Land Registry offices. They will have the existing registry and to change that, the owner needs to say how and why in the application. The changes can then be made. The Land Registry office can explain the forms needed.

Hope this helps.

[buzzbee]

The ownership is as joint tennants, so it will pass to me. I am thinking more about what I report, as it has only been like this for about 3 years, prior to which it was in my mum's name only.

I believe that the norm, when it is joint tennants is that for IHT purposes, half of the value is counted and I'm sure I read somewhere that if it passes to a son/daughter, a further 10% is taken off???

I am not sure if this is any different, if this changed within the last 7 years

That was why I wasn't sure if I should report the house value as...
1) The full value of the house
2) Half of the value, minus 10%
3) Half of the value, minus 10% and then (my) half of the value shown as a gift?
4) Something else?

[Sam101]

As joint tenants you own 50% each. When you read through the application for Probate, you will see what is required.

You were gifted the 50% by your mother 3 years ago, at which time she owned 100% and as a gift of only 3 years, then when stating the assets of your mother, then that is what is declared. There is nothing to worry about as you already know that IHT is not a problem.

May I suggest that you download the application and the help pages that are available and read then through. I feel sure that it will become clear to you. There are also several pages on gifting rules which may help

[des8]

If a property is owned as "joint tenants" both owners own 100% of the property, and in event of death the law of survivorship comes into play.
50% of its value at the time of gifting is the figure so will fall below the (IHT threshold

If the property is owned as "tenants in common" each owns a percentage of the property. (the split may be 50/50, but it could be any other split e.g. 40/60)

Survivorship also comes into operation in respect of joint bank accounts

Unless the banks or insurance companies require a grant of probate i wonder if it is necessary in your circumstances