IHT calculation

[IsThisOn?]

Hi. I would appreciate it if someone can advise on this please.

To calculate and pay IHT, do the financial assets need to be encashed, or can it be done using the values of the assets as at the date of death? A firm has been engaged to deal with this and there seems to be some confusion over what needs to be done before IHT can be settled. The executors are also the beneficiaries and have said that they can pay the IHT from their own money and so do not need to wait for probate to be granted and pay it from the estate.

The firm seems to want all the money from the financial assets to be with them first. This adds a complication in that the estate is of a husband and wife who have both passed away. The spouse who was due to inherit the whole estate on the first death, then died before probate was granted. So some of the assets were not transferred to them before their death and the firm that are now dealing with this seem to want the estate of the first spouse to be fully settled before they will accept these funds. That looks as though it could delay the calculation and payment of IHT, rather than just doing it based on the known value of the assets of the first person on the date of death of their spouse, who would have inherited all their assets.

I hope that makes sense!

[PallasAthena]

To answer your first question, you declare to HMRC the open market value of non-cash assets at date of death - what you could sell them for. You do not have to sell the the assets and convert to cash. Many assets may never be converted to cash - eg jewellery passed down the family. Beneficiaries may be planning to live in the house they are inheriting. There are various HMRC rules about how the declared IHT values must be evidenced and justified.

The executors are free to fund the IHT from their own resources and recover it from the estate after probate.

I don't understand who this firm are or who has appointed them.

[IsThisOn?]

One of the executors/beneficiaries was keen to hire a "professional" to get probate granted as quickly as possible following the second death. So far this is not really proving to be the case, although they do keep offering to quote for additional work...

[Pezza54]

Who was the executor/administrator for the estate of the first spouse to die?
Could this executor be delaying the process and the firm is quoting for undertaking outstanding duties for this executor?

[IsThisOn?]

It's the same executors (the children of the now deceased couple) for both deaths. I don't think the executors are intentionally trying to delay anything. It's more that the contact at the legal firm that was engaged following the second death was expected to get things moving quickly, but then became unavailable for a while due to IT issues. Since communication resumed they have seemed a bit evasive in spelling out exactly what they require to get the IHT sorted. For example they have said that they cannot accept the funds from the first spouse until the estate administration has been completed. However, I don't see why this means they can't sort out the IHT for the second death using the values of the assets that they would have inherited from their spouse on the first death.

When engaging the legal firm the original understanding was that the calculation of IHT would be sorted first and that the executors/beneficiaries would pay this to avoid racking up interest on the tax due. I posted here to check my understanding that it is not a requirement for monies to have been transferred to calculate IHT. As long as you know the value of the assets that make up the total estate that should be enough?

The actual distribution of the estate cannot take place until probate is granted for the second death, which is still some time away as the application has not yet been made. But I don't see why the fact that some assets are still in the name of the first spouse to die would be a barrier to calculating the IHT due following the second death, or indeed submitting the application for probate.

[Pezza54]

It is possible to pay IHT before the estimated value of the estate is obtained to avoid interest being charged
Form IHT 422 is used by the executor online (except for trusts) or by post
If an overpayment is made, HMRC (after probate) will refund the difference plus interest

[Pezza54]

The firm may be waiting to find out what, if any, transferable allowances (NRB + RNRB) are available from the estate of the first spouse to die. These allowances could make a big difference to IHT due on the second estate

[IsThisOn?]

The firm may be waiting to find out what, if any, transferable allowances (NRB + RNRB) are available from the estate of the first spouse to die. These allowances could make a big difference to IHT due on the second estate

They were provided with details of all the financial assets at the start and a valuation was carried out of the only property involved.

[Pezza54]

Yes but what about the transferable allowances?

[IsThisOn?]

Yes but what about the transferable allowances?

My understanding is that they apply.

[Pezza54]

You should check with the executors that they have notified the firm of the amount of the transferable allowances.
There may be up to £500k NRB to transfer, depending on the will
At the same time you can tell them that they can pay IHT on account

[IsThisOn?]

You should check with the executors that they have notified the firm of the amount of the transferable allowances.
There may be up to £500k NRB to transfer, depending on the will
At the same time you can tell them that they can pay IHT on account

Yes the firm is aware and has agreed that the transferable allowances apply. It just does not seem that they are giving much priority to sorting out the IHT and my concern is that interest charges are racking up.

If there are sufficient financial assets available in the estate to pay the IHT (without selling the property) can that money be used to pay the IHT before probate has been granted?

Otherwise if the executors pay the IHT with their own money, do they have to wait for probate to be reimbursed from the estate, or can that be done once sufficient financial assets have been encashed?

[Pezza54]

Executors can use estate money to pay IHT, in stage payments if necessary, before probate

They should use form IHT 422 to obtain an IHT reference number at least 3 weeks before making payment

Payment can be made from an online bank account