Inheritance Tax Penalty: who pays?

[PickNickering]

I assumed an executor wouldn’t be personally liable because they are doing it as a favour most of the time. Unless they are direct beneficiaries. I’ll think long and hard before agreeing to it.
If there was any complications or moaning from the beneficiaries I’d just get a solicitor to do it all or resign.

£92k is a lot of money to give away to the government

An executor can be personally liable though as they owe the beneficiaries a duty of care so if they are negligent they can be sued.

Sometimes as well it’s not an easy matter of just resigning if they have started to deal with the estate - so called “inter meddling”

Two things that could be changed perhaps.

Where elderly siblings live together in a house worth say £525,000 ( no other assets to speak of). One dies. There is a £325,000 allowance but the IHT to pay is 40% of the £200,000 over their allowance, being £80,000. The estate might not be able to pay this without selling the house, rendering the surviving sibling homeless. This needs sorting even if it is just deferring the IHT to after the second death.


The other thing that could be sorted is the date the IHT has to be paid, iirc it has to be paid by 6 months. If a house forms part of the estate, but hasn't been sold at the six month mark, then IHT has to be paid from the estate, and this might be from funds which are not yet available. Surely IHT could be deferred till all monies are in.

IHT is paid by only a few estates, around 4%. You either don't pay it, pay to not pay it, or inherit a nice lump sum, knowing the treasury has benefitted. What is not to like.

With property the executors have the option when filing the IHT400 to use the instalment option. This in effect means that they don’t have to pay the IHT attributable to the property within the usual 6 months but can pay it by instalments up to 10 years. It’s still not ideal as interest is payable but it at least enables the executors to get probate and gives them some leeway as regards the property.

 

[MGC]

In principle I agree but I think there should be a caveat for London properties being inherited by youths who live there.

I doubt an 18 year old about to go to university should have expected his healthy father to drown saving a young family that got into trouble in the sea, thus rendering him homeless.

Don’t try and brush it off as anything other than scratterish

 

[CatRyan]

Don’t try and brush it off as anything other than scratterish

I appreciate your efforts here, I really do. Keep it up why don't you.

 

[Qwerty]

The thing is that the incredibly wealthy families just tie it all up in trusts etc and don't pay a penny in tax. In London you're never going to find a decent property below the threshold so I know of instances where it means people are made homeless as a result. My friend Web drowned abroad and his son inherited but was just starting University and found himself either homeless or with a massive tax bill.

Why would he be homeless he's inherited at least £325k and 60% of anything over that. Awful what happened to his dad but the son has been well provided for.

 

[buster]

Ok.

Can you confirm how much YOU paid ?

 

[Qwerty]

£92k is a lot of money to give away to the government

Bet he wished the government got £920k. Hed be 10 times better off.

 

[southstander]

Cgt if applicable needs paying up front prior to death.

Looking at transferring a flat to my daughter's and could be stung with a very hefty bill

Become a Tory MP. Rules do not then apply.

 

[Qwerty]

Two things that could be changed perhaps.

Where elderly siblings live together in a house worth say £525,000 ( no other assets to speak of). One dies. There is a £325,000 allowance but the IHT to pay is 40% of the £200,000 over their allowance, being £80,000. The estate might not be able to pay this without selling the house, rendering the surviving sibling homeless. This needs sorting even if it is just deferring the IHT to after the second death.


The other thing that could be sorted is the date the IHT has to be paid, iirc it has to be paid by 6 months. If a house forms part of the estate, but hasn't been sold at the six month mark, then IHT has to be paid from the estate, and this might be from funds which are not yet available. Surely IHT could be deferred till all monies are in.

IHT is paid by only a few estates, around 4%. You either don't pay it, pay to not pay it, or inherit a nice lump sum, knowing the treasury has benefitted. What is not to like.

Bloody hell you're the second person to claim somebody in receipt of £325,000+ is practically homeless

I doubt an 18 year old about to go to university should have expected his healthy father to drown saving a young family that got into trouble in the sea, thus rendering him homeless.

Sorry for the lad but to claim he's been rendered homeless is ridiculous.

The "gain of money" through inheritance is completely tied to the loss of a family member, otherwise it wouldn't be an inheritance.

We should be encouraging people to do well for themselves so they can leave something behind to their family.

They can leave something behind £325k tax free

 

[CatRyan]

Why would he be homeless he's inherited at least £325k and 60% of anything over that. Awful what happened to his dad but the son has been well provided for.

Homeless from his home he grew up in and then having to find something cheaper further out.

 

[Qwerty]

Homeless from his home he grew up in and then having to find something cheaper further out.

When he finished university he'll be in pole position to buy property in or around his family home.
As he has a massive tax bill he'll have received a massive amount over the £325k allowance.
If the tax bill was £80k, he's got £455k cash in the bank.

 

[Lonz]

They can leave something behind £325k tax free

You should be able to leave as much as you like.

 

[Qwerty]

You should be able to leave as much as you like.

That's the argument, should be scrapped, raised or lowered.
The argument for scrapping it isn't helped when the claim is receiptiants of £325k are rendered homeless though.

 

[buster]

Homeless from his home he grew up in and then having to find something cheaper further out.

No one has a divine right to stay or own the house they grew up in.

 

[peachy]

Bloody hell you're the second person to claim somebody in receipt of £325,000+ is practically homeless

If the surviving sibling, say maybe in their eighties, has no other assets other than the house, is facing a bill of £80,000, the £80,000 has to be paid and they would likely have to sell the house to pay the £80,000.
Agreed they'd still have £445,000 remaining to buy a new house. Not bad at all, but a huge upheaval. All I suggested was a tweak to pay the £80,000 on their death rather than within six months of the first sibling's death.

Seems cruel when a tweak is all that is needed. Same tax will be paid, just later. I never claimed they will be practically homeless .

 

[Longcount]

The "gain of money" through inheritance is completely tied to the loss of a family member, otherwise it wouldn't be an inheritance.

We should be encouraging people to do well for themselves so they can leave something behind to their family.

I don't mind part of my estate being taxed when I eventually passed. I'll have benefited enough from tax avoidance with what I've accumulated, so when it's time to pass it on to family, I honestly don't mind the prospect of what I haven't spent myself having a cut taken for the good of wider society (theoretically, anyway).

 

[CatRyan]

When he finished university he'll be in pole position to buy property in or around his family home.
As he has a massive tax bill he'll have received a massive amount over the £325k allowance.
If the tax bill was £80k, he's got £455k cash in the bank.

I suppose. Not everything is about pounds shillings and pence though is it. He had to sell his home, clear it all out, deal with all that, all the legal mire, lose all his family's stuff and deal with his father dying so suddenly so far away and sort out getting to uni....the death of a parent is bad enough at any age.
It isn't about the cash he has as a result but about all he has lost that can never be replaced. That is why I think there should be a caveat of some kind when a primary residence is involved.

 

[Qwerty]

I suppose. Not everything is about pounds shillings and pence though is it. He had to sell his home, clear it all out, deal with all that, all the legal mire, lose all his family's stuff and deal with his father dying so suddenly so far away and sort out getting to uni....the death of a parent is bad enough at any age.
It isn't about the cash he has as a result but about all he has lost that can never be replaced. That is why I think there should be a caveat of some kind when a primary residence is involved.

There's a case for the tax to be deferred for a number of years at accumulative interest (5 years max for arguments sake).

 

[CatRyan]

There's a case for the tax to be deferred for a number of years at accumulative interest (5 years max for arguments sake).

I understand the logistics would be even more nightmarish than they already are but ultimately the point of IHT is to prevent the rich getting richer but in that it has signally failed. This is not a tax on the super rich....they dodge it effortlessly. It is a tax on those that shouldn't really have to hand over such a wedge when their loved ones have already paid all the taxes etc in their tenure if the estate.

 

[Qwerty]

I understand the logistics would be even more nightmarish than they already are but ultimately the point of IHT is to prevent the rich getting richer but in that it has signally failed. This is not a tax on the super rich....they dodge it effortlessly. It is a tax on those that shouldn't really have to hand over such a wedge when their loved ones have already paid all the taxes etc in their tenure if the estate.

Because the super rich can dodge it isn't a reason to scrap it. Closing the loopholes will be the right thing to do.

If the lad has to take out a £150000 mortgage on a £600000 house in 5 years time he's in a fantastic position.

 

[CatRyan]

Because the super rich can dodge it isn't a reason to scrap it. Closing the loopholes will be the right thing to do.

If the lad has to take out a £150000 mortgage on a £600000 house in 5 years time he's in a fantastic position.

I talked to him at the time and it was impossible for him to get a mortgage to keep the house. I don't know all the details as the poor boy was fagged to death with it all so I didn't want to interrogate him.