Inheriting a house.

No tax benefit from the proposal.  What's the house like ? I ask as we had something similar when MIL passed - three sisters. House needed to be sold to cover three years nursing care fees, but family said 'why don't you buy it'. Thing is, the 'others' then would have got cash, and we'd have ended up with a bigger house that needed a load of work. They decided to sell it, pay the fees off and divide the little that was left between them.

You might find it less of a pain to sell the house, then think about moving yourselves. I'm more for making life easier than adding in extra complications. You've then got to sell two houses, and sister has to do nothing, and just banks the cash.

If it is worth £1 million you will have to pay 40% of everything about £325000 in inheritance tax wont you? So you will be looking at a bill of £270,000 in IHT. Might be something different in your circumstances but you would presumably have to pay of the sister plus the share of IHT

Sell the house.

Use the money to buy your next home on the coast now and use it as a holiday home for the next 4 years, then sell your current house

First, sorry for your loss.

Then: short answer, no. It’s likely much less tax than that.

If there was a spouse, it’s likely the other partners IHT allowance went to the mum.

there’s a bigger allowance tied to property of up to 500k total each, so if there were two of them and not taking other assets into consideration there can be an IHT allowance up to 1m

also:

If it is worth £1 million you will have to pay 40% of everything about £325000 in inheritance tax wont you? So you will be looking at a bill of £270,000 in IHT. Might be something different in your circumstances but you would presumably have to pay of the sister plus the share of IHT

it’s a small difference, but I’d say ‘the estate’ will have to pay the tax. Not ‘you’. I think it’s a significant difference. There’s a lot of ‘now I have to pay this tax’ chat, but that’s not how it it. Yes, you inherit less so it might feel that way, but IMO inheriting less isn’t the same as having to find a load of cash.

Yes, I know that if a family is desperate to avoid selling a massive house they have to find another way for the bill to be paid, but I’d argue that’s still not quite the same.

Sell it and buy another house near the coast with your inheritance then rent that out for four years?

Or just sell it and retire now on the funds! If you are on and average wage you'll have more than four years salary available and some left over.

If it is worth £1 million you will have to pay 40% of everything about £325000 in inheritance tax wont you?

Not that clear cut, but IHT does need thinking about and being aware of how big the bill is likely to be.

Sell up - both your house and mums. Retire today to the coast, or semi retire with some straightforward part time jobs.

It is certainly an old person's house and I've no real desire to live in it.

Just wondered if we were missing a trick by not moving in.

Inheritance tax wise ,do the girls get to use their deceased fathers allowance?

The house is worth close to a million.

No because you would end up owning 2 homes for a period so one of them would be liable for capital gains tax on any increase in value from the date you purchased it. If thats only a few months of owning 2 it might not mater as any gain would be too small

Inheritance tax wise ,do the girls get to use their deceased fathers allowance?

You need professional advice.

You need professional advice.

this.

but again, as above, yes they probably do. And there’s additional allowance for property.

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

If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000.

If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die.

As Matt says, get advice

But, potentially there's an overall allowance of 325 + 325 + 325k. It just depends on the circumstances.

But if the house alone is worth circa 1 million, then you are almost certainly going to think about IHT on the estate

There is a lot of info on the web. But a suitable tax specialist will be worth contacting

yeah assuming there was a mrs zip's dad who still married to the mum when he died, you get his allowance bundled up, plus the additional amounts for property - I wouldn't be surprised if the entire £1mm was tax-free, but other assets they're likely to have (if they have a posh house) will be taxed.

The downside of moving would be paying stamp duty on the half-a-house you don't inherit, unless there is enough cash/other assets to offset the entire value of the house (so you effectively take ownership of the entire house and sister gets everything else). Plus all the other costs associated with moving house, which you end up doing twice when you go to the beach instead of once.

If it is worth £1 million you will have to pay 40% of everything about £325000 in inheritance tax wont you?

It's worth mentioning that this is complete bollocks, even if you remove the typo.

But more concerning is the evidence of modern slavery....

She will inherit the house along with her sister.

Plus all the other costs associated with moving house, which you end up doing twice when you go to the beach instead of once.

At only 4 years from when you planned to change lifestyle and move, with money in your hand, you only live once. Make both a house move and a lifestyle move - change house now, seek low-hassle part time jobs and ease into more time for yourself.

There's no tax bill for children (and/or grandchildren) inheriting all assets unless the combined inheritance from both parents exceeds £1 million (assuming there is a house worth at least £350k in the total, as in this case).

This is common in the case of "all to spouse if they survive me, all to children if spouse is already dead". However if some assets passed to children on the death of first spouse, this reduces the total tax threshold of th 2nd death by that amount. (Technically, the threshold is £325k per person plus £175k for a house passing to children/grandchildren, transferrable between spouses. You get the million by adding them up for both parents.)

Once you're over a million, there is 40% on the excess. Even then, you're still getting a million tax free for the "achievement" of being born to rich people. Congratulations.

 Even then, you’re still getting a million tax free for the “achievement” of being born to rich people.

A house that has inflated to £1m in value is the only significant asset that a lot of normal, older working class people have these days.

Depends heavily on location, obvs.

You need professional advice.

Best advice you'll get. Also, buy a new bike.

As the OP say's 'it's an old person's house' - I'd sell it, deal with IHT and split the proceeds then move yourself. Less messy and you aren't having to pay the other sister and sort out IHT etc and sell your property to pay for it all.

I wasn't buying a house that needed new windows, kitchen, bathroom and re-wiring. Both the kitchen and bathroom were old and knackered and the house old fashioned (not changed in 40 years other than when we gave it a lick of paint for MIL/FIL).

A house that has inflated to £1m in value is the only significant asset that a lot of normal, older working class people have these days.

I nearly choked on my midafternoon biscuits!  I wonder if you were trying to say “not everyone who has ended up with a house of significant value, will also have a portfolio of other assets” but that’s certainly not how I read it at first.

The value of a house can only really be confirmed when somebody hands over the money for it. Would you be happy if you bought the sister out on an estimated value then when it came to sell on you couldn't achieve that. Or would there be tensions if you sold it for more and the sister was out of pocket.

I nearly choked on my midafternoon biscuits!  I wonder if you were trying to say “not everyone who has ended up with a house of significant value, will also have a portfolio of other assets” but that’s certainly not how I read it at first.

Not sure I follow you mate, but just a having valuable house and a semi-reasonable pension is not uncommon.

Basically, not everyone in a house that might fetch £1m is "rich".

I'm still not quite sure what your point is chakaping?

Edit: it looks like you're saying that it's ok for kids of non rich rich people to become rich through accident of birth...

I guess...

If you go through with the plan to buy the house, you have a limited opportunity post the death to have an amendment (deed of variation) applied to the will (change of beneficiaries) if agreed by both affected beneficiaries.  This would make the entire house coming to you fall within the inheritance and hence be free of stamp duty (which might be advantageous).

This however runs onto the rocks as any "outside the estate" exchange of value with the sister will be impossible to tie to the deed being implemented.  It really depends on whether everybody trusts everybody else and (horrible to say it) funny things happen to people in the face of wills and inheritance so it really is best to keep things on the straight and level with no shady side trades.

Yet again it falls into the category of "get advice".

With the estate being worth over a million and there being 3 major beneficiaries...

I'd honestly just get a solicitor to do the administration.. Yes it might cost say 5k in legal fees but those fees will come off the top line of the estate so you won't need to find that money, so to speak.

You'll also all get proper transparent accounts of estate, and advice on IHT.

Some of the above is nonsense.. The estate only pays IHT on the amount above the IHT threshold, not on the total value of the estate, and after claiming discounts such as dads allowance passing to mum, and as all the beneficiaries are direct family descendants, there's more relief to be applied there tooas it's a 'family home'.

My advice would be

1) given the value of the estate pay a solicitor to do the administration.. You can remain executors and just give the solicitor permission to do the admin on your behalf.

2) keep it simple... Liquidate the entire estate and then after fees/expenses /debts paid you can just split the reminder of the cash equally between the beneficiaries assuming that's what the will says/allows.

I’m still not quite sure what your point is chakaping?

Edit: it looks like you’re saying that it’s ok for kids of non rich rich people to become rich through accident of birth…

I guess…

Why would you think I'm saying that?

Are they gonna be rich if they've had to wait for their part of the inheritance to buy a 3-bed semi in the same part of the country?

Basically, not everyone in a house that might fetch £1m is “rich”.

Especially in this case as (let's assume the entire estate (house and any savings) is worth a million. After debts and expenses are paid) ... split 3 ways it's less than 330k each.

One beneficiary taking on the house might not be the best idea as they will then be on the hook for maintaining the house and paying council tax and insurance etc until they decide to just keep it or sell it... And if they sell it... That comes with it's own costs in the shape of agents commission and conveyance fees etc.

Keep it simple flatten the lot and then split the remainder 3 ways.

Are they gonna be rich if they’ve had to wait for their part of the inheritance to buy a 3-bed semi in the same part of the country?

A damn sight richer than the next door neighbours who perhaps didn't have the unearned benefit of half a million quid* dropping through the letterbox one day by accidental virtue of their birth...

Why would you think I’m saying that?

Because I'm not yet clear what you are saying, hence me asking you.

* Apologies, I can't recall if our notional not rich rich heir is part of a 2 way, 3 way or sole inheritance

@thegeneralist

Inheritance and tax law is what it is. The executor of the estate has a legal obligation to do things according to the law or they can be held personally liable...

It sounds like you are trying to argue that inheritance shouldn't exist.. I mean, good luck with that but it's hardly the point of this topic.

@the OP... Sorry I kept saying split 3 ways.. But it seems it's two daughters... So split 2 ways.

Unless you (your Mrs) really want to keep the house for a forever home I wouldn't entertain her 'buying her sister out'.

Keep it simple, sell everything within the estate administration and then after expenses the sisters just split the remainder equally.

I inherited an overdraft.

Another vote for not buying the house unless you want to keep it, otherwise it could get messy & if you hadn't noticed buying & selling houses costs money, so not a lot of point in buying a house for a short period. Good luck with whatever you decide.

Indeed.. And in the current market, that million pound house might only Sell for 750 or something.. Has it been valued?

You need a free estate agents valuation ASAP as the estate needs to know what the value of the house at the time of death was in order to calculate the rest of the estate, assuming the house is by far the largest asset in the estate, for IHT purposes.

Plus you'll be in the hook in the meantime and have to pay all the fees and council taxyourself rather than it being split between the sisters.

Selling was always on the cards but just wanted to check that that we weren't missing an obvious swerve.

Selling was always on the cards but just wanted to check that that we weren’t missing an obvious swerve.

I doubt it, unless you want to keep the house long-term, 4 years is not long term.

If anything, liquidating the lot and selling the house at current market value might save you a lot of time and money in the future, as the cost of selling the house will be split between the two sisters, rather than your Mrs buying her sister out and taking the whole thing on, whilst the other sister just gets a cheque for 50% by sitting on her arse and doing nothing.

I inherited an overdraft.

Overdraft? You were lucky. I inherited a bankrupt diamond mine in South Africa.

You try telling the kids today that, and they won't believe you.

As mentioned above, we didn't want MIL's house - this was before her getting ill. Once MIL died, one of the sisters 'thought' she could move in it super cheap. Her three bed ex-council house, she thought, was worth the same as a four bed detached round 'the corner'. She'd moved stuff up as well.

There was no way we could have given the house to her 'cheap' due to the charge from the council - it had to be at market value.

SIL never got her act together in selling hers (she'd need the money to buy the other sisters/council out).  It took another year to sell the house on the market, and it went for what we could get. Most of it was then paid to the council for care fees, and the three sisters split what else was left.

There is a lot of hassle keeping an empty property going, so get rid if you don't want the fuss. Unless it's absolutely what you'd like, sell. Sounds like it's not.

I inherited an overdraft.

Beneficiaries aren't liable for debts.

Yes I think there's some confusion 'up thread' about the very big differences between beneficiaries, and executors.

They are both different legal entities... Even though a beneficiary or beneficiaries may also act as executors, it's important to know the legal difference.

Hmrc really don't like a house being sold to a family member when there's iht due, every pound under what hmrc consider the true market value is a 40p loss to them.  If it's sold on the open market it achieves true market value.

Hmrc really don’t like a house being sold to a family member when there’s iht due, every pound under what hmrc consider the true market value is a 40p loss to them. If it’s sold on the open market it achieves true market value.

If i'm reading the above correctly, that's not what they are asking...one beneficiary can easily 'forfiet' thier rights to the house, in exchange for an equivelent lump sum of cash (50% of the market value of the hiuse at the time of death).

First things first..OP's Mrs (if acting as executor) needs to call 2 different estate agents to get a current market value for the house, as is. That's critical incase there are any further shenanigans over the value of the house in future.

A good example is my own, my Nans house was valued at £375k, but eventualy sold about a year later for £352k, so it basically made a £27k loss as far as the estate/tax liability is concerned. \that loss can be offeset.

And in the meantime I had to pay the council tax, insurance, and general maintenence to keep the house in a sellable condition....

If the OP takes on the house without even having it valued by at least 2 independent estate agents... see where i'm going here?

cha****ng, I thought it was just a bad turn of phrase, but perhaps you actually meant this:

A house that has inflated to £1m in value is the only significant asset that a lot of normal, older working class people have these days.

bits in bold and underlined to highlight the emphasis

I don’t necessarily think working class is a useful distinction these days, but the idea that a lot of normal working class people have anything close to £1m is deluded - one of the problems with IHT is that those who fall into it don’t realise just how lucky they are.   Less than 1:20 estates result in inheritance tax.

My family has been through a house inheritance. No idea what you should do but a few points

 The house is valued as part of the estate

 If inheritance tax is due you pay it before you can sell the house. So you have to fund the inheritance tax out of the estate or your own pocket. You can’t sell the house before you pay the tax.

In our case the house increased in value between clearing probate and being sold. Basically there was a huge legal delay and Covid increased prices. It’s worth remembering you’ll be paying council tax, insurance and possibly utilities until it’s sold. A condition of our insurance was a weekly visit. We got a neighbour to do this most weeks as we were 2 hours drive away

Just to clarify my above post re probate valuation, hmrc didn't accept 3 estate agent valuations (they all came within 5k, i actually got 5).  I had to get a RICS surveyors report for c500 quid, deductible expense, to provide evidence of full market value, their definition not mine.

It was the value at date of death, so don't go improving anything until you get an agreed valuation.

House not going on open market was the only asset hmrc could really go for, shares, cash etc, all have a definable valuation on a specific date.

Just to clarify my above post re probate valuation, hmrc didn't accept 3 estate agent valuations (they all came within 5k, i actually got 5).  I had to get a RICS surveyors report for c500 quid, deductible expense, to provide evidence of full market value, their definition not mine.

It was the value at date of death, so don't go improving anything until you get an agreed valuation.

House not going on open market was the only asset hmrc could really go for, shares, cash etc, all have a definable valuation on a specific date.