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Hi Its MamaTax Here!
Thanks for the question.
If its a joint account, by default the account is taken be 50:50 unless there are other supporting documents to proof otherwise.
However if the deceased person provided all the money in a bank account and the account may be in joint names just for convenience. In that case, you need to include in your valuation all the money that was in the account on the date the person died. And if another person had provided some of the money in the account, you only include the amount that the deceased person provided.
Could you confirm who provided the funds and how was the income earned by the joint account prior the death reported, ie in whose account was the income recorded?
With regards XXXXX XXXXX should account for the gift, we need to understand how the funds in the joint account should be accounted first -if you could answer the questions above. Hope that your mother's spouse was donating his share and not both donating both parties' share.
Hi there. Let me know if you are still online?
Sorry for the delay.
It turns out that my parents had a variety of bank accounts, mostly joint.
The income, from employers & state pensions was in an approximate ratio of 3:1 (father:mother) - ie my mothers income was about 25% of the total.
There were a variety of gifts, some about £3,000 over the 7 years, all from different joint accounts. If I canot allocate these 100% to my dad, can I at least allocate them 25% mum, 75% dad - the ratio of income?
Also, throughout the 7 years, my father gave a regular gift of £100 per month to each of 3 grandchildren to help with University education. This also came out of the joint account. This I would consider to be a regular gift out of income, as I can show that this did not eat into savings. Again, can I allocate this all to him (his income alone is sufficien to show he can afford this) of do I have to split it between mum & dad, and if so can I make that split 25% mum, 75% dad?
My mum's estate (including share of house) is over the £325,000 threshold.
So I assume that you are saying I should apportion all the gifts in the 25/75 ratio. In other words I only allocate £25 of the regular gifts to my mum.
Does this also mean that I can exclude any (non-regular) gifts that add up to effectively £12,000 per year, as I will be only allocating 25% - ie £3,000 to my mum?
Thanks. I assume these rules apply to
The situation with my mum's will is that everything up to the nil-rate limit £325,000? goes into a trust, the rest passes to my dad. So in principle no IHT is payable at this point (until my dad dies), but I need to calculate these gifts to add to the estate to work out what is put in the trust.
I understand that gifts "eat up" the tax threshold first, so does that mean that I need to add 25% of the gifts (less the exemptions above) first, then add other assets, in calculating the value of the estate?
Can you also confirm that I cannot use the 3-7 year taper of the gifts that apply to tax calc, for the purposes of estate valuation?
Hi - thanks for the tips. I do not think IHT is liable, as the will states that the first £325 goes into the trust (so no tax liable), then the remainder is transferred to my dad (spouse transfer so no tax liability).
The hard part, I think, is going back through all his records to find the dates & amounts of gifts etc, which I will have to do anyway.
Yes, a spreadsheet example would help. Assume she has shares of £10,000 in her own name, ISAs in her name worth about £150,000, other bank accounts worth about £40,000 and owned half the house that is worth about £600,000. Her most significant goft was £7,500 (25% of £30,000) she gave to my brother in December 2005, which is 6y 8months before she died in Aug 2012.
Thanks Nigel Firstly apologies on the format of the answer below - its just a problem with this site. If this is not clear i have attached an excel spreadsheet of the answer HERE. How to Workout Inheritance Tax: Based on the numbers you provided your IHT workings would look this (see below):
1. Taxable on Death (which can be transferred to Spouse) The Potential Exempt Transfers (PET) made by mum in the last 7 years prior death now becomes a chargeable transfer because it is made within 7 years of death. However, because there are more than 6 years between the date of gift and the date of death, any death tax to be incurred by the donee can be reduced by taper relief.
In addition its worth your dad start looking into IHT planning to reduce the tax bill- either by gifting some of the assets now, using trusts, investing in IHT efficient assets etc