I have read HMRC's guidance IHT206(2006) - the guidance for the short-form IHT205 relating to small estates.
I'm confused.
The deceased owned a property with the survivor as a tenant-in-common. A mortgage was secured on the property, where both tenants-in-common were joint borrowers. The deceased and survivor were joint applicants for life/mortgage protection insurance. The insurance was written out of trust.
IHT2006(2006) tells me that I should include only the share of the property's value and the respective share of the mortage. Fine: happy with that.
The form asks for the payout from the insurance company (box 13.5). The policy paid out on the first death of the co-insured.
So, the form has 50% of the property value, 50% of the mortgage value, but then 100% of the insurance payout.
This sucks. But is it right?
Have I missed something about the mortgage? If a property is tenancy-in-common, would the mortgage have been structured identically?
(The form also asks for the premia paid to the insurer. To me, if the estate is the whole beneficiary, then there is no gift to have diminished the estate within the past 7 years. And, in any event, regular income funded those premia, so there's another reason for exemption!)