Ronald Raygun: The Denouement

I don't know if you will remember but six months ago you (and Jonathan etc) helped me go through a complex financial puzzle involving Mary, Al, Bern etc. The puzzle has simplified because Mary has died.

If you ever have to die then heart failure is the way to go. You leave the house on a cold day, you are active at 78 despite having lived your entire life on a diet of nothing but cream cakes and sticky buns, you come back into the warm lounge surrounded by all your favourite things, settle down in front of the TV with a couple of bars of chocolate and fall asleep.

Heart Failure (not to be confused with Heart Attack, pains across the chest): "You become dizzy for a few seconds then you fall asleep".

Yes I know, "Our thoughts are with you at this tragic moment". The challenge for anyone replying in this thread is: if you *must* come out with platitudes come out with some original ones, the dismal words are off limits, it was a nice way to live and a nice way to die and Al doesn't want to be sad.

However the £120K IHT bill that Al was worrying about 6 months ago kicks in. Al hasn't planned for what he will do if a plane crashes in the garden, he hasn't planned for how he will cope if his leg is amputated, he hasn't planned for how he will cope financially with Mary's death. It's not the sort of thing you plan for.

The huge number of "What if?" scenarios have consolidated themselves down into the singular "What do we do now?" The family set up their scheme up via *excellent* solicitors and reading the will it seems this likelihood was properly forseen, but before we set them on at it £170 per hour (or however much it is 5 years after it was £140 per hour) we would like to understand it for ourselves.

The problem is that the estate owes £120K to the taxman and only has £90K of assets ? plus a house. The house is owned 50:50 with Al. Al has the right to buy the house at:

"?90 per cent of the of the value of my interest in the Property at the time of my death as determined (on the principles which apply for inheritance tax purposes) by a valuer appointed by my Trustees?"

House prices are falling. What is meant by "the principles which apply for inheritance tax purposes"?

Reply to
Troy Steadman
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Out of genuine interest, how can an estate owe 120k to the taxman if the house isnt valued yet and there are 90k of other assets?

Reply to
Tumbleweed

If their "excellent" solicitors didn't explain it to them at the time, in layman's terms, they were ripped off and should demand a partial refund of those £170ph.

Presumably because Alice's ballpark estimate is that the estate is worth

653k (653k - 263k = 400k, of which 40% is 120k), and therefore that the house is worth approximately 563k. A valuation would simply serve to review that figure, and Troy seems to imply that prices have fallen since that figure was first bandied about, perhaps following a valuation not too long ago, so the reviewed figure could well be a little less.

I can't be bothered hunting around the archives, so I'm sure Troy will oblige by refreshing our memories. IIRC it was all about ice maidens. There was Al-ice, Bern-ice, and there may also have been a Cand-ice, but we just called them Al and Bern (and maybe Cand) to avoid getting too cold. As I recall there was a bit of a problem with relations between them being somewhat chilly.

What was this 50:50 stuff? Was it the case that Mary gave half her house to Al, so that at the moment Al owns half and Mary's estate the other half, and Al has been willed the option to buy the other 50% at

90% of what it's worth?

If this arrangement happened recently, then of course Al's share still counts as part of the estate for IHT purposes. ISTR Al lived in the house with Mary so it wouldn't have been a GWR. I believe Al's share would be valued as at the time of gift (i.e. before its market value began to slide) and Mary's share will be valued as at date of death. I don't suppose there is any more deep or siniter meaning to be adduced to the technical term of "principles which apply", except possibly for the "loss to estate" principle by which the sum of the values of the two halves is not necessarily the same as the value of the whole. This is probably irrelevant in this case. The remaining half is worth less than half the whole house because there is a sitting tenant (who owns the other half), but if the remaming half is valued at less, then the gifted share would have to be valued at more so it should all come out in the wash barring market value drift over the course of the past half year.

What to do? Troy didn't say whether the house contents (sentimental value etc) were included in the value of "the house" or in the 90k of other assets. Assuming the 90k are liquid (cash, shares, life policy pay-outs), then of course they can be put to good use by reducing the IHT bill to 30k net.

As I see it, Al has the option to buy the other half at a 10% discount. If he (sorry, *she*) chooses not to exercise this option, she will presumably then wish to sell her half (either to Bern/Cand or to an open market buyer, and Bern/Cand would need to decide whether they'd want to sell the whole house jointly or keep their half with a stranger as co-owner). I forget what share Al retains of the remaining estate, I think there was some horse trading whereby Mary decided Al should have half the house straight away and Bern/Cand the bulk of the rest of the estate later. Anyway, if Al doesn't buy the estate's half, Bern/Cand will presumably sell it and pay the 30k IHT from the proceeds and keep the rest.

If Al does buy it, the estate will likewise be awash with cash from which to settle the IHT bill. Al, of course, will need to have or raise the funds. A 40% mortgage should not be difficult, but only if he has the income to support 225k of borrowing. Failing that, dunno. The IHT bill doesn't have to be paid straight away, does it? But if the ice maidens want to be rid of the spectre of the IR having a hold on their collective property, it ought to be a simple matter for them to raise a joint mortgage on only enough borrowing to pay off the tax man, and then either see what they can do about setting aside their differences and sharing enjoyment of the house as Mary would have wanted, or doing as they would have done anyway.

Reply to
Ronald Raygun

"Ronald Raygun"

Reply to
Troy Steadman

Make that Centrica (otherwise Nogood Boyo will be complaining I'm misleading you all). What happened to the Tesco interim?

Reply to
Troy Steadman

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