"A man can do all things if he but wills them."
Leon Battista Alberti
Legal specialist in providing Later Life estate planning solutions and advising vulnerable clients.
What your executor in your Will should know about the new excepted estate probate rules.
Gavin says: As a Will maker, it is important your chosen executor knows that some estates are excepted from the need to pay Inheritance Tax, which could mean being able to use a more simplified route to obtaining a Grant of Probate.
Also, in January 2022, with the aim of simplifying the Inheritance Tax process, the rules concerning excepted estates changed and now it is no longer necessary to complete Inheritance Tax form 205 if an estate is exempt from Inheritance Tax.
How did the previous regulations work?
It used to be a requirement that even if an estate was not liable to pay any Inheritance Tax, account form IHT205 had to be completed and filed with HM Revenue & Customs before the estate’s administrators or executors could apply to the Probate Registry for a Grant of Letters of Administration or a Grant of Probate.
Everyone has an Inheritance Tax allowance and, if this is not used when they die, it can be passed on to their spouse. The previous rules stated that where an unused allowance was transferred, then form IHT400 needed to be completed and filed before an application could be made to the Probate Registry. This is a longer and more in-depth form than IHT205.
Where the deceased had made chargeable lifetime transfers, i.e., the transfer of money into a trust, there was a requirement to report these when the value exceeded £150,000.
Also, where an estate included foreign property valued at over £100,000, then form IHT400 was again required.
What is an Excepted Estate?
An excepted estate arises in the following cases:
• Where the value of an estate falls below the Inheritance Tax threshold
• Where an estate is valued at less than £1 million, to include chargeable and exempt lifetime transfers, and the value of property passing to beneficiaries falls below the Inheritance Tax threshold
• Where the estate is that of an individual not domiciled in the UK and who held only limited UK assets
What are the new excepted estate regulations?
Following criticism of HM Revenue & Customs for requiring extensive information when no Inheritance Tax was payable, the new rules aim to make it easier for those carrying out an estate administration to deal with the initial phase of applying to the Probate Registry for a grant. The Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 will apply to all estates where the deceased died on or after 1 January 2022.
If an estate is excepted from paying Inheritance Tax, then the value of the estate does not need to be reported to HM Customs & Excise. To calculate the value of an estate, you need to value all of the assets, to include some gifts made in the seven years before death, and subtract debts and other liabilities. You can also discount assets left to a spouse or civil partner. Where the net value falls below the Inheritance Tax threshold, you will not be required to submit an account to HM Customs & Excise.
The value of the estate will still need to be accurately calculated and notified to the Probate Registry at the time of application for a grant.
If it is likely your estate may qualify to be an exempt estate, it is important that your chosen executor know what to do to in such a situation.
What would you need to do if you feel your estate is likely to qualify to be an excepted estate?
It would be prudent in your Will to appoint an executor who is aware how Inheritance Tax works, what allowances can be claimed and how to deal with your estate should it likely qualify to be an excepted estate or not as the case maybe. Alternatively, you can consider appointing a professional executor who has the skills to best deal with your estate and see that your hard-earned assets passes safely to your loved ones.
To find out whether the person you are considering appointing as executor in your Will would be able to deal properly with your estate when the time comes, or whether it would be best to consider appointing a professional executor, contact me now on 01404813676 or by email on firstname.lastname@example.org for an introductory free 30 minute consultation where I will consider your circumstances and who would be the best executor for you to appoint in your Will.
Gavin Ball BA, LLB, TEP, MIPW
Director, Gavin Ball Later Life Planning