Q I am an executor to my aunt's will. She had stocks and shares, worth over £500,000, taking all the value of the estate as it stood seven years ago. Since then though, she has given most of these away to relatives.
She transferred her house (worth £100,000) to me when she became unable to live on her own four years ago, and moved in with my son and I.
I became her carer and she continued to live with us until her death. Last year she transferred shares valued at £200,000 to me.
The seven-year rule has not has not expired on the gifts transferred, so they would be liable for inheritance tax, but she has given most of her assets away, and there is very little left to pay any tax.
What is the position regarding the size of the estate? As it is now, it has a few thousand pounds left in it.
A You appear to be in a very difficult situation. I am afraid your aunt's estate could face a very large tax demand from the Revenue that will have to be paid before probate can be granted
Any gifts made less than seven years ago would have to be added on to the nominal value of the estate for tax purposes, since they do not all qualify for exemption tax relief. It is commonly believed that the inheritance tax liability starts to decline after three years from
when the gift(s) were made. But this only applies if the total exemption (currently £263,000) has already been used up.
Otherwise the Revenue simply adds the value of the gifts on to what is left in the estate, deducts the exemption, and imposes inheritance tax on the balance. Since your aunt gave you some £300,000 - the house and the shares - you may be liable to pay the lion's share of the tax, although the other beneficiaries may also have to pay something dependent on the size and dates of the gifts received.
The transfer of the house could well be viewed by the Revenue as a "gift with reservation" and therefore not exempt from inheritance tax at all, as your aunt came to live with you. You should be able to claim a deduction of £3,000 a year for the past seven years since your aunt was allowed to give away that sum free of tax liability. She was also entitled to make tax-exempt income payments of £250 a year.
My advice would be to go to your local Citizen's Advice Bureau as a first step. They have experience in dealing with these matters and should be able to recommend a solicitor who won't charge inordinate fees.
In any event l think it may be best for you to use a solicitor to apply for probate when the Inland Revenue will require details of all the gifts made to assess the tax liability.