COMPLETING THE INHERITANCE TAX FORM

The Return of Estate Information Form, as it is called, will come with the probate application form and will have to be completed and sent back to the Probate Registry at the same time as the PAL They will pass this particular form on to HM Customs and Revenue Capital Taxes Office.

Form IHT205 needs to completed if the total value of the estate (after exemptions) falls below the Inheritance Tax threshold (£285,000 in 2006/7, £300,000 in 2007/8, £312,000 in 2008/9 and £325,000 in 2009/10), as 94 per cent of all estates currently escape IHT.

The form needs to be completed carefully with reference to the very comprehensive booklet of instructions which accompany it. It is a good idea to make a photocopy of it to practise on before filling in the final copy.

If when answering questions 2-10 the answer is Yes you may be asked to fill in Form IHT200 instead. You will also need Form IHT200 if you discover at the end of your calculations that the estate is liable for inheritance tax.

The main part of the form requires you to list the deceased’s assets and put a valuation on them. When you informed the various banks, building societies, insurance and investment companies of the deceased’s death they should have given you such information. If not, now is the time to ask them for this.

There is normally no need to bring in a professional valuer to value property unless it is extremely valuable. Instead you could find out how much similar properties in the area have sold for in recent months and base your valuation on this. Local estate agents and the local Land Registry Office can be of help. Note that selling prices are usually lower than asking prices. However, you should beware of grossly undervaluing the property because if you decide to sell it soon after you could incur a large amount of capital gains tax to pay!

After valuing the estate you need to deduct liabilities – which will include funeral expenses and any other payments due. You also need to deduct exemptions, such as the value of the house if it is passing to a joint owner.

If you find after your calculations that the net estate is above the IHT threshold, it might be sensible to see if any adjustments are possible to the figures. Sometimes it is possible to make adjustments legitimately to the will in order to make it more tax efficient, but for this you will need legal advice.