Fergus Muirhead answers your consumer questions
I'm Fergus Muirhead and I'm here to answer any questions you may have about any money or consumer issues.
Please drop me a line here at firstname.lastname@example.org with your questions.
You can also read more on money and consumer issues on my own blog.
Q: On inheritance tax, I would be interested to know what would happen if an heir refused to inherit something in the deceased's estate. Can they do that? This question is related to a timeshare contract we have whereby the owner's right to the timeshare is granted 'in perpetuity'. At the age of 78, I no longer want the timeshare and my sons who will inherit one day don't want it either - particularly as the contract imputes an ever-escalating maintenance charge. We've had it up for sale for several years now, but no takers - even at a price of £1. Nor have there been any rental offers, as the week in question is in February when the weather is not exactly conducive to holidaying, and the resort facilities are often curtailed. Possibly they will have an 'out' in EU legislation whereby a person's rights include refusal to accept. Another aspect to this is - would this lead to complications with the granting of probate/winding up of the estate? Thank you for any light you may care to shed on this subject - there must be many of my generation in the same boat! Robin Paterson
A: Anyone can refuse to accept an inheritance, or redirect it to someone else who wants it. However in the scenario you outline, if no one wanted the timeshare, it could leave the estate in limbo as the executors could not fully wind up the estate without dealing with the issue. It may be that the executors would have to retain funds from elsewhere in the estate to cover some of the liabilities you mention such as management charges. A lot depends on the terms of the contract and its provisions in relation to what happens on death and if you don't have a copy then, as a starting point, you should ask for one from the resort company. Come back to me after you have received it if you want me to look at things in more detail.
Q: I own half of a house and my mother owns the other half. Neither of us has written a will. My mother has four children including me. When she dies, will there be any inheritance tax to pay? Who will own the other half of the house if we do nothing? Zabdi Keen
A: Whether there's any inheritance tax will depend on the value of your mum's share of the house, together with the rest of her estate, when she dies. What will happen to the house will depend on the way in which the title deeds are drafted. There are two ways of owning property jointly in Scotland - with or without a survivorship clause in the title. If there is such a clause, the house will automatically pass to the surviving owner irrespective of whether or not there's a will. Indeed, even if any will left the estate to a cat and dog home, titles override the will. If there is no survivorship clause in the title deeds, your mum's half of house could pass under the law of intestacy to the four children equally (assuming no surviving spouse or new partner). The other children could then theoretically force a sale of the house to access the funds from their inheritance. It It is important therefore to ensure your mum thinks carefully about what she wants. If she wants you to inherit her share of the house outright, she should prepare a will on that basis. Alternatively, she could direct in the will that her share of the house is held in a trust, and that you have a right to occupy so that the others cannot force a sale - albeit they will ultimately receive a share of the proceeds should it be sold. A will is a good idea as it gives certainty about your mum's wishes, and at the same time avoids the extra expenses incurred when someone dies without a will - there are extra court costs and an insurance bond costing several hundred pounds is also required.
Q: It would be most helpful if you could tell me if it matters whether my mother's funds or mine are used to pay off her outstanding mortgage. I am the sole named beneficiary in her will and upon falling heir to her home, its value - combined with my own estate - would exceed what I understand to be the current threshold of £325,000. David Millett
A: It is difficult to be too precise with this answer without knowing the full ins and outs of the family and financial situation. You should take advice from your solicitor before doing anything concrete but I would advise caution here - if you use your own funds, you could be creating an inheritance tax problem as you're effectively gifting her money which then forms part of her estate when she dies. Likewise if she needs nursing care, what you've gifted could end up being swallowed up there too. Certainly take advice before doing anything.
Q: If the estate of a deceased person is well above the inheritance tax limit and includes shares which have significantly increased in value since they were acquired, then once the shares are sold, are the proceeds first subject to capital gains tax on the profit gained and then the residue subject to inheritance tax? Or is the full value of the proceeds of the shares subject to inheritance tax alone? Ian Brown
A: When a person dies their shares are revalued at the date of their death so it no longer matters what the deceased paid for them. Inheritance tax is paid on that date of death value irrespective of whether they're sold or not. If shares are then sold at a loss within a year of death, you can sometimes claim back some of the tax paid on the date of death values. If the shares are passed on to the beneficiaries and they later sell at a profit, their gain is calculated as the difference between the date of death value and the eventual sale value. So if date of death value was £10,000 and the shares were later sold for £30,000, the gain would be £20,000. After deducting your annual exemption for capital gains tax (currently £10,600) the balance is taxed at whatever rate is applicable to you - 18% for basic rate taxpayers and 28% for higher rate taxpayers.