Deceased domiciled in E&W. Will leaves everything to wife and appoints her as sole executor, however he has a share of assets in Iraq worth between 1.5 – 2 mil. These assets will pass to children under Sharia Law, so on the face of it there is an IHT liability in the region of 660k.
It’s impossible for wife to get formal valuations, value has been supplied by sister and has given a ballpark figure of all the assets, which are a mixture of shops and houses. Wonder whether shops qualify for BPR, but would need their individual values and values of stock etc. Assets can’t be sold and income from them won’t be sufficient to pay IHT.
The annoying thing is that the deceased wasn’t religious, his funeral wishes specifically states that there is to be a non-religious funeral. Wife initially thought she would be getting everything, but it is the sister in Iraq who is insisting the Iraq assets pass under Sharia law.
Unfortunately wife is in need of the UK assets and so can’t pay the IHT on the children’s behalf. I am assuming that unless children enter into a DoV they are stuck with the IHT liability. I am obtaining a copy of the Will file (not prepared by my me) to see what was discussed at the time instructions were taken.
has anyone been in a similar situation?
Rose & Rose
I would be sceptical about the valuation given by the sister; the value of the deceased’s share should I feel be heavily discounted as part of a UK domiciled estate, particularly if as you say the properties can’t be sold. I suspect that a tax valuation based on a multiple of income actually received would give a very different picture. I suggest talking to the Pre-Grant Section at HMRC Inheritance Tax- they are likely to have considerable experience of this kind of situation.
I think advice should also be obtained from an Iraqi lawyer about whether Sharia law does indeed apply- given the country’s recent history it may not be as clear as the sister makes it sound.
I agree with Tim that the Iraqi intestacy provisions need to be considered to ascertain whether that involves the application of Shariah inheritance law. I am also sceptical over the valuations. That said, if Shariah does apply, then a deed of variation seems the obvious step to take. If the children are of age and willing to enter the same then it should be straightforward. Parents are also potential beneficiaries if they have survived the deceased.
I Will Solicitors Ltd
Did the deceased have a share in the profits from the shops:
- i.e. he was a partner entitled to his share of the profits an, in which case he would have declared his share of profits in his UK Self-assessment?
- The deceased owned a share in those shops?
If he only received his share of rent, it is not a property that qualifies for BPR according to my understanding.