Inheritance Tax

[CreativSimba]

I am about to inherit property 50/50 between my sister and myself, for probate reasons the property was valued at �400,000 (current market value probably �450,00).
My stepmother inherited the property from my recently deceased father and although it was not written into his will my stepmother intends to use the amenity which allows her to pass it to us within a given period and intends to do this very soon. Because of the probate value we stand to have to pay �50,000 inheritance tax between us.
I am presently living in the property and have done so for quite sometime without any entitlement to ownership of course.
On the face of it my sister and I would have to find �50,000 to pay the inheritance tax, I doubt whether she would want to get a loan/mortgage etc to do this and although, mortgage 'free' as I am I would prefer not to have that committment either at my age (48) and in reality can not afford to long term as i am self employed with little work right now.
We initially thought that this tax wouldn't necessarily effect us and if the property was consequently sold then we would be looking at around �200,000 each. I would have invested this perhaps in a different property although it would have to be outside the present locality where i would prefer to stay and have existed for a number of years, i am not at present a property owner, although my sister is a joint property owner with her husband.
My stepmother is dual nationality British/USA and pays her tax in the US and the advice given to her to date is via a UK solicitor and she resides in the UK in a property which was jointly owned by my father and herself.
Is there anyway(s) that the inheritance tax can be avoided/reduced without having to sell the property to pay it? If the heritance tax was avoidable then i'm sure my sister and myself could come to some arrangement regarding the future of the property.

[spudqueen]

I'm sorry but I think it's too late to try and avoid inheritance tax. I went through all this when my own Mother died two years ago. There are ways around it but these have to be in place (sometimes for years) before the person dies. I looked upon it as not tax that I was paying but tax that my Mother owed. It is only because house prices have gone up so much in recent years that inheritance tax is due, so if the house was worth less then you wouldn't have tax to pay but you also wouldn't end up with as much money. You do realise that you only have to pay 40% on any monies ABOVE the inheritance tax limit (don't know what it is now but was about �280,000 when my Mum died) not 40% on EVERYTHING that is left. I also wouldn't count on declaring the value of the property as less than it really is as I've just had a tax return to do regarding the sale of my Mothers house. If in doubt about anything then let a solicitor handle it, they do this everyday and know what they're doing.

[CreativSimba]

Hi...thanks for the input!
My father had been suffering from altzheimers for about 5yrs and so his solicitors basically controlled his finances etc. The valuation for probate was necessary to establish his etstate, although my stepmother and he had not doubt spoken in the past about what to do with the property it became too late for him to write such into a will.
Yes i realise that the IHT is only payable on any amount over the threshold but am also assuming that the �280,000 would be split between two and not �280,000 allowance each?

[themas]

The IHT nil rate band is now �285,000, so if the house is valued at �400,000 the bill (at 40%) is �46,000. The nil rate band applies to the value of the deceased's estate as a whole. So if your father left other assets as well as the house his total estate would be more than �400,000 and the inheritance tax more than �46,000.

The tax has to be paid out of the estate and the executors are responsible for seeing this is done. I don't know of any way you can reduce the liability now, but you could discuss it with the solicitor. In some cases the Tax people accept payment over a period of time, but interest is added.