Bridging Loans for Inheritance Tax Payments

At Bridging Options, we know that when someone you love passes away, it is not only a sad time but can often be one of financial worry – especially if they have left property or other valuable assets to you in their will settlement that you need to pay inheritance tax on.

A short term bridging loan secured against the assets of those you are set to inherit, provides a good financial solution to paying your inheritance tax to HMRC. Bridging loans can be arranged quickly and allows you time to pay back the debt once the assets have sold.

If you have been bequeathed valuable assets or property by a loved one, then the pressure is on for you to find enough funding in order to settle the inheritance debt within a six month period. At Bridging Options there’s no need to worry as our bridging loans can be arranged within a matter of days, allowing you time to pay HMRC and gain probate effortlessly. Here we explain more.

What is inheritance tax and why do you pay it?

Inheritance Tax is a specific tax paid towards the estate (property, money or possessions) of someone who has died.

There is normally no Inheritance Tax to pay if either:

  • The value of you estate is below the £325,000 threshold
  • You leave everything over the £325,000 threshold to your spouse, civil partner a charity or a community amateur sports club.

Although there are other reliefs and exemptions to the rule (such as giving your home away to your children or adding it to your partners threshold), in general if you are eligible for Inheritance Tax in the UK, then you will owe 40% to HMRC on anything above £325,000.

Why use a bridging loan to pay your inheritance tax?

When someone leaves you significant wealth via property, possessions and even cars, the combined amount can result in a hefty inheritance bill.

As an inheritor you have 6 months (from the end of the month when the person leaving the inheritance died) to pay the inheritance tax, which is usually repaid using money from the deceased person’s estate. However, you will only be granted probate (which is access to the assets of the estate) after you have settled the tax that is owed.  And, if the property is difficult to sell it could take a while before funds are available.

Inheritance situations are also rarely straight forward, and when emotions are high and people are grieving, having access to short-term finance can often take the heat out of a situation which could otherwise cause conflict. This includes situations where an estate has been left to more than one person, or family shares are involved.

A bridging loan offers a short term way to pay off the debt and allows breathing space to dispose of the property as everyone sees fit, without worrying about the pressures of time.

What can you use to secure a bridging loan?

Although you need to pay tax on an inherited asset, unfortunately you can’t borrow against it for the purpose of the loan as technically, you do not own it yet!  You can, however, secure a bridging loan using another property that you have already acquired, such as your own home.

Most people obtain bridging loans using their own assets but pay them off using the finance raised from selling the inherited estate. This exit strategy must be agreed with your lender beforehand and will need to be achievable within a set time period of around 12 months. The lender will also need to feel confident that the estate is relatively straight forward and unlikely to be contested along the way.

At Bridging Options, our bridging loans are agreed on an individual basis depending on the relevant circumstances. In order to find out just how much you are eligible to borrow, take a look at our easy to use calculator and receive an instant, no obligation quote via your email or mobile.

How to secure a bridging loan?

Bridging loans are highly flexible and ideally suited to resolving inheritance tax issues because they can be arranged quickly and easily and are able to be secured against a wide variety of different assets.

The amount that you can borrow for a bridging loan is entirely at the lender’s discretion and dependant on whether it is secured against assets through either a first or second charge.

Although most bridging lenders prefer to receive “first charge” security on their loans – meaning that there is no other finance secured against the asset – some lenders will also accept assets that have already been financed. This is known as a “second charge” and can include houses that are already under mortgage or cars purchased under lease agreements.

The ability to use a variety of assets as collateral is important when resolving an estate, as it gives executors the time they need to pay off the various bills involved such as inheritance tax and minimises the impact it has on their legacy.

As with all financial products, however, it is important that the full terms and conditions of the bridging loan are detailed beforehand, and we strongly advise that you to speak with one of our expert brokers.

A bridging loan for inheritance tax must be repaid in full and with interest and fees applied. If the loan cannot be repaid for one reason or another, then the assets against which the loan is secured may be repossessed instead.

Why choose Bridging Options?

At Bridging Options, we know how important it is to protect and cherish your inheritance. Using a bridging loan to temporarily cover the gap to meet your necessary financial needs, allows you (as the executor), the opportunity to avoid dismantling your estate simply to pay hefty inheritance bills.

If your assets have been valued for probate, then why not ring our expert brokers to discuss the best form of bridging finance for you and your circumstances.

Get in touch today for a free, no obligation telephone consultation.

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