IHT on property question

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    IHT on property question

    I have been living in my parents home for last 10 years and it is my primary residence. i dont currently own anything else.
    My dad passed away 3 years back and my mum removed his named from the deeds of property and added me as joint ownership with her 50/50 on land registry

    we live together and share the bills etc. Is there any tax issues that could arise should something happen to me or her in terms of IHT. note - the house is both our primary residence.

    thanks.

    #2
    Are you joint tenants or tenants in common?
    Is there a mortgage (or was there when the deeds were changed)?
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      We are joint tenants. There is no mortgage on the house, and neither was there when the deeds were changed.

      Comment


        #4
        If you are joint tenants, you aren't 50:50 owners, you both own all of the property jointly with the other person.

        If something happens to either of you, the other will become the sole owner - not as a matter of inheritance, but as a consequence of survivorship.
        It never becomes part of the deceased person's estate.

        I imagine that's what happened when your father died, the tenancy remained with the surviving joint tenant.

        One thing you should consider is what happens if you both die (he said bleakly).
        You should have sensible wills to detail what should happen.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          ok thanks for reply. So if something was to happen to my mother, the house becomes solely mine and i wont have to pay any IHT on it??. and if something happens to me the house goes back to being soley hers?

          one more question when my father passed was his IHT allowance of £325,000 passed to my mother, meaning her allowance on her whole estate is now £650,000 ?

          Comment


            #6
            also another question there isnt any CGT implications for me when me and my mother become joint owners? for eg if we sold the house later

            Comment


              #7
              There's no CGT on the property that is your main home.
              You both own the property and both live there, so it's not within the CGT regime - unless one of you moves out and it ceases to be your home before you sell it.

              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                thanks jpkeates for the replies.

                i have a question. By adding my name to my mums main house where we live as joint tenants. what affect has this created on IHT ??(some people said to me i should not have added my name to the property)

                say my mum passes away in 6 years or 9 years. she has 300k in cash and apart from this house (worth 500k now) no other assets. you said above earlier "It never becomes part of the deceased person's estate." so the house is totally excluded from IHT by adding my name as joint tenants ? and will the £325k IHT allowance she has (or £625k including my dads who passed) be used purely against the cash she has should she pass?

                Comment


                  #9
                  Most of the material on this is US-centric, but I think the transfer was a gift with reservation of benefits, so fully within IHT. It's too obvious a loophole, otherwise.

                  Also there is a risk that, if you get into financial difficulties, your mother will end up homeless.

                  This looks possibly relevant: https://www.moneywise.co.uk/work/tax...nheritance-tax

                  Comment


                    #10
                    Bit confused now. So maybe it wasnt a good idea to put the house in joint names with mother.
                    If we sell the house to buy another house is the cgt implications for me?
                    ​​​​​Or say if she passes will i have to pay cgt if i sell the house and move elsewhere?

                    Comment


                      #11
                      If it is a gift with reservation of benefits, her estate has to pay inheritance tax, as though the full market value, at the time it was gifted, were part of her estate (or you will have to pay the IHT if there is not enough money to cover it). Of course, it is possible that the estate is still within the allowance.

                      Comment


                        #12
                        Ok my mum does not pay rent to me if that matters.
                        She originally bought the house for 80k with my dad back in the 90s. He passed away in 2012.

                        The house was put as joint tenancy between me and my mum in 2016. Valuation then was around 400 to 450k.
                        Now in 2019 house is worth 550k. Can you please advise the iht costs?

                        Comment


                          #13
                          Not paying rent reinforces the reservation of benefits position.

                          Whilst I believe it would be subject to the 40% marginal rate on that part of the £450k that took the estate over the allowance, my knowledge only really extends to knowing there is an issue in principle, and there may be subtleties that I've failed to take account of.

                          If she had given it to you outright, and either moved out, or paid full market rent, I think it would have been a PET and the liability would drop to 0 in 7 years, but, if it had reservation of benefits, I think that the seven year clock never starts.

                          I assume the valuation when it was gifted, would be used, but can't rule out that the value at death would be used.

                          If you are doing this sort of thing, and IHT might be payable, you really want to consult an expert, not a forum.

                          Unless you intend to sell it before probate, I don't see that the arrangement helps with probate, and, in any case, I don't think that avoid any inheritance tax.

                          Comment


                            #14
                            It's not a "gift with reservation" if both the person making the gift and the recipient both occupy the property and the recipient doesn't pay anything to the donor.
                            That exception is essentially aimed at exactly this kind of situation.

                            Your mother paying rent wouldn't change that position, you paying her rent would.

                            It would be sensible to get proper legal advice because something that documents the terms of the gift might be useful later on - but this kind of gift of joint ownership is informally known as a "probate avoider" for this reason.
                            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                            Comment


                              #15
                              I spoke with HMRC IHT and CGT dept about all this, as it was bothering me.

                              Correct its not a gift with reservation as we are both living there as our main residence. They said upon either individuals death the property will go all to the other person. There is possibly no need for probate on the house if this happens (in fact i believe this is all a joint tenancy does if you live at the same place, no other benefit or point to it. it will work differently obviously if someone does not live there).

                              They also said that IHT will work as follows if mum passes: £325k from my dad (if he didnt use all his band), £325k from my mum = £650k, plus can claim from each parent £150k for the new house band, bringing the IHT allowance to a possible £950k.
                              The current house is worth around £600k and cash assets £200k so IHT is avoided.
                              **They did say something about if i had to fill in a IHT form/probate form i would declare half the current value of the house as part of my mums estate.**

                              In regards to CGT they said i would pay no tax as long as the house remains my main place of residence after her passing. if i decided to move house later no CGT will apply as long as it stays my main place.

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