Inheritance tax???

Lancalot · 30 January 2008 at 10:15AM

Hope this is the right forum. About 4 years ago we sold our house and went to live with my husband’s mother, who was ill and unable to look after herself, she did not want to go into a home. The house she lived in was very large and she only lived in part of the house. We had to do major works, to bring the whole house up to a liveable standard ( we have 2 small children) so my husband took 6 months off to do the work himself. All the money we made on our previous house plus savings we used. It was agreed that the house would be transferred to our names and my mother-in-law. At the time of the transfer I asked the question about inheritance tax, but was told that we would not have to worry about this because we had done the transfer to beneficial joint tenants.

My mother-in-law passed away in November of last year. As the transfer was only completed just under 4 years ago where do we stand. Can I ask the question firstly if my late mother-in-law estate is over £300,000 would we still be liable for inheritance tax and secondly if this is the case would they go on the value of the house at the time of death or at the time of the transfer.

Sorry I have gone on a bit.

missile · 31 January 2008 at 4:22PM

Lancalot wrote: »

Can someone help with some advice.

Many thanks

Lancalot

I do not believe you have any IHT liability, but I suggest you go back to the solicitor who previously advised you.

Edinburghlass_2 · 1 February 2008 at 9:10PM

Can't help any more than the previous post suggests but you can have a read of the official website here...

http://www.hmrc.gov.uk/cto/iht.htm

Lancalot · 1 February 2008 at 9:22PM

Hi Everyone

Thank you all for taking the time to reply to my question. I will also go to the site mentioned to have a read about inheritance.

C

Biggles · 2 February 2008 at 1:35AM

Lancalot, I'm not sure what you need will be found in the basic HMRC rules.

If, after taking into account the 'gift' (ie the house) and the time that had elapsed since it was given, your inheritance still falls into the IHT bracket, it may be that the expenses you incurred on the maintence of the house could be offset against that figure, bringing you down below the IHT band again.

Depending on the sums involved, you may need to talk to someone experienced in this field.

sebastianj · 5 February 2008 at 1:47PM

Not an expert, in this instance I don't think there is any liability. What ever has been transferred should be considered as part of her will, unless contested. The Gift issue comes into play on if the estate value is higher than the limit normally cash etc.

Declare it when you do your taxes as normal as inherited estate. If you are making any money from the estate, only then you pay tax on that income.
I think

rgd
seb

KD · 7 February 2008 at 10:25PM

In October 2007, the government introduced a new IHT nil rate band of £300K per person. When a spouse dies their unused nil rate can be transferred,

Depending on the will of your late father- in law it is possible to transfer any unused nil rate band from his estate to your mother in law, so potentially £600k before any IHT has to be paid.

The house is definately a gift that has failed to achieve the 7 year rule, so must travel back into the estate. I also think it would be reasonable to take off the cost s that you incurred for tax purposes.

I'd encourage you to contact your local tax office, they are more than willing to help explain the rules and talk you through the situation.

Villz · 11 February 2008 at 3:23PM

Okay
Firstly I hoped you used a solicitor at the time that you moved in with your mother-in-law to take advice and structure this properly!

For instance the 3 of you ma have been advised to draw up a trust deed together to protect your and your husband's capital investment in the property. That would then mean that you yourselves then owned a share in the property. Or you might have been advised to agree that the money was to be a loan your mother -in-law.

Assuming the first option, there was no gift by your m-i-l to you unless under the trust deed she gave you a share bigger than the share equivalent to the capital sum you spent on the property. So no gift using up any part of her nil rate band and her estate is only charged to IHT on the value of her part share (less a 10% or possibly 15% discount because of joint ownership) plus any other assets she had at death ( and of course any other gifts exceedint the annual allowance in the 7 years before death). If the total comes to below the nil rate band no IHT.

If however it was structured as a loan, mother in law's estate includes the value of the whole of the house at her death, less the amount owing back to you. Again is that over the nil rate band?

Hope this helps

Inheritance tax???

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