Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Dogfeatures
    • By Dogfeatures 11th Aug 17, 1:02 AM
    • 2Posts
    • 0Thanks
    Dogfeatures
    Inheritance tax worry
    • #1
    • 11th Aug 17, 1:02 AM
    Inheritance tax worry 11th Aug 17 at 1:02 AM
    Hello everyone. I am hoping someone can advise and help.
    I have a dear friend who currently lives in a modest bungalow, but the house has land with it and was bought for £650,000 in 2014.
    My friend bought the house 50-50 with her sister. So half owns it.
    Sadly, this last week her sister has been diagnosed with a terminal illness. No one knows how much longer she has to live.
    My friend is very worried about what will happen when/if her sister dies. Obviously she will receive her sister's half of the house in her will.
    But as the property will now have increased in value, they could be looking at a £780,000 or more valuation. Half of that is approx. £390.000 or possibly even more depending n property valuation which they have not done yet, and which has been approximated.

    Now this might sound like my friend has a lot of money going on. But that is not true.
    They bought the property as a retirement home for 'ever'. My friend has no income except a modest pension plus state pension! It is their dream....a little woodland with a stream, land for walking their dogs etc.

    She is upset obviously about her sister's sudden illness and all that entails, and now is worried on top about what will happen to her when she eventually receives her sister's bequest!

    I worked out that at 40% tax payment (above the threshold of £325,000) she could be looking at a tax bill of £26 or more thousand. Which she will not be able to afford. The thought of having to sell up and relocate after her sister's death (bad enough in itself) is actually making her feel suicidal at present.

    Any help or advice would be so welcomed. Thank you in advance.
Page 2
    • Tom99
    • By Tom99 12th Aug 17, 1:23 AM
    • 680 Posts
    • 403 Thanks
    Tom99
    If the land is worth £430,000 on its own, could that not be sold off? It seems a valuable plot of land, does it have development potential then?
    • Apodemus
    • By Apodemus 12th Aug 17, 6:48 AM
    • 958 Posts
    • 769 Thanks
    Apodemus
    But I was thinking today re: the Land Registry option....that surely what might be simple is the sister who is ill signs over her half now to the other sister, while she is still able to do so? As far as I know, she has no other family to leave her estate to, and is in the same position re: cash in the bank or savings (2 pensions only as income and some very modest savings.)
    Originally posted by Dogfeatures
    Others more knowledgeable will be able to confirm, but I would have thought if the ill sister gifts her share of the property, she would need to survive 7 years for the value of the gift to be removed from IHT liability (with a taper from 5 years). Sadly, if she already has a terminal diagnosis this option might not work.
    • tyllwyd
    • By tyllwyd 12th Aug 17, 8:07 AM
    • 5,366 Posts
    • 4,360 Thanks
    tyllwyd
    Does the sister have any savings or life insurance? There might be some money available in the estate that would help to reduce the impact of the IHT.
    • getmore4less
    • By getmore4less 12th Aug 17, 8:27 AM
    • 30,798 Posts
    • 18,410 Thanks
    getmore4less
    Thank you everyone for some very good answers. There is a lot to think about. But I have so much I can show to her now, and there obviously ARE options. (I know nothing at all about this as I've never encountered IHT in any personal dealings.)

    But I was thinking today re: the Land Registry option....that surely what might be simple is the sister who is ill signs over her half now to the other sister, while she is still able to do so? As far as I know, she has no other family to leave her estate to, and is in the same position re: cash in the bank or savings (2 pensions only as income and some very modest savings.)
    The only real item in her will would be half of that house and land.
    I'm sorry I don't know fine details of their joint ownership, but only know it's half-and -half ownership. The house was bought for cash in 2014 after the 2 sisters sold their mother's house after her death. I presume IHT was paid on that too. But what was left was enough for them to buy their current home and land. (It's the land which pushed the price up so high. The bungalow is probably worth about 280-350,000 on its own.)

    Well thank you for all your thoughtful responses. They are very helpful indeed.
    Originally posted by Dogfeatures
    it was(is) not clear but do they both live in the place.

    two issues.

    if she does not live there will be CGT assessment on the gift.
    if she does life there gift with reservation, IHT problem still exists.

    Mitigating IHT issues is going to be hard unless there are other people to give the assets too.


    Seems they may have missed an opportunity to have a decent place to live and more cash for improved lifestyle.

    it won't be easy these situations never are there may still be time to look at alternatives, depends on the prognosis, months or years if any benefit can come to the ill sister.


    the right solution really depends on what the second sister plans are as there may be option to keep at least a nil rate bands worth out of her estate, that would need some expert advice.

    although it might be secondary to illness but some IHT planning is urgently needed.

    Did they not take advice in 2014?
    • Keep pedalling
    • By Keep pedalling 12th Aug 17, 9:01 AM
    • 4,088 Posts
    • 4,443 Thanks
    Keep pedalling
    Unanswered question, is she a widow?
    • xylophone
    • By xylophone 12th Aug 17, 12:15 PM
    • 23,653 Posts
    • 13,782 Thanks
    xylophone
    is the sister who is ill signs over her half now to the other sister, while she is still able to do so?
    If the sister who is terminally ill owns her half as tenant - in- common and gifts the house to her sister now, it would still fall into the deceased's estate for IHT purposes.

    https://www.gov.uk/inheritance-tax/gifts
    • xylophone
    • By xylophone 12th Aug 17, 12:29 PM
    • 23,653 Posts
    • 13,782 Thanks
    xylophone
    Unanswered question, is she a widow?
    The transferable nil rate band covered in link in post 18.

    Where an estate qualifies for spouse or civil partner exemption, the unused proportion of the nil-rate band when the first of the couple dies can be transferred to the estate of the surviving spouse or civil partner, sections 8A-C IHTA. The nil-rate band can be transferred when the surviving spouse or civil partner dies on or after 9 October 2007, irrespective of when the first of the couple died,
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

157Posts Today

2,781Users online

Martin's Twitter
  • Nice debating with (all but the rude ones) of you. Bedtime for me now. Goodnight #bbcqt

  • RT @kevmthomas: @MartinSLewis It was a comment you made about the referendum being a binary choice on a non binary issue that helped me rea?

  • To clarify this. Cameron's gamble that having a stark vote'd mean his team won. He gambled wrong (that's not a stat? https://t.co/NSCT3aKvGS

  • Follow Martin