Inheritance

akschwab

I bought my mother-in-law's council house for her(in her name) about five years ago on the basis that she is leaving it in her will for me.
Is this the most tax efficient way or should I transfer ownership before the unhappy event?

00ec25

depends how much money MIL has got.

if the house, plus all other bits of her estate, total less then the IHT threshold at the date of her death this is £325,000 for this year (and it usually but not always increases each year) then you will pay no IHT anyway.

Does/did she have a partner/husband? Under the new rules his IHT allowance will carryover to her estate when he dies so in reality the total IHT free amount is £650,000

if you transfer it to your name now she will have to live for another 7 years otherwise it would automatically be included as part of her estate for IHT purposes anway. After 7 years it would be free of IHT

also bear in mind that there is a rule called deprivation of assets which means if she needs to go into a council funded care home, the fact she "disposed" of the house by transferring it to you might be taken into account and the council funding would be problematic

00ec25

PS - did she get a RTB discount and is she out of the payback period yet, transfer to you might count as a disposal and so trigger a discount repayment if not?

RayWolfe

00ec25 wrote: »

After 7 years it would be free of IHT

Not if she continues to live in it.

akschwab

Thanks for the replies, her estate will be nowhere near 325K including the property, we are also out of the RTB discount period.
Thanks for the comment about the deprivation of assets, definitely worth considering!