Cutting inheritance tax single person

Bargainhunteress_2

I wonder if mousers could advise on this situation.

A single parent friend has a substantial estate which exceeds the inheritance tax threshold by a large amount.

She is not married and is considering putting her son's name on the deeds of the property (which is mortgage free).

She is wondering if her son would still have to pay inheritance tax on the property after her death.

Over to you guys

CLAPTON

how old is the mum
how old is the son
does he live there

Bargainhunteress_2

Hi Clapton thanks for the fast response.

how old is the mum 47 (she has a serious illness)
how old is the son 22
does he live there yes

roger196

Apologies for being morbid, but how serious is the illness? I don't expect you to answer this on a public forum, but wanted to warn you of the likely questions that you will face. Different answers will apply if she is likely to survive more than two years. How much is the estate. What percentage of the estate is tied up in the house. What are the other assets. The main problem of giving part of the house to the son while she continues to live there is the rule on gifts with reservation of benefit. Shearing exercises used to work ( grant yourself a seven year lease and give away the freehold reversion). You need someone who is up to date on IHT planning ( and for the record I am not) and can carry ou the correct conveyancing.

CLAPTON

the tax issues are

IHT will be payable when she dies although the conservatives have promised to increased the IHT threshold to £1m

IHT is payable if she gives half the house to her son now and dies within 7 years.. it will be broadly the same amount as above.


CGT is a possible liability when the house is sold if the son doesn't live in the house until it is sold.

I'm afraid it all rather depends upon how ill she is.

Normally for a women as young as that one would say give nothing away as she may live for a long time and may want to move, find a new partner etc etc.

John_Pierpoint

Let me assume that the illness is the "Big C".

The mother will go into hospital.
Within a few days the next of kin will be asked "Is she self funding?"
By this they mean "does she own her own house"; let alone any other resources she may have.
Then she will be described as "a bed blocker" because there is nothing more that medical science can do to cure her and attempts will be made to hive her off into an expensive private nursing home.
Giving away your home, knowing you are going to need personal care, is deliberate deprivation of assets. I don't think a healthy adult of 22 will be classed as a dependant. Even if he legally owns some of the property expect it to be hobbled with "a legal charge" until the care expenses are paid.

There is a slight get-out hidden in the legalistic wording of the situation that allows the NHS to continue paying if the patient is receiving palliative care and likely to die within weeks.

I would be looking into who holds enduring/lasting power of attorney, unless it is pretty certain that there is still a life expectancy of (say) 5 to 7 years.

Any chance of getting married ?