varying a will

Mojisola

You also have to consider the implications for the friend and the sibling. If they ever divorced, the part of their Mum's house that they own would be counted as part of any settlement. Owning part of the house may have implications if they ever needed to claim means-tested benefits, particularly housing benefit.

The children would have to write careful wills in case either of them died before their mother.

GDB2222

As others have said, this is extremely complex. Look at this scenario:

None of your planning is carried out. Mum retains the whole house, lives in it to age 85, and then drops dead. On her death, both Mum's and Dad's IHT allowances are available, so £650k can be passed free of IHT. Assuming the house value is within that amount, no IHT is payable. Also, no CGT as it's mum's home, and in any case it's a death.

Consider another scenario. Two-thirds of the house value is given away now, by deed of variation. Mum retains the other 1/3rd of the value of the house, lives in it to age 85, and then drops dead. On her death, Mum's IHT allowances is available, so the 1/3rd can be passed free of IHT. However, if the house is sold, CGT is payable on any appreciation in the children's 2/3rds.

So in those circumstances, your planning has produced a CGT charge where none need have existed. In other circumstances, you may save tax. In yet other circumstances, it could all go horribly wrong, eg daughters falling out with mum, going bankrupt, divorcing. You've got a very good idea here, but Mum needs expert advice, and with all due respect, you're a gifted amateur.

ILW

I would be a little less stingy and spend a couple of hundred on a solicitor.

slim25

Thank you Yorkie1, Sailor Sam,GM,Mojisola and GDB2222 You make good points and perfect sense.

I think ILW summs it all up really.

I have no problem doing a straight forward probate but something like this needs a bit of money spent on it if thats what they want to do.

ILW i shall squeel on you and tell the Mum that you called her stingy because thats roughly what I said when she asked if it was possible to do without paying for proper advice LOL

Thanks again everyone

neverdespairgirl

It can be done, in fact, my OH and his brother and parents did it, because OH's grandfather died a few months before OH's parents (and they knew they were terminally ill) so the will was varied to pass straight to the grandsons.

BUT - this can't be done on the hoof. You will need proper legal advice, and then the mother will also need to take independent legal advice. trying to do it in a half-baked way is positively asking for trouble.

In our own case, OH and I are both barristers - and the family still sought proper legal advice from someone who specialises in this area of law.

RAS

Another scenario,

Gift thirds to the two daughters. One goes bankrupt and the Official Receiver requires the entire equity owned by that person. That leave mum and the other daughter finding a mortgage to pay the OR or sellign the house to pay the OR. Not good. In fact knowing that there was capital in the house might encourage a creditor to push for bankruptcy.

CLAPTON

lets suppoose the house is worth 450,000

1. currently if mum dies now then no IHT and no cgt whether or not a DoV is made or not

2. let suppose mum dies in 10 years time and the house is worth 800,000 and IHT allowance was still 325,000
a. with DoV IHT would apply to 800,000 -325,000 (already given away) - 325000 (mums IHT allowance) so tax on 150,000
b. if no DoV then IHT on 800,00 -650,000 = 150,000
however, cgt will be payable on the sale of the house in DoV case as the 325,00 value has increased to 577,777 (prorata the values) so CGT liable on the gain as the owners are not resident

so no difference in IHT but cgt now payable

3. lets say mum dies and house is worth 800,000 but IHT allowance is now 400,000
a. with DoV the IHT will be on 800,000 -325,000 (already given away) -400,000 (mums allowance) = 75,000
b. without DoV IHT allowance will be 2 x 400,000 i.e. 800,000 so no IHT

also cgt is payable as in example 2 above

so both IHT and cgt is payable with DoV whereas none is liable if no DoV

d. last example
suppose in 10 years time house is worth 900,000 and mum (still going strong ) wants to move house
well cgt will be payable on 650,000 - 325000 (gain in value of the siblings share) i.e. cgt on 325,000 .... a potentially large sum depending upon the cgt allowance and cgt rates at the time (at current rates that would be cgt tax between 54,000 and 85,000



find out the full facts about cgt and IHT

model the likely scenerious and work out the IHT and the cgt payable

timmyt

You need a probate 'solicitor' - far too complicated for this Forum.

Probate is full of opit falls, and I would never ask a non-lawyer to be an executor. Nasty role.

GDB2222

You also need a book that tells you all about the pitfalls. Fortunately, it's available free as it's out of copyright. http://www.gutenberg.org/ebooks/1128

It's pretty gruesome reading btw
#

NotSoWise

if this book is out of copyright - then it probably is out of date!