Inheritance tax and house extension work

KK36

My father-in-law is suffering from Alzheimers and is living by himself at he present moment. We have decided it will eventually be necessary for him to move in with my husband and I.

We have had plans drawn and approved by the local Council, but this has taken quite a long time; almost 12 months in actual fact.

We have now got builders' quotes and are about to start the work.

Could my father in law give us some money to help with the work and how would this be 'taken' as far as Inheritance tax was concerned, should he pass away either after the work was completed, or even before it was done.

Sadly, late in 2006 he was also diagnosed with cancer.

We've lived in the house for about 20 years and it was always OK for us, but the extension was eally for my father in law.

Sorry, to be a bit long winded, but this seems a good forum for general advice

Thank you in anticipation

Petmidget

I cant remember the exact circumstances in which it applies but there are exemption in both IHT and CGT for support of a dependant relative.

So it is entirely possible that you could use part of your fathers capital to build the extension. However if he were to pass away before he was able to occupy it I doubt you would be able to benefit from any expemtion.

I would advise a hour or 2 with a Chartered Tax Advisor to give you some comfort.

Robert_Sterling

He could certaimly lend you the money to pay for the extention.

kennyboy66_2

I would strongly recommend getting some professional advice. You should think about the following.

1) Has your father made a will? This is a must.
2) At what point may you need to get power of attorney over you fathers affairs.
3) How much is you fathers estate likely to be worth. Less than £285k and you would pay no tax.
4) You can give £3000 away in any 1 year and it is exempt from IHT (you can also use previous years £3K as well)
5) Full exemption for larger amounts applies only if your father survives for 7 years after making the gift.
6) Do you have siblings? Think about involving them in discussions to aviod potential fall outs later.