Inheritance Tax on extended property

timmarquard

We live with my parents under one roof and currently renovating and extending the property.
The house is owned by my parents.

Their pension is low and I have to pay for all costs involved for the extension and refurbishment.

Once done the property should have a significant higher value and one day I probably have to pay inheritance tax.

How can I avoid or reduce inheritance tax?

Thank you,

Tim

Deniem

Tim - I have a similar issue to you. Forgive me for slightly hi-jacking your thread, however I thought it would be better than to have 2 threads on similar topics.

My father died 15 years ago, so their estate is solely in my mum's name as I was a minor at the time. Mum is giving me money to use as a deposit on a house on my own, but she has mentioned she wants her name on the deeds. I think she is worried I will do what her friend's daughter did - sign over the house to the first man she fell in love with, but she forgets she raised a more level headed daughter than that! Anyway, I wondered if her names were on the deeds to my house, would I be liable for inheritance tax on my house too?

My mum's house (which is all I will be inheriting) will be worth £350-400k and all of her other assets are being left to family, friends and charities. I am also unsure if the threshold stays at £650k (or whatever the Gov decide to change it to) until my mother passes, or if it reduces back to her individual allowance of £325k due to the number of years ago my father died...?

xylophone

Tim - it seems to be that by paying for the extension and improvements in this way, you have effectively made a loan to your parents. It might be worth considering formalizing this as a loan to be repaid (with RPI updating) on the death of the second parent. This would have to be repaid out of the estate or could possibly be set against the value of the house.

As you live in the house another idea might be to have a portion of the house transferred into your name in proportion to your investment - the house would have to be held as tenants-in-common.

In your position I would certainly take advice from a solicitor experienced in wills and trusts - your parents too.

xylophone

Deniem wrote: »

Tim - I have a similar issue to you. Forgive me for slightly hi-jacking your thread, however I thought it would be better than to have 2 threads on similar topics.

My father died 15 years ago, so their estate is solely in my mum's name as I was a minor at the time. Mum is giving me money to use as a deposit on a house on my own, but she has mentioned she wants her name on the deeds. I think she is worried I will do what her friend's daughter did - sign over the house to the first man she fell in love with, but she forgets she raised a more level headed daughter than that! Anyway, I wondered if her names were on the deeds to my house, would I be liable for inheritance tax on my house too?

My mum's house (which is all I will be inheriting) will be worth £350-400k and all of her other assets are being left to family, friends and charities. I am also unsure if the threshold stays at £650k (or whatever the Gov decide to change it to) until my mother passes, or if it reduces back to her individual allowance of £325k due to the number of years ago my father died...?

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm
Before you go down this path, I would suggest that you and your mother consult a solicitor experienced in wills and trusts and with some knowledge of tax. To avoid conflict of interest it might be suggested that you each see a different partner in the firm.

It seems to me that there are possibly CGT and IHT implications here.

John_Pierpoint

Deniem wrote: »

My mum's house (which is all I will be inheriting) will be worth £350-400k and all of her other assets are being left to family, friends and charities.

What is mum proposing to leave to charity?
Just a sum of money?

You have to be a bit careful with a charity as:
1. They will be represented by a solicitor who may try to pull rank and run the estate to the charity's benefit.
2. They are a special sort of beneficiary, who won't be paying IHT and CGT, this could cause extra administration and a potential conflict of interest.

getmore4less

It seems to me that there are possibly CGT and IHT implications here

Along with the mother being liable for any mortgage since getting one without her on the mortgage will be difficult.

Deniem

xylophone wrote: »

Before you go down this path, I would suggest that you and your mother consult a solicitor experienced in wills and trusts and with some knowledge of tax. To avoid conflict of interest it might be suggested that you each see a different partner in the firm.

It seems to me that there are possibly CGT and IHT implications here.

I had somewhat suggested that, however my mother is very stubborn so it's easier said than done sometimes. When the time comes, I'll at least get one for my own peace of mind, don't want to have to deal with inheritance tax etc on my house on top of having to grieve and deal with my mum's estate.

John_Pierpoint wrote: »

What is mum proposing to leave to charity?
Just a sum of money?

You have to be a bit careful with a charity as:
1. They will be represented by a solicitor who may try to pull rank and run the estate to the charity's benefit.
2. They are a special sort of beneficiary, who won't be paying IHT and CGT, this could cause extra administration and a potential conflict of interest.

It is just a sum of money, yes. She has various stocks, shares, investments, savings and I presume any 'unused' pension too. My mum has sorted out her will through her solicitor, so your other points would have been sorted through them, I'm sure.

getmore4less wrote: »

It seems to me that there are possibly CGT and IHT implications here

Along with the mother being liable for any mortgage since getting one without her on the mortgage will be difficult.

Not too sure which mortgage you are referring to, I assume the one I will be getting...? I was accepted by my first choice (i.e. best deal) last year, before it had to be put on hold for other personal matters. My mum wans't involved and she mentioned she wanted to be on the deeds only, not mortgage...





Thank you all for your help.