Inheritance TAX due on property?

indie80

Hi,

I wonder if you could tell me if inheritance TAX would be due at all in the below circumstance.

My mothers partner (not my father) passed away a year ago. At the time of his death he was still married to another woman but had been separated for a considerable time. They were in the process of going through a divorce but she was being very demanding.

He and my mother lived together for about 9 years in a house that they owned outright. The house was registered in their joint names and it's since be changed to my mothers sole name. The house was also left to my mother in his will.

His estate is quite complex as I imagine he also owned his wifes property and also various others along with a business though I'm unsure of the exact details.

My concern is that my elderly mother is going to get stung with a huge inheritance TAX bill that she's unable to pay without selling her house. When they bought the house I believe they put in 50% capital each. Given that the house was originally in joint names would my mother still be liable for inheritance TAX?

Thanks.

holly_hobby

Your post reads that your mother and father were not married or in a civil partnership, but common law husband and wife ?

I read that the property was in your Mothers sole name, at the time of your Father's death ?

If so, its ownership is unaffected by your Fathers passing.

However, his transfer of equity is technically a PET for IHT purposes, however the fact he remained living there, makes it a Gift with Reservation, and therefore the full value of his donation remains part of his overall estate at death.

To that end the value of the TOE will be included within his estate for IHT calc purposes.

If it only changed to Mums name post Dads death, how was it held when he was alive ?

The fact if was nominated in his Will suggests to me a Tenants In Common arrangement (?)

If so, similar situ, with the value of his share (50%), included in his estate for IHT calc purposes.

IHT is a bill levied on the deceased's estate (not ordinarilly an individual (s) - however where the estate has in sufficient funds to settle the bill, HMRC will approach beneficiaries/pet donee's, for the o/s balance - so your Mum MAY have some exposure wholly dependant on the various aspects discussed.

His personal estate has a 325k limit (as your parents were not married there is obviously no spousal tsf between them, so the effective 650k married couple relief is not applicable between him and Mum).

If there is an IHT liability, which is the total net value of his estate at death - settlement will come from his residual estate (as discussed above), and is administored by the executors.

The other issues that need to be considered apart from this, is that he was still married to A.N.Other - so essentially any capital, chattels, assets, omitted from the will, may be formally allocated under the laws of intestacy if reqd, which means his surviving wife and issue (children -inc you of course), will be beneficiaries of any unbequeated assets, aportioned as per the intestacy allocation laws.

As your fathers estate and family circumsances are complicated esp for discussion on a forum, with apparently a HNW individual, with 1 x suriving wife, and 1 x common law wife and issue, probate assistance from a licenced practioner is essential, to ensure the estate/tax liability is correctly executed, which I would hope is already in place (NB - any professional estate admin costs are a permitted deduction from the decds estate before beneficiary allocation).

Of course if there was no sufficient term assurance already in place for IHT purposes (hopefully in trust if so), disposal of assets within the estate (ie sale of business, etc) may be a very real requirement in order for the estate to settle any HMRC liability.

The above is for discussion, please ensure that independent professional guidance is sought in the matter, for this and all futher comments raised in response to your thread ...

Hope this helps

Holly

indie80

Thanks for the reply Holly and sorry if I didn't make the family situation clearer.

My mother and father are divorced (2002), my father also happened to pass away last year and I've been able to resolve his estate myself as it was much more straight forward.

The property was previously held in joint names between my mother and her partner at the time of his death. She's since had his name removed. They have never been married as he was going through long drawn out divorce proceedings with his wife, they had been separated for 10 years or so I'd image.

I was wondering if as they have been living together for 9 years if that would give her any more rights as if they had been married?

Given the size of the estate I think the IHT limit of £320k would quickly be eaten up. As my mother put in 50% of the properties value originally, where IHT is due, would IHT only be due on his 50% share?

Thanks.

holly_hobby

Ah ok - he's not your Father, which means that anything not bequeathed in his will will go to his wife and his own issue.

Also property was put in Mums name post his passing (so no PET issues) - as I say I presume it was held as tenants in common with its bequest to your Mum within his will.

Intestacy law and IHT law (re transitional rights between spouses) does not recognise common law relationships - they recognise married couples or those in a civil partnership (which are not necessarily only used for same sex relationships).

So there is no spousal tsf re IHT between him and your mum as they were not married, but we do have a surviving wife, issue and apparently a HNW estate - which complicates things somewhat.

Are his wife/issue via their executor dealing with his estate ?

Has your Mum been contacted or involved ?

The value of his share of the property at death, will form part of his total estate for IHT calc purposes (which is based on the NET worth of the estate i.e after payment of all liabilities).

The total bill due on the estate, should be settled by the executor out of estate funds (which may well involve liquidation of some of his assets) - but as I say any remaining unsatisfied IHT liability may be sourced by HMRC from the beneficiaries - and I don't think that his wife or anyone else, can approach your mum for IHT in respect of Dads share of value of the property, UNLESS the estate funds are completely exhausted in respect of any IHT bill due, and even then it will be HMRC who make the election as to whom is pursued (I think !).

BUT, I am not a qualified Probate Solicitor - so please do speak to your own to check this out ...

Hope this helps

Holly

BobQ

indie80 wrote: »

Hi,


He and my mother lived together for about 9 years in a house that they owned outright. The house was registered in their joint names and it's since be changed to my mothers sole name. The house was also left to my mother in his will.

Thanks.

I do not profess to know the ins and outs of the taxation issues Holly has explained but I wonder from your description if the property was jointly owned as "tenants in common" or as "joint tenants". Your comment "it's since be changed to my mothers sole name" implies she was able to do this without recourse to your mothers partner's executor? If so it may have been joint tenants. Does this make a difference to the IHT I wonder as the house passes to the survivor automatically.

holly_hobby

His share of the property was left in the will to Mum - which suggests to me a tenants in common arrangement, as joint tenants gives automatic transfer on death from the decd to surviving owner(s). (unless it really was jnt tenants, meaning that the bequest to Mum via the decd's Will was an un-necessary measure).

Whether it was tenants in common (with the share bequeathed to Mum), or joint tenants with the automatic physical tsf of the property to Mum's ownership - the value of his "share" at death must be included in his total estate, for the calc of any IHT liability which is based on its net value - and payable by the executor of the decd's estate. (which from the OPs comments, does not appear to be either Mum, themselves or a Solicitor on their behalf).

Mum, therefore needs to confer with the executor to determine if the IHT calc has been completed (and if any liability), if this has been settled with HMRC and/or there is os liability of which they need to be aware (i.e - of which HMRC may approach individuals for settlement).

At present I have no idea what communication there is between OP/Mum and the executor, or the property was held under TIC, situation relating to the decd's wife & issue, if the estate has been settled or at what stage probate actually is.

Hope this helps

Holly

getmore4less

There are too many unknowns.

How the house was owned.

Exact terms in the will for the bequest so if the house was tenants in common it may be bequest free of tax..

net value of the estate after all exemptions


If there is no communication with the executors then the first step would be to get a copy of the probate application(Public document) which will have the will and some usefull information.

If tenants in common I think any IHT liability should have been met before the transfer would take place, executors need to keep hold of assets till the bills are paid.

System

holly_hobby wrote: »

Whether it was tenants in common (with the share bequeathed to Mum), or joint tenants with the automatic physical tsf of the property to Mum's ownership - the value of his "share" at death must be included in his total estate, for the calc of any IHT liability which is based on its net value - and payable by the executor of the decd's estate. (which from the OPs comments, does not appear to be either Mum, themselves or a Solicitor on their behalf).

That is incorrect. If joint tenants then the house does not form part of the deceased's estate and is therefore outside IHT calculation.

Mojisola

Who is the executor of the will?

How was your mother able to change the ownership to her name alone if the will isn't settled?

antrobus

!!!!!! wrote: »

That is incorrect. If joint tenants then the house does not form part of the deceased's estate and is therefore outside IHT calculation.

No it's correct. A joint tenants share of property is included in the value of their estate for the purposes of IHT. It's just not that easy to escape the clutches of IHT.

antrobus

holly_hobby wrote: »

...Mum, therefore needs to confer with the executor to determine if the IHT calc has been completed (and if any liability), if this has been settled with HMRC and/or there is os liability of which they need to be aware (i.e - of which HMRC may approach individuals for settlement)....

That is the main point. It's the executor's responsibility to deal with IHT. Only they can tell you what the position is.