Buying Property Jointly With Parents IHT Implications

funkylady

My husband and myself and thinking of buying an investment property (which we would rent out) with my parents. My parents would probably buy half the cost of the house, or maybe more.

Could you tell me, when my first parent dies would they be able to give us their part of the house in the will without incurring any form of tax, or would it have to go into trust, or would it go to my other parent?
If you have any other suggestions around this so that basically their share of the property goes to us without too much tax involvement.

Andy_L

Depends how much their estate is worth in total. If it's over the IHT threshold then discretionary will trusts are the cheapest/easiest way to go and allow a married couple to use the IHT allowance twice.

Search on here for a number of threads or google for more info

funkylady

Their estate would be well in excess of £750,000. I maybe didn't make it clear but the share of the house that my parents would be buying would be in my fathers name, if that makes any difference!

CLAPTON

it depends upon the total picture of your dad's will but e.g.

if you and he owned half the house each
and on your dads death he left you half the house (and nothinbg else) in his will and his wife the remainder of his estate then:
if half the house is less than the then IHT allowance no IH tax would be payable on the estate as the share going to your mother is tax free.
however, if your mother died first then what would your dads intentions be? if you inherit everything then there would be IH tax to pay on the whole estate.

are you the only child?

would he consider giving you the half house now or does he need the income?

jamesd

If the parents owned their portion together as tenants in common, on the death of the first that share of the property could be willed to the children. When the second dies, the same can happen with the remainder. This way the zero-rate band inheritance tax allowance of both parents can be used. This does not work if the parents hold it as joint tenants (the other automaticlaly inherits) or if only one parent owns it.

If instead one parent owns it and the property is passed to the other, on the second death the whole share will benefit from only one zero rate inheritance tax band, instead of two.

More at How to avoid inheritance tax on the family home.