Future Planning

Locana

Hi

Wondering if you can help, please!

Mum, sister and I have had the awkward convo and mum is in the process of making a 'folder' of financial info so that everything is in one place when the 'time comes'. (We had a hard time sorting this when Dad died).

We have been looking at IHT, and cannot fathom what would happen, so would like a little advice if possible. Its relatively straight forward;

Dad died last year, automatically leaving property to mum.

House is now worth £350,000, with a £140,000 mortgage on it. She has an insurance thing that will pay £55,000 on death. But no other insurances. Mortage is interest only (Don't ask!). Mum is 62. Mum has no outstanding bills.

There is only my sister and I, and she wants the house to be left to both of us.

Does she need to make a will? Will we pay IHT? Is there anything we should be doing now?

I own my own home (mortgaged) and sister rents if that makes any difference...

In order to settle the mortgage, we would have to sell and thats all we know..

Should we leave alone and no will.

Thanks for any advice,

Lo

TonyMMM

I would always recommend that someone makes a will - she can then ensure that her wishes are properly carried out ...BUT

Assuming your mother is in reasonable health - she could have 20 or 30 years ahead of her yet. I would suggest that it is just as important that she be addressing her current financial position e.g. how long does the mortgage have to run and what plan does she have to deal with the capital repayment at that time ?

Under current rules it doesn't sound that any IHT would be payable - but the exact position may depend on what happened at the time of your father's estate being dealt with (did he leave a will - if not was the estate correctly administered under the intestacy rules ?). Assuming none of his tax free band was used, it can be transferred to your mother , effectively giving her double the amount before IHT is payable (i.e. £650K) .... again the rules could change massively before the time comes !

It may have been advantageous for your father to have left his half of the house to you/your sister ( to possibly help the house being taken for your mother's future care costs) - but sadly that is no longer an option.

getmore4less

It's not too late to redirect the share of the house if it was tenants in common as youhave 2 years to do a DOV, the mortgage might be an issue with this.

As above mums estate may have upto £650k nill rate band but the estate is currently under the single band £325k unless there are other assets.

The mortgage is probably the biggest issue when does the current term end?.


A will can make things a bit easier because the named executor can legaly start doing stuff immediately allthough in practice even without will you can get most things done before the grant is issued.

Locana

Hi,

Thanks for the replies.


She's in good health, but no repayment plan for the capital!

Unfortunately mum doesnt talk much of the mortgage, I think she knows shes stuffed and will have to sell the house. They got the mortage in '87, which expired in Oct 2012. The bank have extended this for 3 years, by which time she needs to find the 140,000 outstanding.

Dad didn't use his tax free band but was passed to my mum. He left nothing but his half of the house. No will. Mum has nothing to leave but the furniture and a small car (and house). Does that mean the 650k passes to me and my sister so we dont pay IHT?

I guess we have to tackle the subject of planning to paying back the capital..

I could get a mortgage for that amount, but as the house is not in my name that wouldn't work. Plus I have to consider my sister and she only works limited hours, so wouldn't be able to get mortgage. But as said before, its not in our name.

Dilemas, dilemas!

Thanks
Lo

RAS

Hi

I was going to suggest that the best option will be for mum to sell up and buy something smaller sooner rather than later. She needs to clear the mortgage.

She can then leave the new house to you both if she wishes.

Locana

Hi

Yeah, we may have to do that. The only thing is that she wants to remain in London close to work, me, sis and our kids. And the balance of the money just wouldn't be enough, and she is too old to get a mortgage.


Lo

getmore4less

How big is the house or yours

if you live close now then then perhaps multigenerational living is the way to go.

Locana

Mums house is three bedrooms with massive garden. Lovely house. Me and my daughter recently lived with her for 2 months whilst a family member who lives with her went overseas. We have a feeling that family member will be moving out soon to attend Uni, and I may have to live with her again, but have the option of renting out my two bed flat. Mum wouldn't move to mine, plus its too small. Mum is not able to stay on her own since Dad died.

However, we still have to find the 140,000 or move within three years.

Lo

Mojisola

Locana wrote: »

Dad didn't use his tax free band but was passed to my mum. He left nothing but his half of the house. No will. Mum has nothing to leave but the furniture and a small car (and house). Does that mean the 650k passes to me and my sister so we dont pay IHT?

No, it just goes between spouses.

daska

Mojisola wrote: »

No, it just goes between spouses.

erm, just wondering if the OP's question could be read two ways. I suspect they may be thinking that they as beneficiaries paid the IHT on their mum's estate, so just to clarify for the OP:

The IHT is paid by whoever administers the estate of the deceased BEFORE whatever is left gets distributed to the beneficiaries.

In your case whoever deals with your mum's estate should use your father's unused allowance to reduce the IHT bill on your mum's estate before you and your sister inherit it.

(Always assuming she doesn't Will it to the local cat's home!)

getmore4less

I would discuss this now look at mortgage options,

at last that way you eliminate the options that are not viable before the deadline.

does the flat rent standalone, will you get the relvent consents.
what mortgage can you get over what term.

If you sold the flat how much equity.

etc.

whats this other family member doing, if they keep coming and going it just delays the inevitable and it totaly impracticle, something more permanent needs planning for mum ASAP.


Currently mums estate is only £210k, £260k with the payout so well within a single nillrate band.