2006 Deed of variation re house

Icey77

My dad died in 2006 and my mum made a deed of variation to make half of their house over to my siste and I. The Land Registry now shows mum Mum, my sister and I and the owners, there is no percentage split detailed but we all recognise that Mum owns 50% and my sister and I each own 25%.

Mum and I were discussing her will etc over the weekend and we were both wondering how inheritance tax works with the spouse double up - can't remember it's proper term.

Is the 50% that was passed to us included in the £650k threshold? If so how is it treated?

I completely understand that Mum might change her mind and leave her estate to the local cats home between now and then and that's absolutely fine by me, I'd like to understand my responsibilities and how to do the job she's given me as her (current) executor. The current value of the house, judging by a similar house across the road sold recently means her estate is likely to pay inheritance tax.

Many thnaks

Keep_pedalling

Yes the share of the house your father left you will be deducted from the current allowance. If your father died before the 6th April his allowance would have been £275,000 after that £285,000.

To work out the reduction you need an accurate valuation of the house on the date of his death then work out how much this would reduce his allowance passed on to your mother as in the following example.

May 2006 allowance £285k
House value £285£
50% passed to children therefore 50% of allowance used.

This would also reduce the transferable allowance by 50% so as it stands you your mother would have an allowance of £325k + (£325 x 0.5) = £487.5k.

Assuming you are not living with your mother you may also need to pay capital gains tax on any growth in value of your share.

Mojisola

Icey77 wrote: »

The Land Registry now shows mum Mum, my sister and I and the owners, there is no percentage split detailed but we all recognise that Mum owns 50% and my sister and I each own 25%.

I think you should put that in writing. When the time comes to sell the house, you won't want to have to pay capital gains tax on one-third rather than a quarter of the value of the house - if no details are in writing, it could be assumed that the three owners own equal shares.

Icey77

Keep_pedalling wrote: »

To work out the reduction you need an accurate valuation of the house on the date of his death then work out how much this would reduce his allowance passed on to your mother as in the following example.
.

Thankyou! Will establishing the house value back in Sept 2006 be a problem? I assume it would be best to instruct a surveyor for this job?

That way it has been calculated by someone who knows what they're doing rather than us sticking a finger in the air and guessing! I would feel more comfortable making returns to HMRC for inheritance tax and capital gains tax (which hadn't even occurred to me!) with some independent third party documentation and backup.