Inheritance tax on jointly owned house

Lily64

Ten years ago my mum offered to help me buy a house, and we are now co-owners as "tenants in common". My mum sees the house as mine, and I pay all the mortgage. I asked the mortgage lenders to switch to single ownership, but my salary isn't quite enough in their opinion. My mum is concerned that if anything happened to her, 50% of my house would go into her estate, which would tip her above the inheritance tax cutoff, which I would have to pay. We heard that if we change to "joint beneficiaries" there would be no issue of inheritance tax if anything happened to either of us, the full value of the house would simply go to the other person without any tax? Is this true?

(Issues of the house value being included in a possible calculation for care home bills for my mum is not really an issue since she owns a house herself)

SeniorSam

That is correct. However, as you have a mortgage, you need to obtain permission from the lender on any changes before they can be agreed.

You do have another problem in that if your mother does gift you her half and she were to die within the next 7 years, then the value of that gift could still count in her estate if the value would be in the inheritance tax area. However, as you have been paying all the mortgage for ? ? time, it may be that only part of that gift would be considered.

If she is widowed and your father gave his assets to your mother, then on her death there would be both nil rate band allowances before any inheritance tax would be payable = £650,000 rather than £325,000.

Sam

MichelleUK

Lily64 wrote: »

We heard that if we change to "joint beneficiaries" there would be no issue of inheritance tax if anything happened to either of us, the full value of the house would simply go to the other person without any tax? Is this true?

No, this is not true and is often misunderstood on these forums.

For inheritance tax purposes, whether held as "joint tenants" or "tenants in common", the share held by the deceased is included in the calculation as to whether any IHT is due.

Then, if the house is held as joint tenants, the other party/parties automatically own the whole of the property.

If the house is held as tenants in common, the part held by the deceased then belongs to the estate or whoever is named in the will.