Inheritance tax question

the_flying_pig

Apologies if this on the wrong forum.


I wondered if any advice on this situation:


Mother (aged say 90, minimal savings) and son (lifelong bachelor, aged say 65, no kids, no siblings, retired, pension income call it say £15k p.a., minimal other savings) living together in a house they've always inhabited, mother is sole owner.

House is modest enough but in an upper middling area of London.
so very valuable - quite run down (e.g. no central heating) but worth almost certainly £1m+.


Mother dies earlier this week. Son is saddled with an unaffordable [out of income and savings] tax bill [would have been potentially affordable under the new much higher threshold but that doesn't come in till April].


Son not of course looking for sympathy [he's now a moderately rich man thanks basically to an accident of geography] but wants to know how best to make sure he stays in the only home he's ever had whilst maintain an income and ideally [least important] having money left over when he sells up [to spend on nursing home fees, leaving something to a charity or a distant niece or whatever]. Any tips at all gratefully appreciated.

Guest101

Assuming this is factual, not a lot can be done.


Had they been joint owners for a significant period of time there would not be an issue.


selling up is in essence his only choice. (not mortgage is going to be given for a 65 yr old with 15k income)

Mojisola

the_flying_pig wrote: »

House is very valuable - quite run down (e.g. no central heating)

Why stay in a run down property which is only going to deteriorate further without a lot of money being spent on it?

Bite the bullet and sell up and live in comfort for the rest of his life.

the_flying_pig

Mojisola wrote: »

Why stay in a run down property which is only going to deteriorate further without a lot of money being spent on it?

Bite the bullet and sell up and live in comfort for the rest of his life.

yeah, I know but, I mean, it's the only house he's ever lived in, doesn't have loads of friends so current neighbours are quite important to him...

Bluebirdman_of_Alcathays

The tax bill is over £100k, and not going to go anywhere. You could potentially borrow against the property to pay your tax bill (although your age may count against you), but then you'd have to maintain the property and service the debt. I agree with everyone - selling up is the only way to go.

the_flying_pig

Guest101 wrote: »

Assuming this is factual, not a lot can be done.


Had they been joint owners for a significant period of time there would not be an issue.


selling up is in essence his only choice. (not mortgage is going to be given for a 65 yr old with 15k income)

they certainly erred very badly in terms of planning ahead. as I said the april 2017 changes would have been enough to sort it all out.


I suppose I was thinking along the lines of a specialist company that'd lend say £200k or whatever the bill will be on the understanding that they'd get double that back when the owner passed away. maybe doesn't exist??

ThePants999

You might get some more answers here: http://forums.moneysavingexpert.com/forumdisplay.php?f=217

The only option I can see is equity release.

the_flying_pig

ThePants999 wrote: »

You might get some more answers here: http://forums.moneysavingexpert.com/forumdisplay.php?f=217

The only option I can see is equity release.

oh thanks, I'm sure that's the right forum, apologies, I missed it.


also - yes, thanks, equity release, I that's what the chap needs to do his research on. seems like a good option under the circumstances (i.e. no offspring or even particularly close relatives fretting about their inheritance being eroded).


https://www.theguardian.com/money/2013/feb/06/equity-release-schemes-how-they-work

AdrianC

the_flying_pig wrote: »

Mother (aged say 90, minimal savings) and son (lifelong bachelor, aged say 65, no kids, no siblings, retired, pension income call it say £15k p.a., minimal other savings) living together in a house they've always inhabited, mother is sole owner.

House is modest enough but in an upper middling area of London.
so very valuable - quite run down (e.g. no central heating) but worth almost certainly £1m+.

Mother dies earlier this week. Son is saddled with an unaffordable [out of income and savings] tax bill

Son ... wants to know how best to make sure he stays in the only home he's ever had whilst maintain an income and ideally [least important] having money left over when he sells up [to spend on nursing home fees, leaving something to a charity or a distant niece or whatever]. Any tips at all gratefully appreciated.

When did the father die, and what happened with his estate? Everything left to the widow?

If so, then it may be possible to use the father's IHT allowance, so only £350k is taxable instead of £675k - "only" £140k to pay, rather than £270k.

Equity release is his only real option to stay in the property - and free up enough cash to stop it deteriorating further.

But, honestly, his best bet is to get over the "only home he's ever known", and sell the property. "The neighbours are important" - well, lovely, but what if they move next week? He'll have £730k or so in his pocket - MORE than enough to ensure a VERY pleasant retirement.

Mojisola

the_flying_pig wrote: »

yeah, I know but, I mean, it's the only house he's ever lived in, doesn't have loads of friends so current neighbours are quite important to him...

I can understand that - don't local houses ever come up for sale?

Even if he sold up and moved into rented for a while until something in the right area came on the market, his life would be more comfortable than in an old, run down house.

the_flying_pig

Mojisola wrote: »

I can understand that - don't local houses ever come up for sale?

Even if he sold up and moved into rented for a while until something in the right area came on the market, his life would be more comfortable than in an old, run down house.

you make fair points from a logical perspective.


I suppose we're talking about a man who's lived with his mum for 65 years, not, putting it mildly, the adventurous type.


his attachment isn't so much to any particular neighbor as it is to the neighbourhood as a whole including the streets he's plodded along every day for 65 years, the family-run local shop, etc, etc.


he doesn't have loads of hobbies and spends **a lot** of time in the garden, which is currently just how he wants it. maybe something half the size but like 1 or 2 streets away would work best. maybe [sounds tricky] he could convert the upstairs to a flat and sell it?