IHT New Rule ?

BedlingtonBoy

Hi,
Recently been told of a new rule change on IHT.
My wife and I own our home as Tenants in Common, each owning 50%.
On first death the 50% share passes to our son (in a will trust), the surviving spouse continues
to occupy the property until death.
The new Residence Nil Rate Band allowance will be used to offset the 50% value of the property owned at first death.
Just been told that on second death 100% value of the property will be included in the estate of the second spouse, despite the fact that 50% of it has already been included in the first spouse's
estate !
Anyone know if this is true or how to mitigate it ?

Talk about HMRC getting two bites of the same cherry !

trailingspouse

No, I've not come across it - but I'm in the same boat (my parents are Tenants in Common, I'm the sole beneficiary) so I'm awaiting answers with interest...

mrschaucer

Who told you this? Are you sure they said that something you don't own/have never owned (50% of the house) is suddenly included in your estate when you die?

BedlingtonBoy

Hi,

It was a financial advisor from a well known bank ... something to do with them living in the property
after the first death and paying no rent.

HappyHarry

BedlingtonBoy wrote: »

Hi,
Recently been told of a new rule change on IHT.
My wife and I own our home as Tenants in Common, each owning 50%.
On first death the 50% share passes to our son (in a will trust), the surviving spouse continues
to occupy the property until death.
The new Residence Nil Rate Band allowance will be used to offset the 50% value of the property owned at first death.
Just been told that on second death 100% value of the property will be included in the estate of the second spouse, despite the fact that 50% of it has already been included in the first spouse's
estate !
Anyone know if this is true or how to mitigate it ?

Talk about HMRC getting two bites of the same cherry !

No, that’s not right at all.

The new Residence Nil Rate Band wont be available on first death, as the 50% of the property owned by the deceased is being left to a trust and not directly to your son.

On second death, the remaining 50% of the property will be liable to inheritance tax, but will, if being left directly to your son, benefit from the Residence Nil Rate Band.

It might be best to re-write your wills (which sound at least 10 years out of date) with the aid of a solicitor that specialises in this area.

BedlingtonBoy

Hi,

Sorry but I think you're wrong.

It all depends what sort of will trust is used - in our instance our son is the beneficiary of the trust, so
the RNRB allowance is usable.

And yes we are looking to rewrite our wills ...

HappyHarry

BedlingtonBoy wrote: »

Hi,

Sorry but I think you're wrong.

It all depends what sort of will trust is used - in our instance our son is the beneficiary of the trust, so
the RNRB allowance is usable.

And yes we are looking to rewrite our wills ...

Apologies, yes, it does depend on the type of trust used.

getmore4less

typically(with spouse) you would use a life interest trust and then have the RNRB unused and transferable along with the regular nil rate band.

Then the full value is assessed on second death for IHT.

if not using a life interest then the situation will be different and you may end up with the trust paying taxes