New Post Advanced Search

Tenants in Common and IHT

edited 30 November -1 at 1:00AM in Deaths, Funerals & Probate
10 replies 1K views
chat01chat01 Forumite
17 posts
edited 30 November -1 at 1:00AM in Deaths, Funerals & Probate
Hi,

My dad passed away recently and his wife died 15 years earlier. I am an executor of my dad's will.

The house was owned tenants in common, and his wife (my step mum) left a will leaving her half share to her three children. My understanding is that the Will created a Trust that her beneficial interest in the property passed into. Dad was given a right to live in the property until he agreed to sell (or passed away). My Dad and another relative were her executors/trustees; both have now passed away. They did not prove her Will as there were no other assets.

So half of the property is in my dad's estate, and the other half is in a Will trust.

When I am completing the IHT forms (IHT400) am I right in understanding that I should put half the property value down for him as an asset? Should I also put down the other half down as a Trust asset, i.e. That he benefited from at the date of his death?

It is only a modest property and if we include the full value as an asset (whether all as property or part property/part trust asset) it tips him over the IHT threshold. However I understand that I could claim to use step-mums none utilised allowances to offset this by completing another IHT form - does this sound the right way to go?

Many thanks.

Replies

  • Tom99Tom99 Forumite
    5.4K posts
    1,000 Posts Second Anniversary
    ✭✭✭✭
    chat01 wrote: »
    Hi,

    My dad passed away recently and his wife died 15 years earlier. I am an executor of my dad's will.

    The house was owned tenants in common, and his wife (my step mum) left a will leaving her half share to her three children. My understanding is that the Will created a Trust that her beneficial interest in the property passed into. Dad was given a right to live in the property until he agreed to sell (or passed away). My Dad and another relative were her executors/trustees; both have now passed away. They did not prove her Will as there were no other assets.

    So half of the property is in my dad's estate, and the other half is in a Will trust.

    When I am completing the IHT forms (IHT400) am I right in understanding that I should put half the property value down for him as an asset? Should I also put down the other half down as a Trust asset, i.e. That he benefited from at the date of his death?

    It is only a modest property and if we include the full value as an asset (whether all as property or part property/part trust asset) it tips him over the IHT threshold. However I understand that I could claim to use step-mums none utilised allowances to offset this by completing another IHT form - does this sound the right way to go?

    Many thanks.
    I think it depends exactly what type of trust was formed by your step-mothers will as to whether you need to include the 50% in trust as part of your father's assets also whether you can transfer her unused £325k Nil Rate Band to your father.
    Even if that's not possible your father can inherit her Residential Nil Rate Band since see cannot have used it because it did not exist 15yrs ago. So your father has at lease £325k + 2x£150k = £625k allowance.
  • Keep_pedallingKeep_pedalling Forumite
    8K posts
    Fifth Anniversary 1,000 Posts Name Dropper Photogenic
    ✭✭✭✭
    If this is a modest estate then should you not be looking at IHT 205 rather than IHT 400? If his estate is less than £325 + any amount of his wife’s unused nil rate band then you should be able to get away with 205.

    The wording is fairly straight forward on IHT205 ”Did the deceased have the right to receive the benefit from any assets held in a trust that were treated as part of their estate for Inheritance Tax purposes?”

    The trust is part of you father’s step children’s estate not his, so should not need declaring.
  • chat01chat01 Forumite
    17 posts
    Thank you for taking the time to read and reply.

    I have been told that it is a 'bare trust'. My knowledge of trusts is very limited. I think it is a very standard Will.

    The actual wording in the Will is:

    "I give my beneficial interest in my house to my Trustees on trust for sale with power to postpone the sale and to stand possessed of the net sale proceeds of sale and net rents and profits until sale upon trust for my three children in equal shares provided that my Trustees shall not sell the property without the consent of my husband. "
  • chat01 wrote: »
    Thank you for taking the time to read and reply.

    I have been told that it is a 'bare trust'. My knowledge of trusts is very limited. I think it is a very standard Will.

    The actual wording in the Will is:

    "I give my beneficial interest in my house to my Trustees on trust for sale with power to postpone the sale and to stand possessed of the net sale proceeds of sale and net rents and profits until sale upon trust for my three children in equal shares provided that my Trustees shall not sell the property without the consent of my husband. "
    That is a fairly standard clause found in many wills. It is legal jargon saying that the executors (also trustees) have considerable freedom as to how they deal with the sale of the property. Nothing more or less. In practice just forget about the question of trusts as it just confuses things.
  • chat01chat01 Forumite
    17 posts
    Thank you. So I should simply put half of the value of the house on his IHT return which would mean he will be below the £325k?
  • As far as I can see it will not make any difference since no IHT is payable. However it would be prudent to take proper legal advice or ask HMR&C.
  • Tom99Tom99 Forumite
    5.4K posts
    1,000 Posts Second Anniversary
    ✭✭✭✭
    chat01 wrote: »
    Thank you. So I should simply put half of the value of the house on his IHT return which would mean he will be below the £325k?
    Looks like it. But that does mean that the three children might be liable for CGT on any gain during the past 15yrs on the half they own.
  • chat01chat01 Forumite
    17 posts
    Not sure. Sad thing is all her children have since passed too, its now passing onto grandchildren and a spouse. I really don't want to get involved in that side. I just want to sell the house and distribute 'our' half share.
  • getmore4lessgetmore4less Forumite
    39.4K posts
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    ✭✭✭✭✭
    Check carefully

    if the will constructed a life interest, that is very different to a bare trust.

    Also be careful of the succession if the named beneficiaries have died.

    Where in the will is the right to live in the property?
  • Check carefully

    if the will constructed a life interest, that is very different to a bare trust.

    Also be careful of the succession if the named beneficiaries have died.

    Where in the will is the right to live in the property?
    That is one reason the OP really MUST get paid for professional advice. Good as the advice from here MAY be. It is no substitute.. the OP also needs to remember that he may be PERSONALLY liable if he gets it wrong.
Sign In or Register to comment.

Quick links

Essential Money | Who & Where are you? | Work & Benefits | Household and travel | Shopping & Freebies | About MSE | The MoneySavers Arms | Covid-19 & Coronavirus Support