Tenants in Common

seb2020

[FONT=&quot]If my wife and I register our house as Tenants in Common on a 50:50 basis and leave our respective halves to our two children in a mirror will, what will happen to the NRB of the first person who passes? Is the NRB transferred over to the surviving spouse?[/FONT]

[FONT=&quot]What are the pros and cons from a tax point of view of registering the property as tenants in common with each owning a 50:50 share and would our children have to pay IHT on the property if over a certain value?[/FONT]

[FONT=&quot]Could we still sell the house and downsize if it is registered as TIC?[/FONT]

da_rule

seb2020 wrote: »

[FONT=&quot]If my wife and I register our house as Tenants in Common on a 50:50 basis and leave our respective halves to our two children in a mirror will, what will happen to the NRB of the first person who passes? Is the NRB transferred over to the surviving spouse?[/FONT]

The NRB will be decreased by the value of the gift to the children. If any NRB remains then this will be inherited by the surviving spouse.

The NRB (for each person), in this case will be the £325,000 standard NRB plus the additional £150,000 (for this tax year) main residence NRB. The remainder from both can be passed to the surviving spouse.

seb2020 wrote: »

[FONT=&quot]What are the pros and cons from a tax point of view of registering the property as tenants in common with each owning a 50:50 share and would our children have to pay IHT on the property if over a certain value?[/FONT]

The children will not have to pay IHT. The estate pays the IHT.

If the value of the property (or the deceased persons share of the property), plus the value of the rest of the estate is more than the NRB then yes there will be IHT to pay.

From a tax point of view, there is no real benefit, in this case from being TIC. There are tax disadvantages with how you plan to do things. As you are not making the most of the spousal exemption for IHT then both estates may end up having to pay IHT.

However, there are benefits, but not in regards to tax. If, after the death of the first parent, the second parent needs care, the value of the half of the house they do not own will not be regarded. Whereas, if it had been passed to that spouse it would mean that the full value would be considered.

seb2020 wrote: »

[FONT=&quot]Could we still sell the house and downsize if it is registered as TIC?[/FONT]

Yes, of course. Otherwise people who own property as TIC's would never be able to sell.

getmore4less

if you give the share to the kids it uses up nil rate band.

The solution many use is to give a life interests which achieves the best combination of goals, including being IHT and CGT friendly.

seb2020

da_rule and getmore4less thank you for your helpful replies and bearing with me because I do not know much about this subject.

getmore4less would you please provide me with an example of the "life interests" that you have menitoned.
If we arranged a life interest for our children would that not mean that they would have a holding over the property and that there maybe a problem should we ever want to sell?
I suppose with TIC there is some protection against care home fees should a person require a care home when older provided the TIC is set up when they are fit and healthy. I wonder what percentage of the UK elderly end up requiring a care home and what the chances are of this - Just thinking aloud.
We would just like to ensure that our children have the property when we pass on.

getmore4less

The life interest is for the surviving owner not the kids..

Look up immediate post death interest trusts(IPDI)

For most practical purposes it is as if the survivor inherited the share but it is ring fenced from asset grabs.