Joint Tenants or Tenants in Common

Goldman2020

If my spouse and I do the following with our property:-

• Change from Joint Tenants to Tenants in Common.
• Provide each other with a life interest to remain in the property should either of us die.
• Name our children as the beneficiaries of our respective halves of the property.

Would the above save on Inheritance Tax and protect our childrens inheritance or would it create a problem with tax later on?

Thank you in advance for any well meaning comments.

Keep_pedalling

No it won’t save IHT.

The two main reasons to do this are to protect half the value of your home from being used for care costs for the surviving spouse, and to protect your children’s inheritance where second marriages are involved.

The former is not worth doing unless your home is not of sufficient value to cover care cost and leave a decent legacy or you prioritise inheritance over more choice in standards of care you want for yourself.

Goldman2020

I am trying to think of ways to mitigate IHT and also ensure that our children do not have a hefty IHT bill to pay and that their inheritance is protected ; do you have any ideas of ways to do this?

Would it be best to see a solicitor or IFA to discuss ways to reduce IHT?

Keep_pedalling

Assuming you are part of a married couple, you only need to worry about IHT if your estate is likely to exceed £1M due to your personal and residential nil rate band.

Generous gifting is probably the best cause of action you can take all you need to do then is live another 7 years to avoid IHT being due on it. This is what we have done and have covered an untimely death situation by taking out a second death life policy that would cover the tax bill.

I think it worth taking advice from an IFA when £1M+ of assets are concerned, but make sure it is an independent FA.

pphillips

Seems to me like you're getting mixed up as what you are proposing seems to be about reducing your liabilities for social care costs rather than inheritance tax.

Tom99

You can look into making gifts from surplus income if you have any. See Form IHT403.

You can also invest in a SIPP which is free of IHT and free of any tax if you die before age 75 but subject the the beneficiaries marginal rate of income tax if you are over 75.
That gives a positive return even if your child was a 40% tax payer, e.g. for £10,000:
1 - Do Nothing = £10,000 less 40%IHT = £6,000.
2 - SIPP Die before 75 = £10,000 no tax.
3 - SIPP Die age 75+ = £10,000 + 25% tax rebate = £12,500 less 40% tax = £7,500
So a minimum uplift of 25%.
If you are retired with no earnings your SIPP limit is £2,880pa Net each.
PS: It does not have to be a SIPP other sorts of pension will do the same trick.

Goldman2020

Your above responses are helpful - Thank you!