Inheriting two properties from parents?

chris1012

I am thinking a head here with no background knowledge.

My parents have two homes - One they live in and one they rent out.
I am their only son and have no other siblings.

In the event of death to both or one parent what would happen to these properties?
Would I naturally be granted them and if so, would inheritance Tax apply to me in this given scenario?

Both House prices are in excess of £800k

Whilst they are alive and they transferred ownership to me to one of their houses or both, how would this change in terms of tax?

I currently own my property and paying off an remortgage (20% of the value of the house) that I used to do some work on the property.

edgex

Depends what their wills state...

sal_III

https://www.gov.uk/inheritance-tax/passing-on-home

getmore4less

What other assets and debts are they sitting on?

With £1.6m as a starting point their estate is looking at £1/4m IHT bill

They should be getting succession planning advice.

[Deleted User]

Bit of a morbid subject to be thinking about. What's brought this up? Is one of them ill or something?

chris1012 wrote: »

Whilst they are alive and they transferred ownership to me to one of their houses or both, how would this change in terms of tax?

Need to be careful here as it can be classed as deprivation of assets

davidmcn

chris1012 wrote: »

Whilst they are alive and they transferred ownership to me to one of their houses or both, how would this change in terms of tax?

If they die within seven years of the transfer then the assets will still (at least partially) come into IHT calculations.

If they transfer the house they still live in then it might be considered to be wholly part of their assets for IHT (and other) purposes, so you could have the worst of both worlds as it would also be assessed as yours for Capital Gains Tax purposes.

kazwookie

If you are worried you need to ask them what is in their WILLs, if they want to tell you they will.

They could have left the lot to the local dog and cats home, and written you out for all you know.

If they don't have WILL I suggest to point them in the direction of a solicitor who can help them.

TBagpuss

If they have made wills, then the proprties will pass according to their wills.

If they have not made wills, then yes, when they have both died,as their only child, you would inherit.

Of course, if one dies and the other then remarries, that would change things.

given the value of their estate, IHT will be payable.

If they chose to transfer a property yo you this might reduce the IHT bill but there are pitfalls - in particular , it would have to be a genuine gift, not simply a transfer into your name, with them continuing to live there or use the property as they always had. So while there might be some financial advantage to you if they transfer the property, it doesn't benefit them, and reduces their options.

If they want advice about their assets, they would need to speak to a suitable solicitor, - looks for one who is a STEP member - they can then make sure that their wills will achieve the outcome they want, and if they decide that they want to try to reduce tax, will be able to advise about the pros and cons of any options.

Keep_pedalling

They should certainly be looking at IHT planning and if they don’t have wills in place, that should be a priority.

The problem with holding the bulk of your assets in property, is that It creates a problem with IHT planning.

Gifting is a great way to reduce IHT, but if they gifted you the rented property they would probably be hit with a significant CGT liability. Gifting their home is a non starter as unless they also paid you full market rent it would still remain in their estate indefinitely as far as IHT is concerned, and their estate would lose the residential nil rate band which would actually increase IHT liability.

They really should take paid for advice with an estate of that size.

getmore4less

Keep_pedalling wrote: »

They should certainly be looking at IHT planning and if they don’t have wills in place, that should be a priority.

The problem with holding the bulk of your assets in property, is that It creates a problem with IHT planning.

Gifting is a great way to reduce IHT, but if they gifted you the rented property they would probably be hit with a significant CGT liability. Gifting their home is a non starter as unless they also paid you full market rent it would still remain in their estate indefinitely as far as IHT is concerned, and their estate would lose the residential nil rate band which would actually increase IHT liability.

They really should take paid for advice with an estate of that size.

Simple solution gift the residencial move into the rental, or downsize.

Downsize rules give a lot of scope to retain RNRBs

The CGT exposure on the rental is a consideration.

Marvel1

Deleted_User wrote: »

Bit of a morbid subject to be thinking about. What's brought this up? Is one of them ill or something?

No need to be ill to think like this in terms of the unexpected
https://www.walesonline.co.uk/news/wales-news/motorbike-died-crash-mumbles-swansea-16822285