IHT and Tenancy In Common

JazzyZzz

My father passed away in 2000 and my mother became the sole owner of the family home. The house is currently worth around £550,000 and there is no mortgage. As things stand now, with my late father's basic nil-rate band and the residence nil-rate band, there would be no IHT to pay.

In 2018 I moved back to the family home with my children, to care for my mother who's been diagnosed with Alzheimer's. I'm concerned that with the current political uncertainty, if there's a change of government the IHT thresholds may change. I understand that my sister and I can add our names onto the deeds by filling in form TR1 with the Land Registry and setting up a tenancy in common agreement. If we do this does the 7 year gift rule or the reservation of benefit rule apply?

unforeseen

Your first problem will be how you will achieve it. Your mother has been diagnosed with Alzheimers.

If it is too late to get PoA then it needs to be done via the Court of Protection. Neither route will countenance what you are proposing as it is of no benefit to your mother

getmore4less

It is very unlikely any government would reduce the nil rate bands even the current one left them frozen and added the RNRB giving up to £1m with both transferable.

If mum inherited everything and nothing used up any NRB then mums estate will have both NRB and RNRB transferable.

I understand that my sister and I can add our names onto the deeds by filling in form TR1 with the Land Registry and setting up a tenancy in common agreement. If we do this does the 7 year gift rule or the reservation of benefit rule apply?

Aside from can it be done it may not be a good idea.

If the sister does not live there that would create a gift with reservation on the share given to her and a PET for your share.

This would also expose both of you to the SDLT issues of second homes should you ever want to move.

Then there is the ever present deliberate deprivation rules that could get applied as currently there is no IHT benefit, as you moved in that share may be OK, but the sisters gift there would be no primary reason to gift even if normal gifting would have had an IHT benefit.

JazzyZzz

unforeseen wrote: »

Your first problem will be how you will achieve it. Your mother has been diagnosed with Alzheimers.

If it is too late to get PoA then it needs to be done via the Court of Protection. Neither route will countenance what you are proposing as it is of no benefit to your mother

Thank you for your reply. There is a LPoA in place since February 2016.

uknick

If you can get around the Gift with reservation rules POAT (Previously Owned Asset Tax) could come in. The rules dictate your mother is deemed to charge market rent on the portion of the asset sold. This is then applicable for income tax.

However, as you want to gift only part of the house you should be OK as long as your mother pays her fair share of the running costs.

https://www.stoneking.co.uk/literature/e-bulletins/guide-pre-owned-assets-tax

I'm sure you will, but I have to say, please get qualified advice on this before you do anything concrete.

Mojisola

JazzyZzz wrote: »

My father passed away in 2000 and my mother became the sole owner of the family home.

I'm concerned that with the current political uncertainty, if there's a change of government the IHT thresholds may change. I understand that my sister and I can add our names onto the deeds by filling in form TR1 with the Land Registry and setting up a tenancy in common agreement.

JazzyZzz wrote: »

There is a LPoA in place since February 2016.

Whoever is her attorney must act in her best interests - giving away her assets doesn't fit that requirement.

Keep_pedalling

JazzyZzz wrote: »

Thank you for your reply. There is a LPoA in place since February 2016.

A LPA can only be used for the benefit of the donor (your mother) it does not give you the authority to make large gifts to anyone.

There is little chance your mother’s estate will ever pay IHT but there is a strong chance some of will be required for care costs.

xylophone

In 2018 I moved back to the family home with my children, to care for my mother who's been diagnosed with Alzheimer's

Have you sold your own home so that you now own no residential property?

If you obtained a RICS valuation for your mother's home, you could consider buying an interest in it at market value - you would then have the property registered as tenants-in-common in the appropriate proportions.

The money would then be credited to an account in your mother's sole name and used as appropriate to fund her living costs etc.

JazzyZzz

getmore4less wrote: »

It is very unlikely any government would reduce the nil rate bands even the current one left them frozen and added the RNRB giving up to £1m with both transferable.

A Corbyn government is already considering some quite radical changes and not just to IHT...

Unfortunately as a new user on the forum I'm not allowed to put any links to external material in my post, but if you search for 'Corbyn or John McDonnell tax proposals' it makes for interesting reading :eek:

Of course this is all dependant on Corbyn winning the next general election but as we have seen, particularly over the last few years, in politics anything is possible!