Legal owner vs Beneficial Interest & Inheritance Tax

chrisalmond1956

Hello. I have a friend (40% tax payer) who has purchased an investment property with his wife (TiC), and has completed a Deed of Assignment over his Beneficial Interest in his half of the Property over to his low income mother....for income tax purposes, obviously!

I am concerned for him that if she were to die, this asset would form part of her estate (which is in excess of £1million). Is this correct? If so, is there anything she can do in her will for this not to be true?

oldbikebloke

"you" cannot have it both ways
beneficial ownership means just that for ALL formats of tax 

unholyangel

Whats more, if the mother needs care then the local authority will take it into account when assessing whether she can self fund. So IHT may never be an issue, if her care needs use it all.

I also presume if he has assigned his ownership to his mother, that the mother is actually in receipt of any income from the property - but the cynic in me doubts this due to what's been said (ie wouldn't make sense to lose 100% of the gross amount of income & the asset itself to another person to avoid losing an extra 20% on income profits to tax). 

steampowered

The mother owns half of the property. That's the point of the deed of assignment - it transfers ownership.

The interest would form part of the mother's estate for inheritance tax purposes.

Likewise, the mother would be free to gift her share in the property to charity, or to leave it to somewhere else in her will. Your friend may expect the mother to leave the property to him in her will, but that isn't guaranteed.