IHT205 and 10% joint property discount

poppystar

Page 8 of the guidance notes for IHT205 mention the 10% property valuation discount on deceased share of jointly owned properties where not owned by spouse/partner. Only saw this on second reading through! 

I assume this applies as the property was held tenants in common between my father (the deceased) and me after my mother’s death even though he had the right to live there, responsibility for upkeep etc 

So the value at 11.8 would be 50% of open market valuation less 10% of that. Is it necessary to explain how this is calculated in box 13?
especially since there is no way for them to differentiate between someone with sole ownership or part in response to this question. 

Anyone done this? Thanks.

xylophone

Do you mean that your mother's will created an Immediate Post Death Interest in Possession Trust of which you were the Trustee?

http://www.tolleytaxtutor.co.uk/taxtutor/files/subscriber/personal-tax/uk-trusts-and-estates/lectures/1d12.pdf
https://www.accountancydaily.co/qa-interest-possession-and-residence-nil-rate-band

poppystar

xylophone said:

Do you mean that your mother's will created an Immediate Post Death Interest in Possession Trust of which you were the Trustee?

http://www.tolleytaxtutor.co.uk/taxtutor/files/subscriber/personal-tax/uk-trusts-and-estates/lectures/1d12.pdf
https://www.accountancydaily.co/qa-interest-possession-and-residence-nil-rate-band

That isn’t a term that was ever used and I’m still a bit confused by the links.

M’s Will left her half to me but F had right to live there. This was further explained by the solicitors as he could sell, downsize or whatever he wanted but I was entitled to half of the value of that original property (he did however remain in the property until his death). The Land Registry documents were updated to show me and F as tenants in common, the Will remaining as the document protecting his rights.

Does that help? Does it affect the 10% discount?

xylophone

You can check with the solicitor but it does look very like an interest in possession trust. See second link above and

https://www.canadalife.co.uk/adviser/ican-academy/briefing-notes/estate-planning-trusts/the-residence-nil-rate-band

Your father has left his share of the property to you?

 On death, the value of the IIP is added to your father's death estate (which includes his beneficial half share) but you would claim his NRB, his RNRB, and any transferable NRB and RNRB?

Try pm to  https://forums.moneysavingexpert.com/profile/Jeremy535897 who is very knowledgeable in this area?

getmore4less

There is no discount. you need to go back to Question 4 .

If he had the right to live there and it is his estate you are dealing with then 100% of the property value applies to his estate.

You did not inherit anything the property went into a interest in possession trust(you were legal owner as a trustee) with dad as the life tenant and you as as the remainderman.
.
You get the share when the trust is dissolved(most often by the death of the life tenant).
IHT 205 notes, question 4 applies.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/730619/IHT206-2011.pdf

poppystar

getmore4less said:

There is no discount. you need to go back to Question 4 .

If he had the right to live there and it is his estate you are dealing with then 100% of the property value applies to his estate.

You did not inherit anything the property went into a interest in possession trust(you were legal owner as a trustee) with dad as the life tenant and you as as the remainderman.
.
You get the share when the trust is dissolved(most often by the death of the life tenant).
IHT 205 notes, question 4 applies.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/730619/IHT206-2011.pdf

Now I’m even more confused! Sorry. 

I’ll get there but just need to take it bit by bit..

So even though F never owned M’s half of the house and the value of M’s half of the house was included in her IHT205 it has to be included again on F’s IHT205. Is this not double counting of that half of the house?

getmore4less

That's how it works when you inherit something,  when you die it is included in your estate.

When did mum die the rules changed  a bit in 2006 for life interest trusts.

Your dad inherits the right to live in the house which means it is included in his estate when he died.

Don't forget as he got the beneficial interest when mum dies it did not reduce the transferable nil rate band as it get the spouse exemption and it also qualifies for the residential nil rate band(s) 
 
It also means it gets rebased for CGT now you inherit.all of it.

 

poppystar

getmore4less said:

That's how it works when you inherit something,  when you die it is included in your estate.

When did mum die the rules changed  a bit in 2006 for life interest trusts.

Your dad inherits the right to live in the house which means it is included in his estate when he died.

Don't forget as he got the beneficial interest when mum dies it did not reduce the transferable nil rate band as it get the spouse exemption and it also qualifies for the residential nil rate band(s) 
 
It also means it gets rebased for CGT now you inherit.all of it.

 

Thanks that’s a bit clearer. I was looking at the property as just that rather than as something that gave benefit.

It means I’ll have to go down the IHT400 route so am a bit concerned that isn’t something easy to do as layperson! Probably loads more questions especially on how to show beneficial interest in the forms.

Can I just check what you means as rebased for CGT?

Thanks so much for help

xylophone

https://www.claritytaylorvinters.com/sites/default/files/research/notes/trusts.pdf

Gains Arising on Death of a Beneficiary

For a trust where there is an interest in possession, and Inheritance Tax is therefore charged on death of the life tenant, assets are rebased for capital gains tax purposes at the death value.

poppystar

Ok...so now started to look at filling in the RNRB forms which I will need to use if whole value of house included as F’s and have to complete IHT400 and schedules.

I still end up with the same issue with the house and how much Is included on F’s form.

Can you confirm my understanding following this discussion that 100% of house is included for F on these and and therefore £175000 of the value of the house can be added to the £325000? Or is it only F’s half of the house which doesn’t reach £175000?

Ie. When asked what percentage of the residence passes to direct descendants on this deceased death it is 100% not the 50% I would have put prior to this discussion.
Also it presumably is not classified as a joint asset for IHT400?


[i was doing so well prior to this spanner in the works🙁] 

Thanks again.

getmore4less

Most of IHT400 can probably be ignored.

You can also use mums transferable RNRB and there will be mums regular nil rate band.

The house should be a qualifying asset including the life interest as that goes to a direct descendant(you) 

Might be a good idea to read up on the examples in the HMRC IHT manual all on line.