Inheritance of family home

Suzie123

I have a couple of queries regarding inheritance of a family home.

The house was owned by my parents as joint tenants so my mother became the surviving owner on the death of my father in 2016.  At that time, we were advised that we did not need to do anything to notify land registry.

My mother has now passed away and her will leaves the house to myself and my sister equally.  We do not intend to sell the property and will own it as tenants in common so our shares can be dealt with in our wills rather than passing to one another should we die.  Mom did not have any other assets and as we are executors, we are assuming that dealing with land registry should be relatively straightforward.  Any guidance regarding what we need to do would be very much appreciated (we understand that we need to apply for probate etc so the query is purely regarding land registry).

The second consideration is regarding inheritance tax.  We believe the house is worth less than the £500k total of the nil rate band / main residence band.  We understand that we need to notify HMRC of the value of Mom’s assets but are we required to have the house valued?

It feels like we should be able to deal with all of this ourselves, but happy to be guided toward taking advice should people think that would be wise.

Mickey666

If your Father left his entire estate to your Mother then your Mother's estate can also use your Father's nil rate band for IHT.  Plus, since your Mother has left the house to her children there is an additional amount to be added.  I can't remember the precise figures but it will total about £1m before IHT is payable.  So yes, you have to value Mother's entire estate, including the house, but it sounds like it will be well under the threshold for any IHT liability, in which case the precise value of the house shouldn't be an issue - by which I mean that it shouldn't need a formal professional valuation (which would cost a few £100s).  An EA valuation should be acceptable, or even your own estimate based on local sold house prices would probably be ok.  Basically, if the estate valuation is well under the IHT threshold then HMRC is unlikely to query anything.
From what you've described it all sounds quite straightforward and you should be able to deal with everything yourselves.  

xylophone

 land registry.

https://www.gov.uk/update-property-records-someone-dies

Sea_Shell

What are you both planning to do with the property?

Rent it out, or one of you live in it?

By not selling and just splitting the cash, you could be opening a can of worms further down the line if circumstances (or your feelings) change.

Suzie123

Sea_Shell said:

What are you both planning to do with the property?

Rent it out, or one of you live in it?

By not selling and just splitting the cash, you could be opening a can of worms further down the line if circumstances (or your feelings) change.

My sister still lives there. She has looked after our parents for a number of years, paid the utilities etc.  I don’t have any concerns about leaving her there for the foreseeable, but completely understand your advice.  Thank you.

Suzie123

Mickey666 said:

If your Father left his entire estate to your Mother then your Mother's estate can also use your Father's nil rate band for IHT.  Plus, since your Mother has left the house to her children there is an additional amount to be added.  I can't remember the precise figures but it will total about £1m before IHT is payable.  So yes, you have to value Mother's entire estate, including the house, but it sounds like it will be well under the threshold for any IHT liability, in which case the precise value of the house shouldn't be an issue - by which I mean that it shouldn't need a formal professional valuation (which would cost a few £100s).  An EA valuation should be acceptable, or even your own estimate based on local sold house prices would probably be ok.  Basically, if the estate valuation is well under the IHT threshold then HMRC is unlikely to query anything.
From what you've described it all sounds quite straightforward and you should be able to deal with everything yourselves.  

Thank you.  Yes Dad’s nil rate band will be available but I don’t know what, if anything, was notified to HMRC at the time of his death. And like you say, the total estate will be well within the threshold so hopefully straightforward.

poppystar

Suzie123 said:

Thank you.  Yes Dad’s nil rate band will be available but I don’t know what, if anything, was notified to HMRC at the time of his death. And like you say, the total estate will be well within the threshold so hopefully straightforward.

Who was executor for your father’s estate? It might be useful to get any paperwork relations to that. 

Brynsam

Sea_Shell said:

By not selling and just splitting the cash, you could be opening a can of worms further down the line if circumstances (or your feelings) change.

One of the wriggliest of those worms could be future capital gains tax for you when you come to dispose of your half of the property, given that you don't live there. Even giving your half to your sister won't get you out of that hole, because HMRC will treat it as being disposed of at market value, regardless of how much or little you receive in return. 

Also keep in mind that if you don't already own your own property, and want to buy in the future, you won't be eligible for assistance under any first time buyer schemes and you will be subject to a second home surcharge of 3% on stamp duty. 

getmore4less

Suzie123 said:

Sea_Shell said:

What are you both planning to do with the property?

Rent it out, or one of you live in it?

By not selling and just splitting the cash, you could be opening a can of worms further down the line if circumstances (or your feelings) change.

My sister still lives there. She has looked after our parents for a number of years, paid the utilities etc.  I don’t have any concerns about leaving her there for the foreseeable, but completely understand your advice.  Thank you.

You could look at a DOV to create  an IPDI trust with sister as the life tenant.

That would ring fence your share and avoids the future CGT issue mentioned but may create IHT issues for sister.

Suzie123

Brynsam said:

Sea_Shell said:

By not selling and just splitting the cash, you could be opening a can of worms further down the line if circumstances (or your feelings) change.

One of the wriggliest of those worms could be future capital gains tax for you when you come to dispose of your half of the property, given that you don't live there. Even giving your half to your sister won't get you out of that hole, because HMRC will treat it as being disposed of at market value, regardless of how much or little you receive in return. 

Also keep in mind that if you don't already own your own property, and want to buy in the future, you won't be eligible for assistance under any first time buyer schemes and you will be subject to a second home surcharge of 3% on stamp duty. 

I already have my own property and don’t intend to ever move but hadn’t thought of CGT.  Definitely something to consider.

Suzie123

getmore4less said:

Suzie123 said:

Sea_Shell said:

What are you both planning to do with the property?

Rent it out, or one of you live in it?

By not selling and just splitting the cash, you could be opening a can of worms further down the line if circumstances (or your feelings) change.

My sister still lives there. She has looked after our parents for a number of years, paid the utilities etc.  I don’t have any concerns about leaving her there for the foreseeable, but completely understand your advice.  Thank you.

You could look at a DOV to create  an IPDI trust with sister as the life tenant.

That would ring fence your share and avoids the future CGT issue mentioned but may create IHT issues for sister.

Can you please explain what that means?