Inheritance tax

[Deleted User]

AdrianC said:

Traceyaylmer said:

it was only because mums solicitor wrote it in the email we knew that apart from the 42000 the rest is classed as gifted
...
We thought we were just buying it and owning the deeds, didnt know about the gifted bit and realised it means we will have inheritance tax to pay.

I think you might need to take a step back and get a better understanding of IHT.

Inheritance tax is paid from and by the estate of a dead person, if their estate is large enough - so if they had enough money and assets...
It's not paid by anybody alive.
It's paid by the estate before inheritances are distributed to family members.

If somebody makes a large gift in the 7 years before they die, that gift may be partially included in their estate for IHT, depending on how long before their death it was made.

The 7 year rule doesn’t apply to gifts made with reservation like the one the OP’s Mum is making. 

theoretica

Actually it sounds even more complicated.

1 - she will still be living in the home.  This means the 7 year rule does not apply and inheritance tax is likely to be payable however long it is between her gift and death.  This is not a normal outright gift, but a 'Gift with Reservations'.

2 - You will own a home that is not your main residence.  This means Capital Gains Tax will apply when it is sold, on the increase in value between now and then.

So potentially two taxes rather than one.

What benefit do you see in your mother gifting her house to you rather than leaving it to you in her will and documenting that she has borrowed 14k off each of you?

Traceyaylmer

So if she dies after 7 years we wont have any iht to pay? ,  we will own the house if we sign this paperwork today so our names are on the deeds does it still apply, 

[Deleted User]

Traceyaylmer said:

So if she dies after 7 years we wont have any iht to pay? ,  we will own the house if we sign this paperwork today so our names are on the deeds does it still apply, 

As I said above the 7 year rule doesn’t apply when it’s a gift with reservation. 

Traceyaylmer

Ok getting it a bit, if she died in say 10 years and the property is worth 200 thousand we will have to pay 40 percent iht when we sell the property or before?

And does what we own (our own houses) do not apply 

Traceyaylmer

If its less than 325 thiers no tax to pay just realised but does our own assets get calculated in this?

Grumpy_chap

Traceyaylmer said:

 has to be payed by tomorrow in fact.

Why?
Why does it have to be paid by tomorrow? 
Is that to avoid SDLT?  If so, the values that have been indicated in the thread may not be liable to SDLT in any case, or certainly not that much.
OR, is mother in dire financial straits and needs the money NOW?

Why is the Solicitor not able to explain the IHT issues?  
This may not devalue the IHT liability by any more than the £42k paid, as the gifted part will be GWR so not exempted from IHT.
Is the value of the estate likely to be large enough to incur IHT in any case?

Has there been any consideration of future care needs for your mother and whether deprivation of assets may come into play?

Are any of you on benefits?  Is it a possibility in the future?  The value of the gifted house may be taken into account as an asset and deprive or reduce a claim for UC?

When the house is sold, you will all be liable for CGT.

Have you given any consideration to what happens if any of the three siblings divorce and the proportion of the gifted / part-owned house is considered a marital asset?

You need professional advice before signing anything.

gettingtheresometime

Grumpy_chap said:

Traceyaylmer said:

 has to be payed by tomorrow in fact.

Why?
Why does it have to be paid by tomorrow? 
Is that to avoid SDLT?  If so, the values that have been indicated in the thread may not be liable to SDLT in any case, or certainly not that much.
OR, is mother in dire financial straits and needs the money NOW?

I assumed it was because of the later.

I'm in no way an expert but if it is the reason wouldn't it be better for the children to put a charge on the house for the sum lent the mum so in effect they become the mortgage company?

theoretica

Traceyaylmer said:

If its less than 325 thiers no tax to pay just realised but does our own assets get calculated in this?

No, you don't need to pay inheritance tax on stuff that has always been yours just because your parent dies.  Only things (including money) that came (to you or anyone else) from your parent have any consideration.

getmore4less

Traceyaylmer said:

Hi, me and my siblings plus spouses so 6 in all, are paying 42000 between us , to pay off my mums mortgage she owes left, but taking over the deeds of whole property.with a trust to say she can live thier till she dies.
My question is the remainder of the value is gifted to us, we havent signed the paperwork yet, is thuer another way without the gifting as we oresume thier will then be inheritance tax?
And if not does the whole property value added on to each couples inheritance value or a 3rd of it?
We aim to sell it when she dies and we all have a mortgage? Please help we are supposed to sign today

That's a key piece of information

this creates a lifetime interest in possession trust


The tax rules for lifetime  trusts changed in 2006 and don't work like the same sort of trust(IPDI) created by wills used typically to protect he interests of a spouse.


AIUI the tax regime is similar(same?) as a discretionary trust.


Also you won't own anything if the property is in the trust you will be legal owners as trustees.
(in effect you will also be putting assets into the trust if you pay of the mortgage)


Another issue is you can only have 4 legal owners  but you have 6 that want to get a beneficial shares from the trust as remaindermen. 


can get complicated if any of the remaindermen  die before the life tenant does.