Joint Tenants

Lornagalbraith

My mother owns a house that in itself is over the tax threshold. I am 1 of 3 siblings, and we want to know if the house can be put into joint names with my mother and she can still live there? Are we right in understanding that this is a much safer way to avoid the IHT? It also doesn't leave my mother vulnerable in case any of our marital relationships breakdown. Many thanks.

Jeremy535897

If you put the house in the joint names of your mother and her three children, and only your mother continues to live there rent free, you create the following problems:

• the whole of the house remains in her estate for inheritance tax purposes, as it would be a gift with reservation
• the capital gains tax free uplift on death would be lost on the shares owned by the children
• the gift would probably be regarded as a deprivation of assets by your mother in the event of her needing means tested council help in the future
• if the children would own an interest in more than one residential property as a result, the additional rate of stamp duty will be brought into play (not on the gift itself, if that is for no consideration, but on future disposals of that and any other residential property)
• if any one of the children has marital problems in the future, the occupation by mother is not a guarantee that the property cannot be impacted.

Keep_pedalling

Have you taken into account her residential NRB which would take her IHT exemption to £500k. Is she a widow? If so you need to take into account the transferable NRBs from her husband which could double that exemption.

if you want to make gifts it is nearly always better to gift liquid assets rather than you home. If she is living in a large house on her own the solution would be to downsize and make gifts with some of the proceeds.

Lornagalbraith

Thank you for your comments, still not sure what to do for the best. She is a widow, and is in a house that is far too big now, but she loves it and can manage it and really doesn't want to move, and we all love to meet up there. Moving forward we want to make sure that when mum goes we don't have to sell the property because of IHT.  The idea is to make it work for the benefit of all of us into our retirement.

Jeremy535897

What is the house and her estate worth, and did her deceased husband leave all his estate to her (and when did he die)? As noted above, you may be worrying about nothing.

[Deleted User]

Lornagalbraith said:

Thank you for your comments, still not sure what to do for the best. She is a widow, and is in a house that is far too big now, but she loves it and can manage it and really doesn't want to move, and we all love to meet up there. Moving forward we want to make sure that when mum goes we don't have to sell the property because of IHT.  The idea is to make it work for the benefit of all of us into our retirement.

The one thing that you must not do is what was suggested in the opening post - more than just inheritance tax may come in to play. As has been said, there may be no inheritance tax in any case - but some rough figures need to be provided.

Keep_pedalling

Lornagalbraith said:

Thank you for your comments, still not sure what to do for the best. She is a widow, and is in a house that is far too big now, but she loves it and can manage it and really doesn't want to move, and we all love to meet up there. Moving forward we want to make sure that when mum goes we don't have to sell the property because of IHT.  The idea is to make it work for the benefit of all of us into our retirement.

We are not talking about a stately home here, trying to hang on to a family home for sentimental reason rarely makes any financial sense when it has to be split between a number of siblings, especially is it could lead to some serious fall out when some want to sell and others don’t.

if your mother’s estate exceeds £1M and the bulk of that consists of her home then it is very difficult to do any IHT planning as gifting it or putting it into a trust won’t work if she still benefits from the asset by living in it. If she is happy as she is then that is more important than looking at protecting children’s inheritance from IHT and possible care costs. 

Purplelady65

Doing what you are proposing is fraught with problems. In addition to the other difficulties that have been raised if one of the children got divorced then the husband or wife would have a claim on the house as an asset. Same also if one of the children died then the ownership of their share could pass to their husband or wife who might want to sell their share. There is also something about paying market rent to the other owners of the house. So if your mother is the only person living in the house and she owns 20% of the house then she should be paying 80% market rent to the other owners of the house. This will be closely looked at if she requires care and if she hasn’t been paying rent could be classed as deprivation of assets. A solicitor will be able to advise you further but if your father left his estate to your mother and the children are the beneficiaries of the estate then the amount before iht is payable could be double anyway so even if you might have to pay some iht it might work out cheaper than other costs outlined by the OPs above.