Inheritance tax - better to have spouse on deeds/mortgage or not?

sicandar

Quickie! - for anyone please help!

Is it better to have a spouse's name on the mortgage and/or deeds for the sake of IHT on property worth more than the threshhold level or not?

(I have a meeting tmorrow to set up a mortgage and currently have asked for quotes in my name only)

sneekymum

Makes no odds as spouse would not be liable for IHT as long as they are UK domiciled.

sicandar

thanks for the reply

sorry I was not clear - I meant for our kids.

Mumstheword

You can own the house as something like 'tennants in common' whereby you each own half rather than jointly owning it all.

Pros: you can leave your half to whoever you like, doesn't automatically go to spouse. Could leave it in trust for kids for example.

Cons: You'd need to put a clause on to say spouse had use of the house for their whole life. Spouse wouldn't have full control, eg for selling if need be. What if spouse needed money from the house to live? eg you die young, spouse needs to sell house and buy a smaller one, using equity to live on? You can leave your half to whoever you like. So half your house could be left to the cats home....! and you'd have lost control over it.

Problem with owning it yourself is that if she dies first you have 'wasted' her IHT allowance. If she'd owned half, she could have left the amount up to the IHT in trust for the kids, and the rest to you, which is IHT free anyway.

Best idea is to speak to a solicitor who knows a bit about this, or maybe someone with more knowledge will come along and give some advice.

Sorry, rushed thid together a bit!!

HTH Mumx

margaretclare

Hi

My understanding, FWIW:

If you take out a mortgage in your name alone, your spouse or partner, or anyone over age 17, has no right to live there. So if you die first, unless he/she can take over the mortgage, or remortgage in own name then he/she can be homeless.

I moved to my present home with my late first husband back in 1990. Because he was on long-term sickness benefits (as they were then) he couldn't be insured, the mortgage lender wouldn't allow us to mortgage in joint names. It had to go in my name alone. He had to sign saying that he had no claim on the property. So he was basically a lodger. In the event, it didn't matter too much - he died 18 months after we moved here.

Fast-forward to 1997 and I invited my present husband, then in flight from a disastrous marriage, to move in with me. Because there was still a mortgage lender with an interest in the property, he was a lodger and even after we married in 2002, his position was vulnerable if I died first. So when we did the equity release to pay off the mortgage, along with the conveyancing I insisted that title was put into joint names, to protect him. He wasn't bothered - said he didn't marry me to get his hands on what I have. I just wanted to ensure he had a roof over his head if I die first.

I don't much like this idea of leaving half to your spouse and half to the rest of the family. I talked to the solicitor who handled B's divorce, and she told me a lot. Told me that you only had to sit in her chair for a while to see the very worst of families coming out. I'd hate to think of my darling husband, after I've gone, owning only half of a property to live in and the rest of the family circling like vultures over the other half...Not saying it would happen, but it could.

Our wills are written so that once the lifetime mortgage is paid off after the second of us departs this mortal coil, whatever is left will be split equally among 5 grandchildren, 3 of mine and 2 of his. We think that's the fairest way all round.

Aunty Margaret

sicandar

Thanks for the advice guys -

I had to set up the mortgage in my name only just this morning but then I went straight to my solicitor (I think it was his underling actually) who said that having the mortgage and deeds in my name only would not affect the IHT equation... He said the IHT allowance would still be spread (so that it would total 540,000 pounds) - should I be worried or can he still do this?

So how does one become a tennant in common - is this something the lawyer will do with the will?

margaretclare

sicandar wrote:

So how does one become a tenant in common - is this something the lawyer will do with the will?

No, it's to do with title to the property, as registered with the Land Registry.

Joint tenants is where both own the property in total and on the death of one of them, title passes 100% to the survivor.

Tenants-in-common is what you were talking about earlier, you each own 50%, or whatever percentage you decide on between you, could be 60-40.
On the death of one of you the survivor doesn't inherit 100%, but just inherits the percentage specified - the remaining percentage can be left to whoever you want. See my remarks in my previous post.

For details of this, either talk to a conveyancing solicitor or go on to the Land Registry's website: https://www.landreg.gov.uk

I'm a bit prejudiced on this - I just don't like the idea at all. Have seen a little bit of what 'families' can be like when money, property, deeds, inheritances etc appear on the horizon!!

Aunty Margaret

Mumstheword

You certainly have to be sure of your family to go down the route of leaving part of a family home to trust.
'Trust' is the important word here. You have to know you can trust your family to do the right thing!
I think it needs discussing with your children. It's a decision that every family must make for themselves based on whether they feel safe to do so, or whether you think the family would try to get the remaining spouse to sell and release equity. Personally I think that would be a revolting thing to do, but not everyone has the same standards do they?
Margaretclare makes a good point..you could own 50% each and leave MOST of that in trust and some to the surviving spouse. Also the surviving spouse could be a trustee. Then, survivor owns more than half of the property, and has a say in the trust. A good solicitor will talk you through all of this.
I would check the situation re the IHT whilst the house is in your sole name though. If your spouse dies, are they trying to say you can say half the house was hers, and so use her IHT allowance? Can't think how that would work if she wasn't on the deeds?

Like I said, you need a good solicitor to talk you through it all.

sicandar

Mumstheword wrote:

If your spouse dies, are they trying to say you can say half the house was hers, and so use her IHT allowance? Can't think how that would work if she wasn't on the deeds?

Like I said, you need a good solicitor to talk you through it all.

That is what this guy said....He said that we should both (ie missus and me) get our wills done together and I specifically asked about the deeds and he said that that was ok - so now i am worried - I would ask my kids but they have tendency to agree glibly with anything I say (my kids are only 1 and 3 years old btw!)

Thanks for the useful adviced though you two. I may need to speak to the solicitor again