How to split a will

hogweed

My Mum is 88, so the question of her will has concerned us lately. Her estate consists mostly of her home, worth something like £170-200k.

She had the house as Tenants in Common with my father, with everything left to me, so I now own half of it (my father died a couple of years ago).

Our dilemma is this. As things stand, her share is also left to me (as the only child). However, I’d want at least half of the income from its sale when she dies to go to my (also only) daughter.

When I contemplate matters like tax etc, I feel a powerful urge to eviscerate myself, and my brain completely seizes up. So, could somebody please advise if I can simply sell the house when the time comes, and give half the proceeds to my daughter, or if that would attract some kind of tax liability?

If so, would Mum be better to change her will to leave her half of the house to my daughter in the first place?

Thanks

Flugelhorn

I think you can do a deed of variation within 2 years of the death, as the only beneficiary you can do the DoV and give 50% to your daughter as though it had been like that all the time in the will.

poppystar

It may not apply to you but if you are on means tested benefits or not able to pay for care you can foresee needing there may be an issue of deprivation of assets. In which case your mother leaving it directly to your daughter might be better. 

If not, as above, just do a deed of variation when the time comes. 

In fact a deed of variation might not even be necessary as it could be regarded as a gift and as long as you survive seven years after then it will not be included in your estate anyway. 

doodling

Hi,

Your options are as follows:

1. Your mum changes her will to leave her half of the house to your daughter.

2. You leave things as they are and when you sell the house you give some money to your daughter.  There is no tax on giving and receiving gifts in the UK so there won't be any tax implications.  There are three issues:
A ) If you die within 7 years of that gift then it might be included in your estate with respect to inheritance tax which might affect how much inheritance tax your estate pays when you die - unless there are really exceptional circumstances this won't affect your daughter at all (other than potentially receiving less from you when you die), she won't be expected to pay tax on the gift she has already received.
B ) For the purposes of means tested benefits you will be considered to have received and kept the whole inheritance.
C ) If you are in a position where there is a reasonable likelihood that you might need care in the fiture then you may be considered to be deliberated depriving yourself of assets.  This becomes more of an issue the older and or more infirm you are when the gift is made.

3. You do a deed of variation after your Mum has died to retrospectively change her will to give the money to your daughter.  A deed of variation needs to be done within 2 years of death and requires all those whose bequests to be reduced to agree to it (if any of those beneficiaries with reduced bequests are minors then a deed of variation is near impossible). This avoids point A above but not points B and C.

thegreenone

Also check whether your daughter would be eligible for any FTB benefits in the future (ie no stamp duty up to 300k) if she owns half a property already.

Dave_5150

Couple of other point that may, or may not be a concern depending on your circumstances.

1. Changing the will to gift half of the house to your daughter could affect her first time buyer status.
2. Receiving a sizable inheritence could affect any means tested benefits your daughter receives.

Newly_retired

I am not an expert, so hope someone more knowledgable may join the discussion, but if you sell the property when you have inherited it, won't there be capital gains tax to take into consideration?

Mojisola

Dave_5150 said:

Couple of other point that may, or may not be a concern depending on your circumstances.

1. Changing the will to gift half of the house to your daughter could affect her first time buyer status.
2. Receiving a sizable inheritence could affect any means tested benefits your daughter receives.

Not if she is left the capital after the house is sold.

RAS

It doesn't seem as if IHT is an issue.

Did your father's will leave his portion of the house to you, and leave a life interest (right to reside) to mum? Hopefully?

In which case if mum needs care, only her portion of the house can be used to cover care home fees, and your portion is safe from CGT.

If dad failed to set up the life interest trust in his will, you inherited absolutely and you don't live there from the date of dad's death, CGT becomes an issue. Alternatively, you do need to register the trust with HMRC under the recent rules.

So you really need to go back to his will, and check the exact wording of your inheritance, so you understand whether it creates a trust or not. Hopefully it does, and then you need to register it.

There is no gift tax, but you can't just give away money if you are in receipt of means-tested benefits, and you'd need to understand the impact of the inheritance on your daughter's finances at the time.

Dave_5150

Mojisola said:

Dave_5150 said:

Couple of other point that may, or may not be a concern depending on your circumstances.

1. Changing the will to gift half of the house to your daughter could affect her first time buyer status.
2. Receiving a sizable inheritence could affect any means tested benefits your daughter receives.

Not if she is left the capital after the house is sold.

Obviously, however I pointed out the impact of been left half the house because that is what the OP had suggested.

hogweed

Thanks so much for all that useful info, bits of which I even understand. Don’t know how to multi-quote on this forum, but I’ll try…

poppystar said:

It may not apply to you but if you are on means tested benefits or not able to pay for care you can foresee needing there may be an issue of deprivation of assets. In which case your mother leaving it directly to your daughter might be better. 

If not, as above, just do a deed of variation when the time comes. 

In fact a deed of variation might not even be necessary as it could be regarded as a gift and as long as you survive seven years after then it will not be included in your estate anyway. 

 

Nobody on benefits; always possible Mum (or me – who knows…) may need to go into care at some point. Yes, I take the point about the 7 years. I’m 68 and in reasonable nick – if I live as long as my parents there won't be a problem, but as I say, who knows…

 

doodling said:

1. Your mum changes her will to leave her half of the house to your daughter.

Think maybe that looks like the least-hassle way?

2.
A ) If you die within 7 years of that gift then it might be included in your estate with respect to inheritance tax which might affect how much inheritance tax your estate pays when you die - unless there are really exceptional circumstances this won't affect your daughter at all (other than potentially receiving less from you when you die), she won't be expected to pay tax on the gift she has already received.

My estate (house) is worth maybe £250k, and I think the limit is £325k right now? So the combined estates would reach somewhere around there.

 

B ) For the purposes of means tested benefits you will be considered to have received and kept the whole inheritance.
C ) If you are in a position where there is a reasonable likelihood that you might need care in the fiture then you may be considered to be deliberated depriving yourself of assets.  This becomes more of an issue the older and or more infirm you are when the gift is made.

Yeah as I say, if all goes well that won’t arise. But I could be unlucky.

3. You do a deed of variation after your Mum has died to retrospectively change her will to give the money to your daughter.  A deed of variation needs to be done within 2 years of death and requires all those whose bequests to be reduced to agree to it (if any of those beneficiaries with reduced bequests are minors then a deed of variation is near impossible). This avoids point A above but not points B and C.

 

The only beneficiaries are daughter and me… but it looks like Option A would be simplest?

 

thegreenone said:

Also check whether your daughter would be eligible for any FTB benefits in the future (ie no stamp duty up to 300k) if she owns half a property already.

 

No, she doesn’t own a property yet

 

RAS said:

Did your father's will leave his portion of the house to you, and leave a life interest (right to reside) to mum? Hopefully?

Don’t know, sorry, will have to take a look. I thought half the house was already hers, and he left his half to me…?