What to do with inherited share of house?

Hi - I'm hoping I can get some clarity on what should be done in the following circumstances, alongside what must be done.

My father in law sadly passed away in June, leaving his 81 year old wife (in good health). My wife is their only child. He left his minimal estate to his wife, all sorted, other than his 50% share of the house (held as Tenants in Common). House value is around £130k, no mortgage.

His 50% share was left in trust with my wife as the ultimate beneficiary of that. The trust deals with her mother's right to stay, referred to as I understand as a Life Interest Trust or Property Trust. We know that we have to register the trust within 2 years. We will also apply for Probate in the next few months to enable them to one day deal with his half of the property. There are three executors (wife, MIL and a niece), they are also the three trustees.

Once she fully inherits, when the life interest trust ends, she would sell the property (we live some distance away). She may of course own the entire property at that time (that is her mother's intention).

As for the 50% share - at the moment we have applied to the Land Registry to take his name off the register, a DJP form. We had thought that would be the end of the process for now, but also read about transferring his share to either the trust, or to my wife.

Is that a necessity, or in reality can it be left as it is with his share protected through the land registry restriction (from TIC), until the time comes to sell the property one day?

Is it wise to leave it in that way, or are there benefits to transferring his share now? If so, is it possible to transfer it to my wife, or must it be to the trust for now?

We don't want to incur the costs and hassle of transferring it if there is no need, given the long term intention to one day sell the property.

Many thanks!

Comments

  • RAS
    RAS Posts: 32,437
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    edited 17 November 2023 at 9:38AM
    A couple who own or have owned a house have a share IHT exemption of up to £1m. So the whole value of the house could be inherited by your wife. It is normal for the second spouse and another to be the trustees of the life interest trust. She can sell at the value of the property when mum dies without paying CGT. And if mum needs to go in a care home, there will be no tax liability on her 50%.

    If your wife becomes the owner of the 50% share she immediately gains a CGT liability based on the value of dad's share when he died in June, which will increase over time.

    Which was why dad was advised to leave his daughter the half share in trust, rather than absolutely.

    I'm not even sure she can transfer the 50% without mum's consent, and would advise they both take legal advice before trying to do so.
    The person who has not made a mistake, has made nothing
  • There is no need to apply for probate to get the house transferred, your MIL is now the beneficial owner of the whole house with legal ownership split between her and the trust. You don’t need to get the LR changed at this stage, that can be done on her death or if she moves out before then

    The rust does need to be registered with HMRC within 2 years (unless MIL dies before then). 

    Because MIL becomes the beneficial owner of his share it forms part of her estate for IHT purposes, but none of his NRB has been used up and is transferable to her estate. Your wife will also not face a CGT liability when the house is eventually sold. 
  • There is no need to apply for probate to get the house transferred, your MIL is now the beneficial owner of the whole house with legal ownership split between her and the trust.

    Thanks for your response.

    As for the question of probate - are we right in thinking that we will eventually need probate for her father, to deal with his share? We had thought it was better to do it now while all is fresh in our minds, and just file it till one day we need to sell the property.
  • Solstar said:
    There is no need to apply for probate to get the house transferred, your MIL is now the beneficial owner of the whole house with legal ownership split between her and the trust.

    Thanks for your response.

    As for the question of probate - are we right in thinking that we will eventually need probate for her father, to deal with his share? We had thought it was better to do it now while all is fresh in our minds, and just file it till one day we need to sell the property.
    No, you will only need it for, and it won’t be required if for some reason you need to sell the house before then.
  • RAS
    RAS Posts: 32,437
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    If mum dies before the house is sold, you only need probate for her estate. 
    The person who has not made a mistake, has made nothing
  • It looks like we don't need to do anything more then, and can rest easy knowing that we can deal with the house in the future without any barriers due to the lack of probate for FIL. That's great news for us, so thanks to you both for your help!
  • msb1234
    msb1234 Posts: 505
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    What I would say is, do you have Power of Attorney for your Mil? 
    I am in a  similar position as you, my mum died, house owned as tenants in common, stepfather no longer has capacity and is in a home. the house has lain empty for 18+ months, I had to apply for Deputyship for my stepfather in order to be able to sell the house. It took 6 months to come through, and the house is now up for sale. His share will go towards his care home fees. 
  • msb1234 said:
    What I would say is, do you have Power of Attorney for your Mil? 
    Not yet, but an application has this week been made through a solicitor so that we do have it in place for the future (financial and welfare). The whole topic is new territory for both us, this board has helped greatly from reading the experiences of others.
  • RnK136
    RnK136 Posts: 68
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    edited 20 November 2023 at 3:48PM
    msb1234 said:
    What I would say is, do you have Power of Attorney for your Mil? 
    I am in a  similar position as you, my mum died, house owned as tenants in common, stepfather no longer has capacity and is in a home. the house has lain empty for 18+ months, I had to apply for Deputyship for my stepfather in order to be able to sell the house. It took 6 months to come through, and the house is now up for sale. His share will go towards his care home fees. 

    Exactly same situation I am in. Mum died almost 2 years ago. Dad now no capacity and gone into residential care. No LPOA. Currently applying for Deputyship as end of next year we need to sell to pay for care fees. House will have sat empty for 18 months by then.
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