Inheriting Half a House on Death of First Parent

GunJack

Don't come over this part of the forum these days, but in a discussion with parents about wills, LPA, etc. this came up...

Their current will passes half their house to me on the first death. Now, I'm a homeowner and me & Mrs. G-J will be looking to move & downsize at some point. If this were to happen AFTER the first death, does that mean when we sell our place and buy our (hopefully) forever home we'll get stung with second property stamp duty as I'll already own half a house? Currently in Wales and would in all probability be buying in Wales too and buying under the £225k threshold...

Anyone come across this or can give any useful info??

housebuyer143

No, if you sell your main residence and buy another the tax isn't due. If you put half that house from your parents in your name then you will likely have to pay stamp duty plus the additional 4% on that share.

doodling

Hi,

GunJack said:

Don't come over this part of the forum these days, but in a discussion with parents about wills, LPA, etc. this came up...

Their current will passes half their house to me on the first death. Now, I'm a homeowner and me & Mrs. G-J will be looking to move & downsize at some point. If this were to happen AFTER the first death, does that mean when we sell our place and buy our (hopefully) forever home we'll get stung with second property stamp duty as I'll already own half a house? Currently in Wales and would in all probability be buying in Wales too and buying under the £225k threshold...

Anyone come across this or can give any useful info??

Will the half be bequeathed to you absolutely, or will you be acting as the trustee of a life interest trust with the beneficial ownership resting with the remaining parent?

If you are acting as a trustee, with only legal but not beneficial ownership, then it is my understanding that the property is disregarded for SDLT purposes.

Of course, if this really matters to you then you should confirm this with a suitable professional.

GunJack

housebuyer143 said:

 If you put half that house from your parents in your name then you will likely have to pay stamp duty plus the additional 4% on that share.

I thought that might be the case, I think their will is currently written to pass the half directly to me which could well make us liable.

doodling

Hi,

GunJack said:

housebuyer143 said:

 If you put half that house from your parents in your name then you will likely have to pay stamp duty plus the additional 4% on that share.

I thought that might be the case, I think their will is currently written to pass the half directly to me which could well make us liable.

That would be unusual - most people don't want their children to be able to throw their widow out of the house in that situation.

silvercar

housebuyer143 said:

No, if you sell your main residence and buy another the tax isn't due. If you put half that house from your parents in your name then you will likely have to pay stamp duty plus the additional 4% on that share.

Are you suggesting there is SDLT to pay on an inheritance? Paging @SDLT_Geek

Keep_pedalling

Hopefully the will leaves the surviving spouse a life interest your share via an immediate post-death interest trust so you don’t actually become the owner until the death of the survivor. If that is not the case I would suggest new wills should be made, both for the security of the surviving spouse and to remove any potential CGT liability when the house is eventually sold. 

_Penny_Dreadful

housebuyer143 said:

No, if you sell your main residence and buy another the tax isn't due. If you put half that house from your parents in your name then you will likely have to pay stamp duty plus the additional 4% on that share.

The first part is correct, providing the OP sells their main residence to purchase another main residence the higher rate of LTT will not be due. 

The second part is incorrect though. You don’t pay LTT on property you inherit. LTT is based on the consideration paid and there is no consideration paid when you inherit. 

The OP could face a potential CGT bill in the future though when they eventually dispose of their share of the inherited property. 

propertyrental

Perhaps an overly cautious question, but do the parents currently own the property as Joint Tenants or Tenants in Common?

The answer might make the OP's dilemma irrelevant.

If you do inherit half the house, it's Capital Gains Tax (on sale) to be concerned about, not SDLT.

SDLT_Geek

GunJack said:

Don't come over this part of the forum these days, but in a discussion with parents about wills, LPA, etc. this came up...

Their current will passes half their house to me on the first death. Now, I'm a homeowner and me & Mrs. G-J will be looking to move & downsize at some point. If this were to happen AFTER the first death, does that mean when we sell our place and buy our (hopefully) forever home we'll get stung with second property stamp duty as I'll already own half a house? Currently in Wales and would in all probability be buying in Wales too and buying under the £225k threshold...

Anyone come across this or can give any useful info??

Because the property OP might be buying is in Wales, the relevant stamp duty is Land Transaction Tax (LTT).  The higher rates of LTT (roughly an extra 4%) do not apply to someone who sells their existing home and buys a new one (again to live in as their only or main residence) even though another property is owned.

Nor would LTT normally be due on the inheritance of a share in a property (assuming the property which might be inherited is also in Wales; if not the SDLT rules for properties in England are similar).

GunJack

doodling said:

Hi,

GunJack said:

housebuyer143 said:

 If you put half that house from your parents in your name then you will likely have to pay stamp duty plus the additional 4% on that share.

I thought that might be the case, I think their will is currently written to pass the half directly to me which could well make us liable.

That would be unusual - most people don't want their children to be able to throw their widow out of the house in that situation.

me throwing one of them out would never even be a possibility, we're quite a close family ...