tenants in common or joint tenants?

bumpergirl

I advised my son and DIL to change their house ownership from joint tenants to tenants in common, thinking of possible future care fees.  they have two almost grown sons who would inherit from each.  I'm now wondering how this affects CGT as the sons will no doubt leave home at which point CGT will kick in. can they mitigate this - perhaps a deed of variation on the first death?

housebuyer143

I don't understand why you think CGT would be due? You don't pay it on a main residence so simply changing ownership from joint to tenants in common will have no impact. 

If one of the other parties dies, are you thinking it will be due then on the inheriting party?

HappyHarry

Why are you advising them to take such actions if you do not understand the implications of  them doing so? Would it not be better for your son and DIL to seek advice from a solicitor who does understand the implications and can advise accordingly?

bumpergirl

I am referring to when the first parent dies and their share is passed to the children who will have left home. Yes, I could belatedly tell them  to see an advisor though they don't have much money to spare- just thought someone on here would know

Keep_pedalling

Have you also advised them to make wills and put LPAs in place? Far more important things to do than worry about care costs.

Bookworm105

rank your concerns as it is a bit late in the day now to be trying to work what you should have advised them when you don't understand it

JT
- house passes to survivor and survivor goes into care = house value at risk
- house passes to survivor  = inheritance tax may be an issue as whole value now liable

TIC
- share passes to beneficiary. Beneficiary exposed to CGT
- share passes to beneficiary. Survivor assessed for care home costs on residue of property still in their name (sale of property may be forced and thus CGT triggered for beneficiary).
- share passes to beneficiary. May be tax efficient for inheritance tax as each death has own thresholds

If you want answers for how to "avoid" things then pay for professional advice

bumpergirl

thank you - most helpful

Sarahspangles

bumpergirl said:

I advised my son and DIL to change their house ownership from joint tenants to tenants in common, thinking of possible future care fees.  they have two almost grown sons who would inherit from each.  I'm now wondering how this affects CGT as the sons will no doubt leave home at which point CGT will kick in. can they mitigate this - perhaps a deed of variation on the first death?

This was in fashion about 15-20 years ago, I know because my in-laws did it. Wills need to be re-written carefully so as to create a Will Trust which allows the survivor to remain in the house, or purchase an alternative house - say a bungalow - for the remainder of their life. What the beneficiaries need to be wary of is transferring ownership at this point, as they would then incur CGT on eventual sale, and also lose their first time buyer status. The Trust eventually needs to be formally registered with HMRC - I say eventually because if the survivor is expected to die soon after their partner this cost can be avoided. If not it’s a few hundred for a solicitor to draw up. There are pros and cons but it’s something people should get advice on!

bumpergirl

that's so helpful - thank you. i think the solution is to do as I did, and downsize  immediately, giving the children their share.