Complex situation: how to avoid inheritance tax/ capital gains involving international Jordanian law

RAS

If the grandparents' intention was to ensure mum got the flat, then the best thing would be for grandma to make a will leaving the flat to mum. 

The suggested life interest was a way of enabling mum to have secure accommodation if grandma wanted to split the inheritance either in line with UK intestacy or Sharia rules.

But you need to clarify whether the house is in grandma or the grandparents' joint names.

The advantage of transferring the flat through inheritance is that there is no CGT to pay. 

You'd need to take advice in whether there might be a IHT liability but if the estate is allowed the Residential Nil Rate Band, then the IHT is up to  £500k in total. That only applies if property is left to direct descendants.

theoretica

I doubt the residential nil rate band will apply - as the grandmother does not have her own residence in the UK to leave.

Marcon

Proper professional advice would be a much safer option than relying on input from random strangers on the internet, especially given the international dimension.

Keep_pedalling

The RNRB does not apply, it is not the grandmother’s home. 

RosieAnn

Marcon said:

Proper professional advice would be a much safer option than relying on input from random strangers on the internet, especially given the international dimension.

Obviously, but that is why we have this forum to ask for advice. I have already highlighted in my post that I am seeking professional advice, due to the complexity of the issue. I am grateful for the insight and advice other people have kindly contributed to this post. I think your comment is not particularly helpful. 

RosieAnn

RAS said:

If the grandparents' intention was to ensure mum got the flat, then the best thing would be for grandma to make a will leaving the flat to mum. 

The suggested life interest was a way of enabling mum to have secure accommodation if grandma wanted to split the inheritance either in line with UK intestacy or Sharia rules.

But you need to clarify whether the house is in grandma or the grandparents' joint names.

The advantage of transferring the flat through inheritance is that there is no CGT to pay. 

You'd need to take advice in whether there might be a IHT liability but if the estate is allowed the Residential Nil Rate Band, then the IHT is up to  £500k in total. That only applies if property is left to direct descendants.

Thank you that is really helpful. I wasn't aware of what a life interest is so have done some research into it. Fundamentally I think we need to get the grandmother to create a will. We are seeking professional advice from someone who hopefully has insight into international law also!

poseidon1

RosieAnn said:

RAS said:

If the grandparents' intention was to ensure mum got the flat, then the best thing would be for grandma to make a will leaving the flat to mum. 

The suggested life interest was a way of enabling mum to have secure accommodation if grandma wanted to split the inheritance either in line with UK intestacy or Sharia rules.

But you need to clarify whether the house is in grandma or the grandparents' joint names.

The advantage of transferring the flat through inheritance is that there is no CGT to pay. 

You'd need to take advice in whether there might be a IHT liability but if the estate is allowed the Residential Nil Rate Band, then the IHT is up to  £500k in total. That only applies if property is left to direct descendants.

Thank you that is really helpful. I wasn't aware of what a life interest is so have done some research into it. Fundamentally I think we need to get the grandmother to create a will. We are seeking professional advice from someone who hopefully has insight into international law also!

I would Strongly recommend you find a suitable lawyer via the STEP directory ( Society of Trust and Estate Practitioners). 

This cross border estate planning situation is way beyond the competency of the average High Street solicitor firm.

Incidentally non resident foreign owners of UK residential property only became liable to UK capital gains tax on disposal of such property as of 6 April 2015 ( prior to that foreign owners were wholly exempt). 

When this change was introduced, foreign owners could elect to have the property revalued as at April 2015,  so that only gains accruing  after that date would be potentially liable to tax on disposal  ( or in this case potential life time gift).

I mention this since a STEP lawyer might offer the view that of instead gifting the property on death by will ( which would erase any CGT exposure entirely), what would be the CGT exposure ( if any) on a lifetime gift?

Naturally there would also be the IHT consideration of death within 7 years, but if the grandmother has no other assets in the UK it is difficulty to see under what circumstances UK probate and a potential IHT return would be a requirement.

As I say this is the domain of an appropriate STEP lawyer, but you should note there is an alternative approach  to secure your partner' mother's position.