Inheritance tax and house ownership

Workerbee999

For personal reasons our house is currently solely in OHs name despite having been married for the whole time of house ownership and paying the mortgage together (now cleared). It was in both our names until 5 years ago. I have no issues or concerns with this.

what implications does this have on inheritance tax, in particular the extra £175k allowance for passing on main property to direct heirs? Do I not have this allowance as I don’t technically own any property or does it not matter between spouses who legally owns it? 

Just wondering if now is the time to put it back in both our names, and whether we should do that before the budget “in case”. 

Keep_pedalling

If the residential NRB stays in place it could have a big impact on IHT if you die first as you will have no RNRB available to transfer to his estate. Unless you are threatened with bankruptcy I can see no good reason not to own the house jointly. 

Do you currently have wills and LPAs in place? If you have children and your husband died intestate, you would not inherit all of his estate if it exceeds £322k, his children would get 50% of anything over that which could also lead to an IHT liability on the first death because a big portion of the estate would not be covered by spousal exemption.

Workerbee999

I feared that might be the answer. It was done this way originally due to me being a statutory director in my job, and seeing the stress a colleague went through when a company they were a director of failed, but that issue for me has passed now, and there is no real reason not to put it back other than getting round to organising it.

To make matters worse I don’t have much in my name at all other than pension and ISAs as I’m an additional rate tax payer and it’s better for OH to earn the interest. So as it stands I wouldn’t even have the first £350k assets for IHT.

AND we don’t have a will or LPA in place - again just never got round to it…. We have one son and house is approx £650k, and savings in OHs name about £200k.

so I had better get a move on, right? Is there any benefit between tenants in common or the other option, I forget what it is?

Jeremy535897

Keep_pedalling said:

If the residential NRB stays in place it could have a big impact on IHT if you die first as you will have no RNRB available to transfer to his estate. Unless you are threatened with bankruptcy I can see no good reason not to own the house jointly. 

Do you currently have wills and LPAs in place? If you have children and your husband died intestate, you would not inherit all of his estate if it exceeds £322k, his children would get 50% of anything over that which could also lead to an IHT liability on the first death because a big portion of the estate would not be covered by spousal exemption.

I don't think that's correct, as the unused RNRB will still be transferred (but wouldn't be available if OP dies first and leaves more than £325,000 to someone other than her spouse):
"Like the standard nil rate band, any unused RNRB can be transferred between spouses and civil partners to be used when the surviving partner dies, regardless of when the first death occurred and whether or not the first deceased held a qualifying residential interest (that is, property ownership is not required by the first deceased). The only check that is required is whether the first deceased’s estate was over £2 million. The transferable RNRB must be claimed by the personal representatives within two years from the end of the month in which the second death occurs."
https://www.canadalife.co.uk/technical-support/the-residence-nil-rate-band/
I don't think there is really an issue under the current rules, as if OP dies first and leaves everything to her husband, the full £1 million will be available to him, and if husband dies first and leaves everything to OP, the same applies.
Owning the property as joint tenants avoids probate issues on the first death (I only know the rules for England and Wales, where I assume OP is domiciled).
If OP's husband has substantial wealth and they can afford lifetime gifts, that may be worth looking into before 30 October.

Bookworm105

Workerbee999 said:

so I had better get a move on, right? Is there any benefit between tenants in common or the other option, I forget what it is?

Tenants in Common - each person owns a defined % of the property and can therefore pass that share on via a will. However, best to take legal advice on the implications of creating a will trust for the surviving spouse and the child inheriting the deceased's share so you understand how that affects both in legal and tax terms. For example, spouse wanting to sell and move on, or child not yet being a property owner in their own right, or child already owning and living elsewhere but surviving spouse does not sell up.

Joint Tenants - each person owns 100% of the property. In the example of 2 owners, upon the first death the "survivorship rule" applies, meaning the surviving owner carries on as the sole owner. Neither person has a share that can be left to anyone else in their will. JT is an impossible choice where you wish a child to inherit upon your death,