Unmarried couple owning 2 properties with 2 children

Biddybiddie

Am I correct in believing that if one property is 100% owned by one individual in an unmarried couple and the second property 100% under the other individual on the Deeds at Land Registry instead of both being 50% owners of both properties this will be beneficial for IHT on death of either when there are 2 children?

Will this enable each person to take advantage of the residence nil rate band up to £500K at each person's death provided the relevant property is left to the children in a Will as beneficiaries?

Is there any tax implication if the properties are simply transferred from one to the other legally?
Or is the transfer of the 50% to the other considered by HMRC as a gift and this would have to be done 7 years before death?

FlorayG

I think partly this is going to depend on who lives where. I'm assuming as they are a 'couple' they live together and have one joint address for correspondence?
Unless each one lives in their own house ( in which case they are not considered a couple they are two single people) I don't think it's simple

Keep_pedalling

How old are your children? The only way you can get the full £500k in exemption is to leave £500k or more including a home worth at least £175k, but there are a couple of problems with this. The first being if your children are minors they can’t own property so it would either have to go in to trust or be sold and the proceeds placed in trust. The first option would lose them their first time buyer status.

Assuming you are living in one of these houses and the other is rented out only the estate of the person owning the home could claim the RNRB if the other died first they would only have the £325k NRB exemption. There is also an issue if the two properties are of very different values as IHT could be due even if your joint net worth is below £1M

If you split the ownership of each property 50/50 there would likely to be a CGT liability on the owner of the second property.

In your situation I can see no advantage in not becoming civil partners or getting married.

Biddybiddie

FlorayG said:

I think partly this is going to depend on who lives where. I'm assuming as they are a 'couple' they live together and have one joint address for correspondence?
Unless each one lives in their own house ( in which case they are not considered a couple they are two single people) I don't think it's simple

Thank you. Yes it is far from simple!

Biddybiddie

Keep_pedalling said:

How old are your children? The only way you can get the full £500k in exemption is to leave £500k or more including a home worth at least £175k, but there are a couple of problems with this. The first being if your children are minors they can’t own property so it would either have to go in to trust or be sold and the proceeds placed in trust. The first option would lose them their first time buyer status.

Assuming you are living in one of these houses and the other is rented out only the estate of the person owning the home could claim the RNRB if the other died first they would only have the £325k NRB exemption. There is also an issue if the two properties are of very different values as IHT could be due even if your joint net worth is below £1M

If you split the ownership of each property 50/50 there would likely to be a CGT liability on the owner of the second property.

In your situation I can see no advantage in not becoming civil partners or getting married.

Thank you. The children are now grown up so no issues with inheriting.
The houses are of broadly similar value £450k one lived in 8 months the second no longer rented but used for lengthy holidays as now retired.
Would prefer not to marry but may have to consider civil partnership now it is available.
Just thought one house each and when each person dies that property would be left to children 50% each share and claim the RNIB up to 500K on that. Then repeat on second person's demise?

poseidon1

Biddybiddie said:

Keep_pedalling said:

How old are your children? The only way you can get the full £500k in exemption is to leave £500k or more including a home worth at least £175k, but there are a couple of problems with this. The first being if your children are minors they can’t own property so it would either have to go in to trust or be sold and the proceeds placed in trust. The first option would lose them their first time buyer status.

Assuming you are living in one of these houses and the other is rented out only the estate of the person owning the home could claim the RNRB if the other died first they would only have the £325k NRB exemption. There is also an issue if the two properties are of very different values as IHT could be due even if your joint net worth is below £1M

If you split the ownership of each property 50/50 there would likely to be a CGT liability on the owner of the second property.

In your situation I can see no advantage in not becoming civil partners or getting married.

Thank you. The children are now grown up so no issues with inheriting.
The houses are of broadly similar value £450k one lived in 8 months the second no longer rented but used for lengthy holidays as now retired.
Would prefer not to marry but may have to consider civil partnership now it is available.
Just thought one house each and when each person dies that property would be left to children 50% each share and claim the RNIB up to 500K on that. Then repeat on second person's demise?

Civil partnership solves all your issues, but more importantly simplifies future dealings with your respective estates as far as your children are concerned, as well as permitting more tax efficient wills going forward. 

 Successive governments have bent over backwards to reward traditional nuclear families via different aspects of the tax system ( especially IHT).  Cannot understand why entering into this formal partnership to simplify the life of all concerned, is so hard to contemplate

Keep_pedalling

Biddybiddie said:

Keep_pedalling said:

How old are your children? The only way you can get the full £500k in exemption is to leave £500k or more including a home worth at least £175k, but there are a couple of problems with this. The first being if your children are minors they can’t own property so it would either have to go in to trust or be sold and the proceeds placed in trust. The first option would lose them their first time buyer status.

Assuming you are living in one of these houses and the other is rented out only the estate of the person owning the home could claim the RNRB if the other died first they would only have the £325k NRB exemption. There is also an issue if the two properties are of very different values as IHT could be due even if your joint net worth is below £1M

If you split the ownership of each property 50/50 there would likely to be a CGT liability on the owner of the second property.

In your situation I can see no advantage in not becoming civil partners or getting married.

Thank you. The children are now grown up so no issues with inheriting.
The houses are of broadly similar value £450k one lived in 8 months the second no longer rented but used for lengthy holidays as now retired.
Would prefer not to marry but may have to consider civil partnership now it is available.
Just thought one house each and when each person dies that property would be left to children 50% each share and claim the RNIB up to 500K on that. Then repeat on second person's demise?

The RNRB can only be claimed on your primary residence so if the owner of the holiday cottage died tomorrow the RNRB is not going to be claimable. Presumably you have other assets that take your closer to or into IHT territory so I really think it would be foolish not to form a civil partnership ASAP.