IHT Query (Joint Tenants)

Hayley_222

Hi, I wonder if someone can help me because I’ve Googled this to death (no pun intended) and I’m still confused.

My parents own a property as Joint Tenants (worth 700k no mortgage), they are not married. My father also has cash assets to the value of 350-400k. 

If my father died unmarried would my mother:

- Get his share of the house without IHT to pay but have IHT on the cash assets
- or would everything attract IHT even though they are Joint Tenants. 

I know the easiest solution here is for them to marry and I’m hoping that’s what they will decide. 

kempiejon

No the easiest thing to do is stay as they are. There are allowances for inheritance tax and whist alive it is easy to mitigate the estate value. Marriage is not a tax solution. It is a holy estate, a covenant before god. Tax is liable on those members of society as part of the reciprocal agreement. IS there a will?

Keep_pedalling

If your parents are not keen on getting married the other option is forming a civil partnership which still brings in spousal exemption.

As it stands, if he died tomorrow his estate would have an IHT liability on everything over his NRB (£325k) 40% of around £375k (£150k). On top of that his residential NRB will not pass to your mother’s estate which would cost you another £70k of IHT on her death.

Getting married or becoming civil partners is a financial no brainer. 

Splitting the tenancy and leaving his share of the house to you would reduce the amount of IHT in his death by £70k as you could use his RNRB, but that adds potential other issues for your mother and a CGT liability in the future.

Do they have wills and lasting powers of attorney in place?

Keep_pedalling

What sole assets does your mother have?

Hayley_222

Thanks all. Mum has a car and small amount of savings in her name. They were both married before and didn’t see marriage as a necessity a second time around (other than for tax purposes). 

There is a will yes. And lasting powers. 

Keep_pedalling

Hayley_222 said:

Thanks all. Mum has a car and small amount of savings in her name. They were both married before and didn’t see marriage as a necessity a second time around (other than for tax purposes). 

There is a will yes. And lasting powers. 

As long as they still see their long term future together then the ‘tax purpose’ reason is a compelling one as it could save in the region on of £1/4M in tax. If your father’s savings are in ISAs then they could remain in ISAs on his death if they were married or CPs. It also has CGT advantages when assets are transferred between them.

Time to have a sit down with them to discuss this. If they do decide to formalise their partnership they will need to make new wills.

Do either of them have children from a previous marriage?

Hayley_222

No other children. Just myself and my brother. 

Yes, CP or marriage is the most logical thing to do. I think showing them this and the amount of tax that could be due will be the last little bit of incentive they require! 

Keep_pedalling

Hayley_222 said:

No other children. Just myself and my brother. 

Yes, CP or marriage is the most logical thing to do. I think showing them this and the amount of tax that could be due will be the last little bit of incentive they require! 

Good luck!