Inheritance tax and home ownership

Wobble101

My husband is not named on our home deeds - I am the sole owner, now with no mortgage. In our wills we leave everything to one another. We are in our 60s and he has an illness which is not yet debilitating but will become so. 

Before his diagnosis, a lawyer had suggested that we get his name added to the house deeds (as joint tenants), on the grounds that if I died first it would make his life a little easier (I think in terms of being able to sell more quickly than would be possible otherwise).

But we’d like to be clear about any downsides too, and one I’d wondered about relates to inheritance tax. Put simply, if he dies first are there any pros and cons of him being a joint owner of our home in terms of inheritance tax? We have one child. My husband has few assets while I have a lot as a result of a recent inheritance. 

My basic understanding is that his unused IHT allowances would pass to me in his death - but I’m struggling to understand whether his being joint owner of our home makes a material difference to this. 

Thank you. 

Keep_pedalling

It actually makes no difference because as a married couple everything you inherit from a spouse is covered by spousal exemption. What it will avoid if you die first is the need to apply for probate In order to transfer ownership of your home.

Do you have children?

Wobble101

Thanks @Keep_pedalling. Yes, we have an adult child (at university). 

Keep_pedalling

Wobble101 said:

Thanks @Keep_pedalling. Yes, we have an adult child (at university). 

Are they an executor of your wills? If not worth adding them as a joint or back up executor. If you don’t have LPAs in place, that should also be on your urgent to do list as well and again your child can be one of the attorneys.

Jacklob

At the moment as the husband is not on the deeds he does not qualify for the “residential nil rate band £175000) so if he dies first this cannot be inherited. So upon the second death it can,t be used. I have just put my husband on our deeds for this very reason as otherwise there will be a IHT liability upon second death. This is a benefit if either die first. Unless I misunderstand this.

Wobble101

Returning to this thread after doing more reading about this. The key thing I’ve established is that a spouse does NOT need to have co-owned the relevant home for their nil-rare residence band to pass on death to the surviving spouse. As @Keep_pedalling says above. 

“If the first spouse dies after 5 April 2017, any unused RNRB is transferable unless the estate is large enough for the taper to apply. Again, there's no requirement for the first spouse to have owned a share in a qualifying property or to have passed it to a direct descendant.” https://techzone.aberdeenadviser.com/public/iht-est-plan/residence-nil-rate-band-guide#anchor_8

It’s clearly an area where a lot of people are confused as I’ve seen a number of threads on forums like this where people are convinced that the residence nil-rare band can only be transferred on death to the surviving spouse if the deceased spouse was on the deeds. 

The cost of adding my husband to our deeds is around £600. The benefit relates to ease of his selling the home should I die first (without having to wait for probate). Is there any other pro or con I should be aware of? I know that were he on the deeds as tenants in common we could then explore options like leaving his share to my son, but I’m not convinced this is the right option for us. 

Keep_pedalling

Jacklob said:

At the moment as the husband is not on the deeds he does not qualify for the “residential nil rate band £175000) so if he dies first this cannot be inherited. So upon the second death it can,t be used. I have just put my husband on our deeds for this very reason as otherwise there will be a IHT liability upon second death. This is a benefit if either die first. Unless I misunderstand this.

I missed this comment back in May otherwise I would have made an earlier reply. As Wobble101 has already found it is totally wrong. 

The only way the transferable NRB could be lost in this situation would be if the OP died first,  the surviving spouse a few days later and the OPs will contained a survivorship clause preventing him inheriting if he did not survive her death for more than a specified number of days.