Transferring half of property to sibling

bitofsquirrel

My Mum and sister were joint owners of the family home, I have lived here for 44 years , when my Mum died 15 years ago the house became the sole property of my sister ( she also lives in the property ). She has left it to me in her will ( she is 10 years older than me ) but with inheritance tax I will have to sell the property to pay it. We want to put half of the house into my name which was my mums wish, but my sister is unwilling to do it because of fear of getting a tax bill.
I have already filled out all the land registry forms but she won't send them in, What I need to know is because I live here and always have done will I or she have to pay any form of tax ? and is it just filling our the land registry forms or do we need to do something else. This is worrying me a lot as no matter what I do ( we have already been to two financial advisors ) she refuses to take their word for it.

RAS

What is the value of the house?

bitofsquirrel

House is £400.000

bitofsquirrel

I think because it is the family home and  I live here there should be no tax but I need to have an assurance

Keep_pedalling

As you both live there, there would be no capital gains tax liability if she transferred 50% to you now. It would also not be classed as a gift with reservation of benefit so it would drop out of her estate if she lives 7 years after making the gift. As it stands her estate only has a £325K IHT exemption (assuming she is not a widow) so her estate is in IHT terretory so for tax purposes this would be a sensible thing to do. 

p00hsticks

bitofsquirrel said:

I think because it is the family home and  I live here there should be no tax but I need to have an assurance

It's not you that faces a potential tax bill as recipient, but potentially your sister when signing over half to you.

Has she also always lived in the property ever since she owned any of it ? If she has then the should be no tax for her to pay, but if she lived elsewhere for any of that time then there is a potential Capital Gains Tax liability. 

elsien

if she won’t accept the assurances of two financial advisers, I’m pretty sure she’s not going to accept the information from random anonymous people off the internet. 

sheramber

p00hsticks said:

bitofsquirrel said:

I think because it is the family home and  I live here there should be no tax but I need to have an assurance

It's not you that faces a potential tax bill as recipient, but potentially your sister when signing over half to you.

Has she also always lived in the property ever since she owned any of it ? If she has then the should be no tax for her to pay, but if she lived elsewhere for any of that time then there is a potential Capital Gains Tax liability. 

When sister dies IHT would be for on her estate over £325k.

As house is currently valued at £400k , if she has no money to pay the IHT due , then the house would be sold to pay it or the money found  from elsewhere. 

RAS

One option might be cheap term insurance to cover the possible IHT bill?

poppystar

You say ‘we’ want to put half the house into your name - who is ‘we’ as it doesn’t sound as if your sister does? 

Is this a tax worry issue or a security worry issue for your sister? Is she scared of risking losing her home if something should happen to you, in the same way you are concerned about having to sell to pay IHT?

poseidon1

bitofsquirrel said:

My Mum and sister were joint owners of the family home, I have lived here for 44 years , when my Mum died 15 years ago the house became the sole property of my sister ( she also lives in the property ). She has left it to me in her will ( she is 10 years older than me ) but with inheritance tax I will have to sell the property to pay it. We want to put half of the house into my name which was my mums wish, but my sister is unwilling to do it because of fear of getting a tax bill.
I have already filled out all the land registry forms but she won't send them in, What I need to know is because I live here and always have done will I or she have to pay any form of tax ? and is it just filling our the land registry forms or do we need to do something else. This is worrying me a lot as no matter what I do ( we have already been to two financial advisors ) she refuses to take their word for it.

You have my sympathies.

Your sister's inability to understand/ accept that transferring a half interest in the property to you does not trigger any CGT liability on her ( due to main residence CGT exemption) is unfortunate, whilst any IHT that might arise if she does not survive 7 years, is wholly your problem which you could address with term assurance.

You maybe interested to know your situation is not unique. A pair of sisters ( the Burdens) took the UK government to court all the way to ECHR maintaining that has cohabiting siblings, they were discriminated against  in not being afforded the same exempt transfer status as spouses and civil partners. 

Their argument failed of course, however  a private members bill was eventually drafted in 2023 entitled  the Inheritance Act 1984 ( Amendment) ( Siblings ) Bill  to  address this co-habiting sibling scenario and presented to parliament - see article below

https://www.taxinsider.co.uk/no-sibling-rivalry

Had the Bill been enacted, your circumstances would have been eligible for the home to pass to you IHT free if your sister predeceased you. However, sadly it did advance beyond a first reading in the House. It seems very unlikely this draft legislation will be revisited.

If your sister has already rejected advice from 2 seperate advisers on this issue, difficult to see where you go from here other than expensive whole of life insurance to provide the necessary cash to pay the tax.

However, were either of the advisers lawyers or tax accountants? If not, there could be a credibility issue here that could be overcome by written assurances supplied to your sister from one or other professional.