50% of property - IHT / CGT / Resale issues

go9259

My dad died back in 2017 when he lived mortgage free in a house owned by him and my mum (his wife).

For some reason (asking lawyers for why) they were recommended that on their death 50% of the property should be put in my name (I think via a trust but checking). 

Issue is they had nowhere near the £1m IHT limit (£325k x2 + property).  I'm now thinking that:

1. On the sale I will pay CGT on 50% of the value accretion from 2017 to now
2. How will my mum be able to use full value of the house for a new house given I own 50%? 
3. What will happen when mum dies? She isn't paying 50% of a rental equivalent to me - should that matter? 

We're a bit stumped to be honest. 

Flugelhorn

if your parents were tenants in common and your father left you his half of the house in  trust (I  think they call it an immediate post death trust) it would mean your mum and the trust owned the house. I think from reading here that means you are still considered to be a FTB (if you haven't got a house)- and that there is no CGT.
However he trust usually defines what happens if the property is sold - often the whole lot is taken to another property by the widow / widower

Of course it might be a different type of trust...

poseidon1

go9259 said:

My dad died back in 2017 when he lived mortgage free in a house owned by him and my mum (his wife).

For some reason (asking lawyers for why) they were recommended that on their death 50% of the property should be put in my name (I think via a trust but checking). 

Issue is they had nowhere near the £1m IHT limit (£325k x2 + property).  I'm now thinking that:

1. On the sale I will pay CGT on 50% of the value accretion from 2017 to now
2. How will my mum be able to use full value of the house for a new house given I own 50%? 
3. What will happen when mum dies? She isn't paying 50% of a rental equivalent to me - should that matter? 
D
We're a bit stumped to be honest. 

It's likely a bog standard IPDI trust which grants your mother a life interest in your father's half of the property and on her death the trust passes to you.  No rent is due or required since you do not have  beneficial ownership  in the property until mother dies.

There's a variety of reasons for this type of trust. For example it may have been a precautionary measure to ensure you inherit something from him in the event your mother remarried and chose to disinherit you ( a friend is establishing his will on that basis for that very reason!).

If you are not certain it's an IPDI trust, post redacted wording of the trust clauses and we can confirm.

In meantime google the term, since you may be a Co trustee of the arrangement and you will have certain HMRC compliance duties.

Keep_pedalling

If your father’s will gave your mother the right to remain for life then his will creates an immediate post death interest trust. This would mean the trust is the legal owner of his 50% but your mother is the beneficial owner. You would be classed as the remainderman and do not actually inherit until your mother dies.

What happens if your mother wants to downsize is dependant on the wording of the will, but it would be usual that she would be allowed to use the trust assets to purchase a replacement home. 

If this is the case then there would be no CGT liability on the sale of the property which forms part of your mother’s estate for IHT purposes. 

If half the house is in trust it should have been registered with HMRC some time ago.