Gifting Half the house and IHT

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81875024#Comment_81875024

So both £175K residential allowances can be used, even though she is only leaving half a house to someone who already owns the other half?

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81875497#Comment_81875497

The concern was whether the original gift of the half a house was GWR.

If it is, and the Estate including the full value of the house is <£800k as the OP indicated, then two NRB would apply to the Estate.

If the half a house that was gifted is not GWR, then the Estate value is less. Even if only one residential allowance was available, the potential IHT threshold would be £325k + £325K + £175k = £825k. Still an IHT allowance greater than the value of the Estate.

As to whether the second residential allowance is available or not, I cannot be certain. I would expect it would be, but it would take someone some time to research. I am not going to do that as the question is academic in this case.

mybestattempt

https://forums.moneysavingexpert.com/discussion/comment/81875497#Comment_81875497

The RNRB is applied to an estate and is available where the deceased had a share in a residential property (along with any unused RNRB from a predeceased spouse):

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46021

I would add that my view is that because the late mother continued to pay more the 50% of the household outgoings after gifting 50% of the property to the OP until her death, then the gift would not be GWR.

F2KSel

Wow! that has helped to clear things up a bit.

I did hear a few things on the radio over the years about IHT and if all the allowences are used they could add up to 1million pounds, but I could never work out how they got those figures.

Thanks for all the help I'm a little more hopefull now.

Albermarle

The RNRB is applied to an estate and is available where the deceased had a share in a residential property (along with any unused RNRB from a predeceased spouse):

So if you give away half your house and keep half of it, and both you and the receiver of the gift live there, (as per the OP) and the giver lives for 7 years.

Then the estate of the giver will be worth less by the value of half the property, and the estate will still get two RNRBs , assuming that half of the house was left to offspring.

Sounds like a good way to reduce IHT !

F2KSel

Just an update, I had some info from the co-op who are preparing the probate.

This is what they have said.

"Regarding the taxable threshold, in usual circumstances, we could use all exemptions, so with the nil rate band and transferable nil rate band, this allows £650,000 and if we could use the residence nil rate band and the transferable residence nil rate band (as you are a direct descendent), this allows us another £350,000. However, as you and your mother owned the property as tenants in common and you were gifted your share of the property, we cannot use the extra transferable residence nil rate band allowance.

 As you held the property as tenants in common and not joint tenants, your mother’s share is the one included in the estate at an estimate of £165,000. So, we can use the nil rate band, transferable nil rate band and only one residence nil rate band to cover your mother’s share of the property.

 For your share, we must record this as a gift with reservation of benefit, which is recorded on the same inheritance tax forms that are submitted to the court. We must wait for confirmed values of the property and institutions to complete this".