IHT legal loophole

Bossyboots

trisha wrote:

Bossyboots wrote:

The simplest way of doing this is for you to give each other notice in writing that you are severing the joint tenancy and from that date forward you hold the property as tenants in common. You then simply send this to the Land Registry.

My neighbour has the house in his name only, so would they still have to write to each other, or should he just write to his wife informing her of the joint tenancy?

There is no joint tenancy in this situation as the house is owned solely by the husband. The wife only has a share in respect of her rights under the matrimonial rules. This family need an urgent review of their financial planning. If he was to die without making a will his wife would only be entitled to a certain amount of his estate, the exact caculation depending on whether they have children. He should at the least write a will ensuring the whole property goes to his wife. There is no IHT between spouses but if the wife can only take a certain amount, the balance will (if I have understood this correctly) be calculated as his estate and IHT could be payable if it goes over the threshold.

trisha

I have just been speaking to my neighbour, they have made a will leaving it to each other, I think, didn't want to pry too much.

He wanted to know how to write to the land registry about changing from sole owner to both being tenants in common.

I think they are less bothered about the IHT, and more bothered about the state taking the value of the house if one of them went into care.

If I read the article correctly he could change to joint tenants in common
and will it to either the children or a discretionary trust with the children as benificieries.

Sorry if I being confusing. I am still trying to understand it myself ;-)

Bossyboots

trisha wrote:

I have just been speaking to my neighbour, they have made a will leaving it to each other, I think, didn't want to pry too much.

He wanted to know how to write to the land registry about changing from sole owner to both being tenants in common.

I think they are less bothered about the IHT, and more bothered about the state taking the value of the house if one of them went into care.

If I read the article correctly he could change to joint tenants in common
and will it to either the children or a discretionary trust with the children as benificieries.

Sorry if I being confusing. I am still trying to understand it myself ;-)

Don't worry it is confusing.

As far as I am aware,the only way your neighbour can do what he is suggesting is to transfer the property Form TR1) from himself to himself and his wife. The form has a check box for how the owners are going to hold the title and he would put as tenants in common. As this is a transfer between husband and wife it shouldn't attract stamp duty but he can check the inland revenue site to make sure.

If a transaction is suspected of being done to thwart care costs, the local authority can take steps to have the original position reinstated. However, in this case, the couple are married and it is easily argued that a natural progression in that marriage is for them to jointly own the matrimonial home. The issues with the local authorities are really where an older person has transferred all or part of their property to a relative for no apparent good reason and in those circumstances the assumption could be made that it was to avoid care costs. In your neighbour's case, although this is a consideration (which they should now keep to themselves), a transfer between spouses is not a cause for concern.

trisha

Thank you for the advice, I have passed it on to my neighbours, I should point out that the wife is terrified of losing her house if anything happens to her husband, it's not just a case of avoiding things, there seem to be an awful lot of issues indirectly involved with the IHT case. Hopefully we will all get it sorted out, but obviously they are going to need a solicitors advice in their case. It's not as simple as ours.

Bossyboots

trisha wrote:

Thank you for the advice, I have passed it on to my neighbours, I should point out that the wife is terrified of losing her house if anything happens to her husband, it's not just a case of avoiding things, there seem to be an awful lot of issues indirectly involved with the IHT case. Hopefully we will all get it sorted out, but obviously they are going to need a solicitors advice in their case. It's not as simple as ours.

I agree, they should get proper legal advice as it is only with the full facts that they can get the information they need and there is quite a bit of sorting out to do to protect the wife's interests.

Glad to have been of help.

Kenny4315

sneekymum wrote:

The people who are really hit by IHT are those who were hoping to inherit that money that the tax man got instead. These are not necessarily middle class or rich and may never get the opportunity to retire early and have some fun with the cash...

Those poor luvs ! Surely £265kish non taxed would be sufficient to have some fun even if its split a few ways :rolleyes: . It'll certainly be enough to buy a couple of beers. :beer: I'd be happy as larry if my old man left me that sort of dough, unforntunately my inheritance is likely to be an allotment full of veg, several pigeon lofts, and some prize winning pigeons (well sometimes prize winning). Does anyone know a good recipe for pigeon pie :think:

The hassle of IHT rest with the person avec the loot, it is he/she who sees there hard earned loot being snatched my messers Blair & Brown, even if it happens they have croaked it. The inheritor never had the cash in the first place, so they can't really complain too much.

trisha

We are going to write to each other, make a copy, then send the original to the Land Registry, then we should get some confirmation of the changes, hopefully.

Bossyboots

Paul_Varjak wrote:

According to many sources, severance of joint tenancy can certainly be achieved when at least one joint owner writes to all other joint owners, severing joint tenancy.

But with the introduction of Land Registration, it would seem sensible register the change with the Land Registry.

Just relying on a note from one joint tenant to other joint tenants, seems fraught with difficulties, not least of which is where to store the severance document to ensure it is not lost.

At least with registration all interested parties can just refer to public documents to determine the status of ownership rather than having to locate long-missing documents after death.

That is absolutely correct, the severance is effected on the sending of a letter to the other party. You don't even need to prove that they received, just that you posted it to an address when they should have received it. Recorded delivery is always advisable though.

This means that one half of a married couple can sever the tenancy if the split up.

I agree that it is best to register it with the Land Registry for extra security.

crisp

Bossyboots wrote:

Don't worry it is confusing.

As far as I am aware,the only way your neighbour can do what he is suggesting is to transfer the property Form TR1) from himself to himself and his wife. The form has a check box for how the owners are going to hold the title and he would put as tenants in common. As this is a transfer between husband and wife it shouldn't attract stamp duty but he can check the inland revenue site to make sure.

If I completed a Form TR1 to transfer a property from me to my mother and me would that attract stamp duty? I was just curious following on from your remarks.

wee-pat

Hi, I have been reading the inheritance tax suggestions in this forum with great interest, the question I would like to ask is there anybody whose parents made mirror wills and nil rate discretionary trust situation and it turn out as their parents wanted or did the tax man win in the end.