Inheritance tax worry
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getmore4less wrote: »it will need paying on first death.
Of course it will. Sorry - not all there today.0 -
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It is also worth pointing out that it is the sisters estate that pays the tax, not your friend.
If the sister has other assets (any savings for example), these can be used to settle the IHT bill on the estate instead of having to take equity out of the house.
Otherwise, equity release does sound like the best option (and is designed for situations exactly like this).0 -
Surely if they both own it (either joint or in common can't remember which) then it doesn't form part of the estate & just transfers to the other party. So first thing would be to find out how the property is owned.
For clarity, when my ex-H died, he was living in the house. His family obviously got all his bank accounts, death in service etc but, because of the way we still owned it, I got all the house (although my solicitor almost gave it ALL away)
ETA they could change the way it is owned with land registry to avoid problems! Would you believe that I read a couple of days ago on another thread on here that this change can actually be done without the other party knowing about it - now that is really a bad thing!0 -
Surely if they both own it (either joint or in common can't remember which) then it doesn't form part of the estate & just transfers to the other party. So first thing would be to find out how the property is owned.
For clarity, when my ex-H died, he was living in the house. His family obviously got all his bank accounts, death in service etc but, because of the way we still owned it, I got all the house (although my solicitor almost gave it ALL away)
ETA they could change the way it is owned with land registry to avoid problems!
It may not form part of the distributable estate if joint tenants but will still form part of the taxable estate.0 -
Can I assume from that then that it only doesn't form part of the estate if they are a married couple? Or have I misunderstood?0
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The value of each sister's share would appear to be £390,000.
It would appear that each sister has only a single tax allowance.
If either sister were bequeathing the property to a direct descendant, then see https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band
However, it would appear to be the case that these ladies would choose to leave their estates to each other.
Even if the property is owned as joint tenants, although the property would pass outside any will, half the value still falls into the deceased's estate.0 -
Can I assume from that then that it only doesn't form part of the estate if they are a married couple? Or have I misunderstood?
it always forms part of the estate,
There are exemptions that kick in for assets that pass to a spouse/civil partner either by survivorship(joint tenants) or through will/intestacy.0 -
Thank you everyone for some very good answers. There is a lot to think about. But I have so much I can show to her now, and there obviously ARE options. (I know nothing at all about this as I've never encountered IHT in any personal dealings.)
But I was thinking today re: the Land Registry option....that surely what might be simple is the sister who is ill signs over her half now to the other sister, while she is still able to do so? As far as I know, she has no other family to leave her estate to, and is in the same position re: cash in the bank or savings (2 pensions only as income and some very modest savings.)
The only real item in her will would be half of that house and land.
I'm sorry I don't know fine details of their joint ownership, but only know it's half-and -half ownership. The house was bought for cash in 2014 after the 2 sisters sold their mother's house after her death. I presume IHT was paid on that too. But what was left was enough for them to buy their current home and land. (It's the land which pushed the price up so high. The bungalow is probably worth about 280-350,000 on its own.)
Well thank you for all your thoughtful responses. They are very helpful indeed.0 -
[FONT=Tahoma, sans-serif]If the land is worth £430,000 on its own, could that not be sold off? It seems a valuable plot of land, does it have development potential then?[/FONT]0
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