IHT on Joint Tenancy Asset

(Tobias Gleed-Owen) #1

Deceased (D) originally held her property in sole name and wrote a Will leaving her interest in the property to her daughter (A) free of IHT.

D later transferred the property into the the joint names of herself and A (with whom she co-occupied the property) as joint tenants. Shortly afterwards, she executed a codicil re-publishing the Will (but not making any change to the legacy of the property).

Following D’s death, A would receive D’s share of the property by survivorship and the legacy in the Will would lapse. However, there is a substantial IHT liability. I believe A would ordinarily be liable for this IHT (s.211 IHTA). Is it possible for the wording of the legacy to change this conclusion so that the PRs will be liable for IHT as an admin expense for the free estate?

I would have thought not given that the legacy lapsed, but s.211(2) provides that the normal rule is subject to contrary intention in the Will.

Tobias Gleed-Owen
Hewitsons LLP

(EDIT - my original question contained a typo referring to individuals A and B. In fact, the recipient of the lifetime gift & the legacy and the surviving joint tenant are all the same person)

(Paul Saunders) #2

It is not unusual to include in a will that the estate is liable for all inheritance tax payable upon the death of the testator. To the extent IHT relates to a failed PET, etc., it will be treated as a general legacy to the beneficiary in question.

Although this may be accomplished by just “tweaking” the usual wording on the payment of debts, testamentary expenses, etc., I suggest it might better be included as a specific clause so as to avoid possible confusion at a later date as to whether, or not, it was intentional.

Paul Saunders

(Tobias Gleed-Owen) #3

Thanks Paul - I realise my original post contained a typo which I have now amended. The recipient of the lifetime gift & the legacy and the surviving joint tenant are all the same person (A).

I agree about the normal provisions for IHT on the lifetime gift to A. I am more interested in tax on the transfer of the remaining half of the property to A as surviving joint tenant.

I would be interested in members’ views about whether the inclusion of a simple tax-free legacy of the property in the Will would be sufficient to conclude that tax on the transfer to A by survorship should be paid by the PRs rather than by A?

Tobias Gleed-Owen
Hewitsons LLP

(Nigel Scase) #4

Unless I am missing something obvious could D & A not simply sever the joint tenancy so D’s share passes under the will and goes to A via the tax free legacy?

Nigel Scase
Greene & Greene

(Tobias Gleed-Owen) #5

D has already died (sorry if that was not clear above). Severance could be done post-death for IHT purposes by DoV so that A does not bear the tax on the legacy, but that would require those residuary beneficiaries who will now bear the tax to consent. I am interested to know whether members think the Will could be interpreted as not requiring A to bear the tax without the need for a DoV?

Tobias Gleed-Owen
Hewitsons LLP

(Alex Stanier) #6

I think s.211(1) and (2) are only relevant when an asset vests in the PRs. So the question is whether the republication of the Will was a unilateral act of severance, causing the vesting of the asset in the PRs. I think it very possibly might be (someone once told me there are 6 ways to sever a JT) but to be safe I would want Counsel’s opinion or Court directions.

Alex Stanier
Allan Janes LLP