W inherited the matrimonial home by survivorship over 7 years ago. W has now died intestate leaving 5 children, two of whom live at the home along with their wives and children, and have done so for several years. The other three children live elsewhere. Although W died about a year ago, it has only now been agreed by the two occupying children that the property needs to be sold to pay IHT and to give all the children their equal entitlement.
On the basis that the occupying children have lived in the matrimonial home as their own, in fact one of the kids obtained a mortgage in his name for the benefit of mum, can a discount of say 10% be applied to the probate value of the property on the basis that vacant possession was not immediately available at the time of death?
Where persons share the deceased’s home as licensees at will, i.e. not as tenants or paying lodgers, HMRC has generally allowed a deduction to roughly equate to the costs of obtaining possession against such occupiers, rather than a discount. This has been about £5,000, but it may be possible to negotiate a higher value, mindful that the cost of going to court keeps escalating. As a single claim may be made for possession against all occupiers, it is unlikely HMRC would allow a double allowance as there are 2 children and their families involved.
The fact that one of the children was able to obtain a mortgage in their own name might be relevant, although unless they were on the legal title it might have little impact. I wonder if the deceased was acting as guarantor and merely pledged the property as security. In which case, this would be unlikely to (further) affect the value of the property for IHT, although consideration should be given to whether the lender’s right to claim under the guarantee should be reflected as a liability of the estate?