Hi all, any clarification about where I stand would help…
Husband and wife owned a property as tenants in common (with form A restriction) in equal shares.
They had mirror wills, each leaving their “beneficial half share” to their children as “absolute gifts”. With no mention of IPDI or trust.
Upon the death of the wife, her husband continued to live in the property.
The children never moved in, nor was rent paid to the children.
The Title deeds at HM Land Registry were never updated upon the first death.
Now that the Husband has died, how much of the property will HMRC deem as part of his estate for IHT? Just his half share or the whole of the property as he continued to reside there?
Is there any significance in the fact that the Land Registry was never updated upon the first death?
Check CGT position for the children as deemed ownership from Ws date of death. Value when W died is CGT base cost for the children. Note CGT exempt allowance now only £6K and is relevant at date of disposal. Will be £3K from next April.
If Hs estate subject to IHT, should be able to apply 10-15% reduction on his half share of the property.
I was unaware of the reduction in CGT allowance in the following years.
Using the following example, have I understood regarding CGT?
As the children inherited half of the house upon the death of the wife, they will be liable for CGT on the difference between the value at which they inherited it, and what they sell it for now in 2023 (if they decide to sell)
Presumably as 3 children stand as the beneficiaries to the estate, each use their CGT allowance of £6K if the proceeds of the sale is split 3 ways?
If done within the correct time frame, and using the correct clauses, an IOV upon the first death, redirecting the wife’s share to the husband from from the children could avoid GCT and IHT altogether? Could you foresee any caveats to that approach?
As the children inherited half of the house upon the death of the wife, they will be liable for CGT on the difference between the value at which they inherited it, and what they sell it for now in 2023 (if they decide to sell)
Correct
Presumably as 3 children stand as the beneficiaries to the estate, each use their CGT allowance of £6K if the proceeds of the sale is split 3 ways?
Correct. Each child inherited absolutely 1/3rd of mother’s 50% interest at date of mother’s death and on sale each child will have an annual exempt amount.
If done within the correct time frame, and using the correct clauses, an IOV upon the first death, redirecting the wife’s share to the husband from from the children could avoid GCT and IHT altogether? Could you foresee any caveats to that approach?
If children under a DoV redirect their 50% inheritance from mother to father then on death of father 100% of the property falls within his estate for IHT but with a CGT uplift.
Thanks for confirmation Malcolm. Much appreciated.
IOV may be the way forward.
Could you possibly comment upon the first instance described
I am struggling to understand if under these circumstances HMRC would deem the whole property as part of his estate and not just his half share. If only the half share, then is it deemed a ,jointly owned asset and is therefore declared on IHT404?
Is there any significance in the fact that the Land Registry was never updated upon the first death?
Husband and wife owned a property as tenants in common (with form A restriction) in equal shares.
They had mirror wills, each leaving their “beneficial half share” to their children as “absolute gifts”. With no mention of IPDI or trust.
Upon the death of the wife, her husband continued to live in the property.
The children never moved in, nor was rent paid to the children.
The Title deeds at HM Land Registry were never updated upon the first death.
Given the above,
Now that the Husband has died, how much of the property will HMRC deem as part of his estate for IHT? Just his half share or the whole of the property as he continued to reside there and pay bills?
Is there any significance in the fact that the Land Registry was never updated upon the first death?
1 Half share but 10% discount as no longer related property.
Cannot see any reason why H’s occupation as joint owner with the children is of any relevance to him. They might make a transfer of value by omission to exercise a right to seek an occupation rent under s13 TLATA 1996 but it would be a PET of uncertain value given the ultimate requirement for court approval. See IHTM14810. Some like me tend to see transfers of value under the bed due to our confident expectation that HMRC these days is completely devoid of common sense.
2 No, but the executors of H need to sort out the registration of the new owners as proprietors. If you apply soon HMLR may get round to it before 2024
To fall within his estate for IHT the husband’s interest in the property would need to be either an absolute interest and/or a qualifying interest (IHTA 1984 s49). He clearly owned 50% absolutely but does not appear to have a qualifying interest in possession re the 50% left by his wife to the children. Section 12 TLATA 1996 gives husband rights of occupation based on his own 50% ownership.
Not in my view. Title needs to now be updated at LR.