Hi all,
I hope you can help me. Brief summary of factual position:
My father died in 2002, without a will, when my sibling and I were minors. As such, the intestacy rules kicked in. My late father’s estate consisted of only the family home, which is still the family home and only asset of my mother’s, today.
My mother was entitled to personal chattels, an outright legacy of £125,000, and a life interest in half the remainder of the estate. The spouse exemption for IHT meant that none of my father’s IHT Nil Rate Band was used.
My sibling and I were entitled to the other half of the remainder of the estate, held on statutory trust, until we were adults. This used circa 20% of my father’s IHT nil rate band at the time.
Owing to the life interest and the statutory trust, a form A restriction was placed on the title of the family home preventing it from being sold until the restriction could be removed.
Fast forward to present day and my mother has only recently become fully aware of how the intestacy rules worked when my father died. Now that my sibling and I are over 18, I understand the statutory trust has come to an end and we are now directly entitled to an interest in the property. As such, we believe that we may be liable to additional SDLT, were we to purchase a property ourselves. Of course, this wasn’t a consideration in 2002 and the intestacy rules were likely viewed as being tax efficient.
Having sought advice on IHT and CGT, we are confident that were we to gift our interest in the family home to our mother, we would no longer have an interest in a property and would not be liable to additional SDLT on any property purchases.
My mother’s IHT Nil Rate band would far exceed the value of her only asset - the family home - when combined with my father’s unused Nil Rate band, and Residence Nil Rate band.
Owing to Private Residence Relief, my sibling and I would not be liable to CGT on the gifting of our interests to our mother (cognisant that such a transfer would have to use a disposal value of MV).
So, my question is, how do we best ‘end’ the life interest my mother has in the property and gift/sign away mine and my sibling’s interest in the property, from the statutory trust, to our mother?
I suspect that, strictly, a deed would be the belt and braces approach but I am wondering whether a signed and witnessed letter from each party, detailing their current interests, confirming their understanding of the position, and confirming they are not doing this under duress would be sufficient given the relatively simple factual position of there only being one asset.
Once that was done, my mother could make an application in form RX3 with a statement of truth in form ST5, that would remove the form A restriction.
(Of course, we know there are other ‘worst case scenario’ considerations to this, such as my mother leaving her whole estate to the cat’s home or something!).
Any thoughts/advice would be greatly appreciated. Please forgive any loose terminology - I am by no means a trust expert!
Thanks in advance,
R