IHT on jointly owned flat between father and son

[sjmanchester]

My father was in a fortunate enough position to buy me my first flat, mortgage free, 3 years ago. He listed us both as joint tenants at the time of purchase to be sure if I died it would return to his ownership rather than a future partner. He does not benefit from the property in any way (I don't pay him any rent).

Where do we stand with IHT? As the property would become 100% mine on his death, would IHT be triggered on his share?

The property alone exceeds the 325,000 threshold, in addition to his overall estate.

Also - if I were to sell the property in the coming years and buy somewhere bigger myself, would this then become a CGT issue for him, as the property has gone up fairly substantially since we bought it?

Any advice on our options in terms of ownership going forward would be greatly appreciated.

Many thanks.

[Lee Young]

In the absence of any other documentation if he were to die then half the value of the property would be in his estate for IHT purposes.

If he is not meant to enjoy any value from the property then there should be a declaration of trust stating that - except that would mean if you died he would not get the property back, as the declaration of trust would state that he has no interest in it.

In short, you can't have it both ways. He either has some of the property or he does not. You cant really pick and chose the circumstances where he might have value.

[sjmanchester]

Hi Lee

Thanks for your comments. If he were to put the property 100% in my name, would that trigger a CGT disposal? I understand I can't have it both ways but unsure how to proceed!

Thanks
S

[Lee Young]

If he had a beneficial interest in the property then yes it would. If in fact he was not meant to have ever had a beneficial interest in the property then I would argue that a transfer now does no give rise to a disposal, merely a correction of the paperwork.