Inherited property + remaining parent with life interest

[Frank'O']

Since mothers death, the house is now owned 50% by father and 25% each by my wife and her sister. My wife and I live with her father as she is now his registered carer. We have also retained our own house which is still registered as our main residence. What are the tax implications when the inherited house is sold. Also, sister says an accountant friend has advised that father should be paying rent to live in what was his own home otherwise tax liabilities can be a problem in the future. Is this correct as it seems a somewhat unfair arrangement?

[Matt E]

This year, Mr G Brown introduced a number of rules to prevent people avoiding Inheritance tax on "gifts with reservation", including family properties - if your father had given his property to you but still lived in it on his own, then yes, the proposal is that a (deemed or actual) rent would be due on it - even for property transfers that happened before the legislation was introduced! But from what you have said, I don't see that as being a problem - he still owns the property - no gift with reservation has occurred. Even if he did, as you live with him, there is an exemption for you.

In fact, your personal circumstances mean that it might be a good idea to consider options to minimise the potential IHT - this assumes that the total parental estate, including property, is a substantial amount.

Also, consider what you should do with your current property if the current situation is expected to last for a number of years.

Seek out specialist advice.

Matt