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Where Taxpayers and Advisers Meet

Is my ex-wife entitled to my inheritance?

golden
Posts:2
Joined:Wed Aug 06, 2008 3:04 pm

Postby golden » Mon Aug 04, 2003 1:34 am

I am 50 years old and have lived in my mother's flat for the last 2 and a half years. She is 75 and in the early but rapid stages of Alzheimers. I have been going through seperation and divorce during this time which will be absolute shortly.
The flat was purchased in my parents names under the 'Right to Buy' scheme and I gave my parents the money to do so, £15,500. When my father died 4 years ago the flat was registered solely in my mother's name. My mother has willed the flat to me as sole benificiary. If I do inherit the flat, on my mother's death or it has to be sold in order to pay for my mothers nursing costs and accomodation (being her only asset it is likely to be 'taken' by the local borough to finance this), or the flat is sold and my mother and I move to another area, what would the Inheritance Tax or Capital Gains Tax situation be for me or my mother or wife (divorcing)if the flat is considered in the financial settlement in the divorce. My ex-wife to be has insisted that as I paid for this she wants the proceeds from the sale of the flat to be a part of the settlement which would mean making both my mother and I homeless!

Nigel Lord
Posts:518
Joined:Wed Aug 06, 2008 2:18 pm

Postby Nigel Lord » Mon Aug 04, 2003 1:49 am

Golden

I am sorry about the difficult circumstances in which you find yourself. (I have personal experience of what a devastating disease Alzheimers can be).

I assume from your comments that your mother is the legal owner of the flat. I also assume that the £15,500 used for its purchase was an outright gift. If so, you wife should have no interest in the flat and it should not be taken into consideration in any divorce settlement.

As your mother has a terminal condition, you may wish to take steps to prevent the property moving directly to you in the event of her death. This could be easily arranging using a family trust. You would be able to control the property and benefit from it without taking ownership.

There would only be an Inheritance Tax (IHT) issue if your mother's estate was valued at more than £255,000 (including the value of gifts transferred in the previous 7 years). I assume that this is not the case?

If your mother owns the flat and sells it, there is no CGT problem, as she would be entitled to 100% Principal Private Residence (PPR) Relief. This position could continue even under a trust arrangement.

The property is vulnerable to the local authority. It is important that you should establish your entitlement to reside there to mitigate this problem.

Most of your potential tax problems could be easily resolved. I suggest that you take early professional advice.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk

wealthguard
Posts:4
Joined:Wed Aug 06, 2008 3:04 pm

Postby wealthguard » Mon Aug 04, 2003 2:32 am

There is another point to consider. If the £15,500 you contributed towards the purchase of the property was not an outright gift but instead your intention was to enjoy joint ownership rights with your parents, you will have retained a 'beneficial interest'in the property, irrespective of whether or not your name appears on the Title Deeds. This is a common situation with right to buy properties.

If you can establish your beneficial interest - by proving the amount you contributed towards the purchase, your financial share or interest in the property should not be taken into account when means testing for long-term care. If the £15,500 represented the full purchase price, the whole property could well be exempt from means testing.

Sadly, given your mother's illness, any planning at this stage to protect assets from care fees means testing is likely to fail. The Local Authority is extremely likely to regard such planning as 'deliberate deprivation' of assets in order to avoid paying care fees and could take steps to claw back any assets given away or placed in trust arrangements - regardless of how much time has elapsed before entry into care. Depending upon the current severity of your mother's condition, she may not be deemed capable of putting any arrangements in place that require her consent - although some people with Alzheimer's Disease do have periods of lucidity during which they do have the capacity to make legal decisions etc.

I suggest you seek further advice on this matter.

Rod Fisher
Wealthguard - 01924 - 490555

Nigel Lord
Posts:518
Joined:Wed Aug 06, 2008 2:18 pm

Postby Nigel Lord » Mon Aug 04, 2003 3:19 am

Golden

Rod's advice is valid regarding local authority care, but be wary about establishing a position that allows your wife access to additional assets.

Furthermore, if you established that you were the benficial owner of part or all of the property, you would be potentially exposed to capital gains tax on most of any gain following a sale.

Rod - could I have your e-mail address as I may be interested in referring cases to you.

Nigel@lordassociates.co.uk


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