Property question

[frank mills]

Hi

My parents own their property as tenants in common (50% each) and it has a value of around £800k.

They each want to leave their half of the property to me and the survivor to be able to remain in the property after the first death.

If they each outright gift to me then my understanding IHT will be payable by me on the first and second death (assuming nothing else in estate) and once I inherit my father's half my mother can continue to live there without having to pay me a market rent.

Please can somebody advise me as to whether my uderstanding is correct and if it, would this also apply if the property was left in some kind of interest in possession trust which would protect my mother's life interest.

I'm a little confused by this, all comments/help/advice greatly appreciated.

thanks

Frank

[Lee Young]

If half the property is left to you on the first death then there will be an IHT bill (current rates and your figures) of 400,000-325,000 x 40% = £30,000.

On second death the same situation will apply, though a reduction will be allowed for joint ownership of the property at that point.

The survivor will be able to continue in occupation becasue he or she owns thier own half of the property, but at the same time you could move in as you would then own half. Maybe not ideal for the survivor?

Preferable I would say to give the survivor a life interest on the death of the first, meaning no IHT on first death and then on the survivor's death both the estate and trust pass the property to you. From an IHT point of view, and ignoring the joint ownership discount, the tax would be the same but only paid on second death. Moreover if the nil rate band rises between the tweo deaths, the second estate will benefit from 2 x that increased nil rate band, which might result in an IHT saving.