Postby maths » Thu Dec 19, 2019 6:10 pm
If no gift with reservation arose on your mother's part on her death re the 50% she gifted to you her estate would aggregate to 540k.
With her NRB 325k plus two lots of RNRB (ie 350k post 5.5.20) then no IHT arises.
With a gift with reservation estate becomes 765k. NRB plus two RNRBs gives 675k. IHT at 40% on 90k ie 36k.
As mother has moved out of property in which you now own 50% then in principle on date she moved out she ceased to have reserved any benefit in the 50% she gave to you.
However, although she no longer lives there she receives 100% of the rental income which includes the rent on the 50% you own. Presumably this is the bit to which AG is referring.
If therefore you receive 50% of there rents and mother receives 50% she no longer. has reserved any benefit on the 50% she gave to you; you will then of course be subject to income tax on your 50% rents.
50% of rent of 22,800 is 11,400. Income tax at 20%/40%/45% is 2,280/4,560/5,130 per tax year.
Bottom line seems to be :
(a) that if you leave all as currently then on mother's death IHT 36K.
(b) if you take 50% of rents then no IHT on mother's death (ie save 36k) but income tax charge increases annually as above; thus if mother died ion next 6 years your incearswed income tax charge would be 13,680/27,360/30,780.
Re above, (a) worse than (b) suggesting you the 50% of rents.
The above is intended as a guide and to provide info' to think about. Obviously, as time passes the property would increase in value at a greater rate than the NRB and RNRB increases if any ie IHT charge may increase quite significantly which might then suggest removing reservation by taking 50% of the rents.
The reservation of benefit provisions are complex and other contributors, in particular AG, may disagree with my analysis.