IHT Planning with family home as primary asset

[taxtips]

Hello,

I was hoping to get some initial guidance with an IHT planning query I have.

Essentially my parents are in a position where they would like to create a will/trust that would allow them to pass on their house (aprox £1.3million) to myself and my 3 siblings paying the minimal in IHT costs.

We are currently in a position where we will be selling our current family home and buying another one so thought it would be a good time to put a trust in place before that happens?

I thought best to just sum up below what our primary objectives are with respect to any solution pursued:


1) The main asset of the trust would be the family home which would have a value of between 800-900k based on what we have seen on the market.

2) The cash value remainder from the sale of the current house and after procuring the new house and associated costs would be in the region of 225-275k. From this my parents would like to gift my sister around 50k as a contribution towards the equity of her own property.

3) That would now leave 175-225k in cash of which a proportion (125-175k) ideally would be used to contribute towards a buy to let property within London with myself and possibly other siblings getting a mortgage and going in as partners with my parents if possible.

Finally after reading some articles I think that the formation of a trust/tenants in common agreement would mitigate the possibility of my parents house/assets being used by a Local Council to pay towards care fees? If not this potential factor would need to be addressed with any solution proposed.

I think that pretty much includes all of our requirements from the proposed solution and would be most grateful for receiving any guidance possible and of course pursuing the solution with the relevant professional.

Thanks very much

[Lee Young]

In the initial paragraph of your posting you state "we will be selling our family home". Is this the parents or the children, or indeed both?

Who owns the home that is going to be put in trust? If the value exceeds the nil rate band (irrespective pretty much of what type of trust is used) there would be an IHT charge if it exceeds the available nil rate bands. If a settlor(s) is/are going to live in the property then no IHT saving because of the gift with reservation of benefit rules unless market rent is being paid. Or the s102B let out is available?

Noone can guarantee a liofetime trust will sork to avoid care fees - will trusts work as they are done to the person claiming the benefit; lifetime trusts generally wont work becaue they are done by the person claiming the benefits. However the longer the time between the gift and the claim for benefits the better.

[taxtips]

The family home is owned by our parents who are tenants in common with an equal share.

Sure after reading whatever I can find online would the following scenario be a possibility?

If the next home bought by my parents was once again a tenants in common agreement however say if the house was worth 900k could it be possible for my parents to own around 38% equity each and the remaining 24% equity share being gifted to me?

Would I be correct in thinking that for this to not be a gift with reservation and thus free from IHT after a 7 year period I should contribute 24% towards the running costs of the house i.e utility bills etc and also I must remain living there for a minimum of 7 years?

Also would I be correct in saying that as the property is owned by a tenants in common arrangement the value of the property share left for inheritance be reduced by 10-15% to reflect possibility of a unsellable asset?

Would this be the only real option to minimise the IHT liability when the main asset is the family home or could the property be bought under a newly created business with my parents as shareholders who may then pass their shares in the business and subsequent property accrued free of IHT?

Many thanks for your comments

[riccardob]

Hello,


Finally after reading some articles I think that the formation of a trust/tenants in common agreement would mitigate the possibility of my parents house/assets being used by a Local Council to pay towards care fees? If not this potential factor would need to be addressed with any solution proposed.


Thanks very much

Surely with that amount of money your parents would rather not be looked after by any council?
also is it fair on the taxpayer that someone with that amount of money has their care fees paid by the council?

I am against IHT but this takes the biscuit.

[taxtips]

It is unlikely that our parents would ever be looked after by a council instead of their children. What this or whatever they wish to do with their estate has to do with you exactly I dont know. I have been asked to try and seek the advice of the relevant experts and to pay and pursue a solution for the requirements given to me and your opinion doesn't appear to be one of them.

In short I would appreciate only those who have any input with respect to the original topic post on the thread as im sure there are countless other threads/websites for joe public to discuss whats fair/unfair on the taxpayers.

Hello,


Finally after reading some articles I think that the formation of a trust/tenants in common agreement would mitigate the possibility of my parents house/assets being used by a Local Council to pay towards care fees? If not this potential factor would need to be addressed with any solution proposed.


Thanks very much

Surely with that amount of money your parents would rather not be looked after by any council?
also is it fair on the taxpayer that someone with that amount of money has their care fees paid by the council?

I am against IHT but this takes the biscuit.

[riccardob]

Your first post clearly referred to the avoiding a council from reclaiming care fees. The fact that no other tax expert has replied to your latest query says it all really.

[taxtips]

My first post listed requirements given to me. Again what this has to do with you and your need for posting your ramblings on a specific thread is beyond me.

And whether any other tax expert has commented or not is again none of your concern. I have contacted a number of tax experts who have given me quotes and are happy to try and fulfil the requirements presented. I am here to see if the advice given is the same as what has been received already, a common practice when seeking a solution to a given scenario but I suppose if everyone was too busy sticking there nose in other peoples business like yourself nothing would be achieved.