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Where Taxpayers and Advisers Meet

Lifetime rent - does the property remain as part of a couploe

Joined:Sun Oct 29, 2017 10:56 pm
Lifetime rent - does the property remain as part of a couploe

Postby Shouldknowmore » Mon May 17, 2021 2:07 pm


I'm looking to get a little help with lifetime rent as it has been raised by a solicitor dealing with my inlaws' wills.

My mother in law and father in law have a house (£200k) and cash (£250k) and are both in their late 70s. They are revising their wills and looking at giving power of attorney to their two adult children.

My father in law can't be trusted with managing cash and he knows this. His wife currently had all the assets in her name but their income is his pension. If he dies first she will live off the assets.

My question is over inheritance tax and the lifetime rent suggested by my mother in laws solicitor. The solicitor suggested that if she was to die first that the £250k should be passed to her two adult children to prevent it being frittered away. Her husband would remain in the property with a lifetime rent with the property passing again to the two daughters on his death. He would not pay rent to live there. This suggestion is to prevent their father from selling the property and wasting the money, ultimately being penniless and having nowhere to live. The solicitor couldn't give any guidance on IHT but suggested we find advice.

I understand a little bit about IHT but wanted to confirm about IHT on my mother in laws death. Is her estate £450k with IHT to pay as it is being passed to her daughters or is it £250k (the cash going to her daughters) with the property forming part of my father in laws estate which will then transfer free of IHT to his daughters on his death?
ie if we did as the solicitor suggested would their be no IHT to pay?
Or is it not that simple? I understand about potentially exempt transfers but we are going down the morbid route of assuming that my father in law will die with seven years of my mother in law.

Any guidance will be much appreciated.

Joined:Fri May 16, 2014 3:47 pm

Re: Lifetime rent - does the property remain as part of a couploe

Postby AGoodman » Tue May 18, 2021 11:29 pm

Is this Scotland? (the mention of liferent).

I'm a little shocked that your m-in-law has a solicitor preparing wills who doesn't know the basics of inheritance tax. Maybe it is a Scottish thing but I have never heard of that before. The two are closely intertwined.

Essentially, it should not be a problem. A spouse granted a liferent is treated as receiving the actual property for inheritance tax so the house is spouse exempt from tax if your mother in law should die first. As you suggest, it would then be in f-in-law's estate on his death.

This should not be a taxable estate provided your mother-in-law doesn't die first and pass more than £325k directly to the children. There is also the residential nil rate band so they should (in theory, were it necessary) be able to pass a total of £650k plus the value of the property (up to £350k) to the children between them.

Joined:Sun Oct 29, 2017 10:56 pm

Re: Lifetime rent - does the property remain as part of a couploe

Postby Shouldknowmore » Fri May 21, 2021 12:44 pm

Thank you very much for the reply.

Yes, it is Scotland.

That's been a great help.

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