Inheritance Tax Question

[Guest pioneer31]

Your parents sell their house. One of your parents then banks the money. You come along and put a small amount towards the new house (take out a small loan?) The house is then co-owned by say, you and your mum. You live there with her.

When she dies, (and suppose the estate is worth >285k) you can’t be liable for IT, because you co-own the house with her.

Is this correct?

[crash2006]

Your parents sell their house. One of your parents then banks the money. You come along and put a small amount towards the new house (take out a small loan?) The house is then co-owned by say, you and your mum. You live there with her.

When she dies, (and suppose the estate is worth >285k) you can’t be liable for IT, because you co-own the house with her.

Is this correct?

From what i gathered, its only the percent of you mothers part thats due for tax if its over the iht limit.

Edited July 23, 2006 by crash2006

[Guest pioneer31]

From what i gathered, its only the percent of you mothers part thats due for tax if its over the iht limit.

are you sure?

In the case of my mother and father owning the house, then my father passes the lot to my mother and no IHT is paid by her, so I assumed that co-owning with my mother would come under the same rules?

[numpty]

If you hold it as joint tenants then the property falls outside your mothers estate on death and passes to you by survivorship, HOWEVER the value of her share in the house will form part of her estate and if she survivs your farther then tax will be applicable

[crash2006]

you father passes away leaves everthing to your mother she is free from iht because they are married, now you mother sells the house for 400k then you and your mother buy a property for 400k , your share is 200k your mothers share is 200k of the house that you both brought.

Now you mother passes away she leave her half to you which is worth 200k (iht 285 000) but your mother has 200k in the bank so 200k from the half of the house plus 200k from her saving = 400k - 285= 115k which isnt tax free and you pay a % of it 40% of that.

but you also have to look into cgt from selling the house.

this is an idea of how it works, you should really seek advice.

Edited July 23, 2006 by crash2006

[Jason]

Wouldn't a trust work in this situation? Not that i'm an expert.

[enworb]

I think a sole surviving parent (or maybe both) can give a property to a son or daughter but must pay rent at the going rate if they wish to remain living there.

There is a 7 year rule (at least it used to be) which means if they survive for his long after giving their son/daughter the house, it wil then be theirs and so will not be subject to inheritance tax.

Parents can also give a certain amount of cash to each of their chilldren every tax year, and could possibly remortgage to release some money just for this purpose.

There are definaetly loopholes but unfortunately there are jobworths trying to make the government as much money as possible.

Have you tried searching for this topic on google? You will find out more than you will from us guessers

[crash2006]

I think a sole surviving parent (or maybe both) can give a property to a son or daughter but must pay rent at the going rate if they wish to remain living there.

There is a 7 year rule (at least it used to be) which means if they survive for his long after giving their son/daughter the house, it wil then be theirs and so will not be subject to inheritance tax.

Parents can also give a certain amount of cash to each of their chilldren every tax year, and could possibly remortgage to release some money just for this purpose.

There are definaetly loopholes but unfortunately there are jobworths trying to make the government as much money as possible.

Have you tried searching for this topic on google? You will find out more than you will from us guessers

yes but then you would pay cgt in the future if you sold it, i think i heard if you pay stamp duty at the start then you dont pay cgt and the end.

[I'M WITH STUPID]

The problem with all this is PROBATE - this is a legal term which enables someone inheriting a deceased estate to have legal ownership - in order to get probate you will have to complete an Inland Revenue tax form declaring all the deceased assets - this is the point where you pay lots of nice IHT in order to get probate.

My advice - put the property in your name from day one - then there are no legal hurdles when your parents pass on - the house is yours to sell as and when you choose - who lived there with whom and for how long is nobodys business but yours.

[rockdoctor]

How about;

After first parent dies, they marry someone young and leave the house to them.

After second parent dies you marry the (highly cooperative) young person yourself (might need to be a gay marriage).

Thus in two steps the house transfers to you with no IHT.

Of course there is the slight problem of being married to someone you have only a financial interest in, but hey, a tax dodge is a tax dodge!

Edited July 24, 2006 by rockdoctor

[Guest pioneer31]

Gosh this is a complex tangle. Thanks for the replies by the way.

My plan was for my mother to sell the house (its in her name anyway). I then chip in about 50k to the purchase of another one. We then co-own.

If the whole house goes in my name from day 1, then I need 'her' money to allow me to do that, so it's treated as a gift?

I think I will try and seek advice but I agree with the poster who mentioned 'jobsworths' - who is going to give me advice on how to deny the govt $$$$$ (or in my language, protect the money that my mum and dad worked their arses off for, ok, granted that the house has inflated in value, but they didn't ask for that to happen). By the way is 40% on EVERYTHING, once you cross the threshold, or just the reaminder over £285k?

The whole IHT thing and the elderly care home thing makes my blood boil. There's no incentive to do ANYTHING but sit on your **** in this country.

Save and work > the govt punish you

Sit on your ****> the govt reward you

If my parents GIVE me their house now and survive the next 7 years, I'm not liable for any tax?