Adult Child Living with Parents Long Term - IHT Concerns
Discussion
My father passed away suddenly last year. I've lived with my parents for many years, due to poor health. I would like to remain living in the house, assuming I outlive my mother. The total estate value is significantly below the current £1m IHT threshold for married couples.
However, it has been suggested that it could be beneficial to vary my father's will so that I inherit his half share of the house now and become joint tenants of the house with my mother. This could potentially give me some security should IHT thresholds be lowered significantly in the future - this way, I'd effectively own half the house at the current IHT rate.
I understand that should my mother need a care home (very unlikely for the foreseeable future), the issue of "deprivation of assets" could arise and the will change could be seen as a deprivation of assets but as I say, this is not the reason for considering varying my late father's will - it is simply to attempt to give me some more security in case IHT thresholds are lowered in the future.
Quite a few potential issues have come up such as whether it will be possible to sever my parents' joint tenancy on the property - one solicitor is sure a joint tenancy can be severed after death for the purposes of IHT and CGT using IHTA 1984 s142 and another is adamant that a joint tenancy can never be severed after death and that the half share of the house would have to be a gift from my mother rather than inheritance from my father. This would change things completely as my mother would have to live another 7 years from now which is far from guaranteed given she is already almost 80.
Some solicitors think that my mother and I would have to pay household bills 50/50 if we live together as joint tenants whereas others think that this will be of no concern to HMRC.
It is possible that I may renovate and sell the house if I outlive my mother - if I was a joint tenant with my mother, there would be no CGT on the difference in probate value and renovated value as I presumably wouldn't have to go through probate. Even if the will isn't changed though, am I right in thinking that I could renovate the house and sell it for more than the probate value as I'd be exempt from CGT as it has always been my sole and main residence?
I have carried out a lot of research on whether it is worth varying my father's will and many think I'm overthinking things and that varying the will is likely to make things unnecessarily complicated. I'm aware that inheriting half the house will reduce the remaining IHT RNRB balance to £800k (assuming half the house is worth £200k) but this does not make a tangible difference as if the will wasn't varied, the whole house rather than just half would form part of the estate. I appreciate that if the house doubles in value in my mother's lifetime, that half share would be worth £400k but then I'd still have £800k RNRB remaining! So I can't really see the issue in varying the will damaging the RNRB balance remaining in real terms but of course stand to be corrected!
I'd greatly appreciate any advice about varying the will and me becoming a joint tenant with my mother, particularly from anyone who has adult children living with them and is concerned about IHT.
I appreciate that it is quite rare for an adult to live with their parents long-term so it is potentially quite different from most other IHT cases. Also, it's more an issue of giving me some more security to stay in the family house should IHT rules be changed, rather than trying to reduce IHT due or avoiding care home fees.
I'd imagine that there would be a lot of resistance from the public if IHT thresholds are substantially reduced but anything is possible! If I was in better health and had my own property, I would be far less concerned.
Much appreciate any feedback.
However, it has been suggested that it could be beneficial to vary my father's will so that I inherit his half share of the house now and become joint tenants of the house with my mother. This could potentially give me some security should IHT thresholds be lowered significantly in the future - this way, I'd effectively own half the house at the current IHT rate.
I understand that should my mother need a care home (very unlikely for the foreseeable future), the issue of "deprivation of assets" could arise and the will change could be seen as a deprivation of assets but as I say, this is not the reason for considering varying my late father's will - it is simply to attempt to give me some more security in case IHT thresholds are lowered in the future.
Quite a few potential issues have come up such as whether it will be possible to sever my parents' joint tenancy on the property - one solicitor is sure a joint tenancy can be severed after death for the purposes of IHT and CGT using IHTA 1984 s142 and another is adamant that a joint tenancy can never be severed after death and that the half share of the house would have to be a gift from my mother rather than inheritance from my father. This would change things completely as my mother would have to live another 7 years from now which is far from guaranteed given she is already almost 80.
Some solicitors think that my mother and I would have to pay household bills 50/50 if we live together as joint tenants whereas others think that this will be of no concern to HMRC.
It is possible that I may renovate and sell the house if I outlive my mother - if I was a joint tenant with my mother, there would be no CGT on the difference in probate value and renovated value as I presumably wouldn't have to go through probate. Even if the will isn't changed though, am I right in thinking that I could renovate the house and sell it for more than the probate value as I'd be exempt from CGT as it has always been my sole and main residence?
I have carried out a lot of research on whether it is worth varying my father's will and many think I'm overthinking things and that varying the will is likely to make things unnecessarily complicated. I'm aware that inheriting half the house will reduce the remaining IHT RNRB balance to £800k (assuming half the house is worth £200k) but this does not make a tangible difference as if the will wasn't varied, the whole house rather than just half would form part of the estate. I appreciate that if the house doubles in value in my mother's lifetime, that half share would be worth £400k but then I'd still have £800k RNRB remaining! So I can't really see the issue in varying the will damaging the RNRB balance remaining in real terms but of course stand to be corrected!
I'd greatly appreciate any advice about varying the will and me becoming a joint tenant with my mother, particularly from anyone who has adult children living with them and is concerned about IHT.
I appreciate that it is quite rare for an adult to live with their parents long-term so it is potentially quite different from most other IHT cases. Also, it's more an issue of giving me some more security to stay in the family house should IHT rules be changed, rather than trying to reduce IHT due or avoiding care home fees.
I'd imagine that there would be a lot of resistance from the public if IHT thresholds are substantially reduced but anything is possible! If I was in better health and had my own property, I would be far less concerned.
Much appreciate any feedback.
Edited by hal3210 on Thursday 9th October 01:12
Many thanks for your reply. I was initially told by a solicitor that the best approach would be for my mother to transfer the entire house to me - this was frankly pretty poor advice as I'm sure if this was carried out, my mother would have to pay rent to live in the property and then I'd be subject to income tax on this rent.
Given this poor advice, I've then approached other solicitors but there has been so much conflicting information - whether it is possible to sever my parents' joint tenancy is the main example of this. Some say it is possible and others not and if the half share of the house comes from my mother as a gift rather than my father as inheritance, the 7 year rule applies so if my mother does not live another 7 years it negates the whole process.
The other issue I'm having is that any solicitor I approach seems very keen to change the will as it generates work for them. One even suggested putting the property in a trust which seems ridiculous given it's well below IHT threshold value. So if I approach the most qualified solicitor or tax advisor they are almost bound to recommend changing the will as it gives them more work. It's a bit like a certain fast fit chain recommending changing tyres before they are needed!
I just thought it might be less biased to ask for advice on the forum but I appreciate that an adult living with parents long term is pretty rare so there doesn't seem to be much advice from experience available.
Given this poor advice, I've then approached other solicitors but there has been so much conflicting information - whether it is possible to sever my parents' joint tenancy is the main example of this. Some say it is possible and others not and if the half share of the house comes from my mother as a gift rather than my father as inheritance, the 7 year rule applies so if my mother does not live another 7 years it negates the whole process.
The other issue I'm having is that any solicitor I approach seems very keen to change the will as it generates work for them. One even suggested putting the property in a trust which seems ridiculous given it's well below IHT threshold value. So if I approach the most qualified solicitor or tax advisor they are almost bound to recommend changing the will as it gives them more work. It's a bit like a certain fast fit chain recommending changing tyres before they are needed!
I just thought it might be less biased to ask for advice on the forum but I appreciate that an adult living with parents long term is pretty rare so there doesn't seem to be much advice from experience available.
A deed of variation can alter your father's will to gift you his share of the house, it will include a retrospective severance if the house wasn't already owned as tenants in common. There is a fixed 2 year window from death to get it completed. The DoV will not be classed self deprivation as it is treated as though the your father had constructed the will that way prior to death.
Many thanks for your reply. My parents were joint tenants, it's good to hear that the DoV will retrospectively sever this as some solicitors have said it is not possible to sever a joint tenancy after death.
That is also good to hear that the DoV won't be classed as deprivation as in the fairly unlikely event my mother needs care, only her half of the house could be considered. In fact, my solicitor thought it is unlikely the council would come after this half if I was a joint owner.
Do you know if my mother and I are expected to pay household bills 50/50 if joint tenants and whether HMRC have to be notified of the DoV, given that no IHT would be due on the effect of the DoV?
Many thanks again - I'm finding it difficult to decide whether to carry out the DoV as the estate value is significantly below the current IHT threshold but in saying that, I can't really think of any tangible disadvantages of carrying out the DoV from an IHT of CGT point of view. Given that the house is my main residence, I would be exempt from any CGT.
That is also good to hear that the DoV won't be classed as deprivation as in the fairly unlikely event my mother needs care, only her half of the house could be considered. In fact, my solicitor thought it is unlikely the council would come after this half if I was a joint owner.
Do you know if my mother and I are expected to pay household bills 50/50 if joint tenants and whether HMRC have to be notified of the DoV, given that no IHT would be due on the effect of the DoV?
Many thanks again - I'm finding it difficult to decide whether to carry out the DoV as the estate value is significantly below the current IHT threshold but in saying that, I can't really think of any tangible disadvantages of carrying out the DoV from an IHT of CGT point of view. Given that the house is my main residence, I would be exempt from any CGT.
I'm no expert. But having recently gone through the care funding and IHT process for my father, I'd say generally it comes down to common sense. Have you contacted HMRC yourself for advice? They should be able to tell you if you need to notify them. There may even be guidance online. I suspect they wouldn't need to be notified if it's under the nil rate band.
Pay some bills so that you can show a record of living there over time. You are genuinely living there. Deprivation of assets is used for people who gift their house before death and then don't pay back market rent for continuing to live there. A clear attempt at a dodge among other methods.
I think it also depends how far under the IHT threshold the house is. With the RNRB and allowance carried over from your father, you will have £1mil total allowance. Even if this government change the thresholds or say remove the RNRB, how much will it likely affect you?
Pay some bills so that you can show a record of living there over time. You are genuinely living there. Deprivation of assets is used for people who gift their house before death and then don't pay back market rent for continuing to live there. A clear attempt at a dodge among other methods.
I think it also depends how far under the IHT threshold the house is. With the RNRB and allowance carried over from your father, you will have £1mil total allowance. Even if this government change the thresholds or say remove the RNRB, how much will it likely affect you?
loskie said:
could the rent you charge your mother be the max but no more than permitted under the tax free "rent a room scheme" so tax was not an issue to you.
I'm pretty sure that if I was a joint tenant with my mother (having inherited half the property from my father under a deed of variation), there would be no Gift with Reservation of Benefit as we would be living in the same property so I don't think my mother would need to pay any rent. The only time my mother would have to pay rent is if she gifted the entire house to me which I don't think is a very good idea. Not least because in the unlikely event I passed before my mother, my IHT threshold would only be £325k.
Sanderling said:
I'm no expert. But having recently gone through the care funding and IHT process for my father, I'd say generally it comes down to common sense. Have you contacted HMRC yourself for advice? They should be able to tell you if you need to notify them. There may even be guidance online. I suspect they wouldn't need to be notified if it's under the nil rate band.
Pay some bills so that you can show a record of living there over time. You are genuinely living there. Deprivation of assets is used for people who gift their house before death and then don't pay back market rent for continuing to live there. A clear attempt at a dodge among other methods.
I think it also depends how far under the IHT threshold the house is. With the RNRB and allowance carried over from your father, you will have £1mil total allowance. Even if this government change the thresholds or say remove the RNRB, how much will it likely affect you?
Sorry to hear you have recently gone through the care funding and IHT process for your father. Pay some bills so that you can show a record of living there over time. You are genuinely living there. Deprivation of assets is used for people who gift their house before death and then don't pay back market rent for continuing to live there. A clear attempt at a dodge among other methods.
I think it also depends how far under the IHT threshold the house is. With the RNRB and allowance carried over from your father, you will have £1mil total allowance. Even if this government change the thresholds or say remove the RNRB, how much will it likely affect you?
I haven't actually contacted HMRC, it's something I'm considering but HMRC's forum seems to have offered conflicting advice to those who have asked a similar enquiry.
One solicitor has said HMRC would need to be notified of the deed of variation and another has said it is not necessary. From what I've read online, it sounds as though HMRC don't need to be notified unless it creates an IHT liability which it doesn't.
Naturally, I have contributed a fair bit to the upkeep of the house over the years, paying for some builders' work, paying the phone/internet bills but I can't say that I've paid 50% of the household bills precisely. Again, our solicitor doesn't think who pays the bills will be of concern to HMRC - besides, it's safe to say that even if my mother pays all the bills and lives to 100, the total amount paid would definitely not exceed the £1m RNRB and it could even be argued that her paying the bills could come under the gifting from excess income. So as daft as it sounds, if I paid my mother half the household bills, I could be gifted it back as me paying half the bills would allow my mother to gift it back from excess income.
I genuinely live in the house, I'm on the electoral register and have never purchased my own property.
I totally appreciate that most people will think I'm overthinking and being very paranoid about IHT thresholds coming down as realistically, the total estate currently wouldn't be worth much more than half the £1m RNRB. So I totally understand why most people would wonder why I'm so concerned! I just feel quite vulnerable at the moment as if the IHT rules are changed, I would literally have no claim on the house whereas if a deed of variation was carried out, I would at least effectively have the security of owning half the house.
It might also make sense for the deed of variation to ensure that I inherit my father's savings so again, I have the security of inheriting them at the current IHT rate. Admittedly, this isn't a massive advantage as most of the parents' savings were held in my mother's name as this was more tax effective re: paying tax on interest as when my father was alive, my mother's pension income was way below the income tax threshold.
The way I tend to look at things now is what is the worst case scenario! If I don't vary the will and IHT thresholds go down massively or house prices go up massively, I could end up with nothing or a tax bill to keep the house. If I vary the will, I can't see it's going to cause any damage but I appreciate that it could cause complications re: paying bills 50/50 and whether my parents' joint tenancy can be severed - I'm pretty sure it can be but this seems a potentially controversial subject!
Many thanks again for your help.
Condolences to you and your Mother.
As regards the DOV it will be your Mother that needs to do this ie by reducing her share from 100% to 50% ( or whatever percentage she wants ) and giving you a share - “ currently 50% as per your thinking.
Whilst you can do this DIY I would strongly suggest not.
Any IHT and potential CGT payable on your Dads estate and indeed probate will have already been paid by the time beneficiaries are paid so absolute no need for either of you at that point to contact HMRC about the change of will dictates.
As regards the DOV it will be your Mother that needs to do this ie by reducing her share from 100% to 50% ( or whatever percentage she wants ) and giving you a share - “ currently 50% as per your thinking.
Whilst you can do this DIY I would strongly suggest not.
Any IHT and potential CGT payable on your Dads estate and indeed probate will have already been paid by the time beneficiaries are paid so absolute no need for either of you at that point to contact HMRC about the change of will dictates.
Thanks Hal3210.
You need to do what is best for you in the end. It doesn't matter what other people on the internet think. If you have no appetite for risk then the right thing to do is secure your position. I was just trying to put your mind at ease. I think what you have experienced already is that there is an amount of interpretation (even within professional circles) when it comes to the rules. I've even heard of the probate office giving wildly different advice to people.
The best thing to do is to get the ball rolling I think, but first educate yourself as best as possible. I managed to get through the IHT and probate forms myself. As an example for the IHT property valuation form, some people get 3 estate agent valuations, some get a RICS valuation and I just submitted 3 examples of similar properties currently for sale from rightmove because my dads estate fell just within the threshold including RNRD. That was accepted by HMRC. I made some mistakes initially when submitting information to the probate office, but they gave me feedback and I made the corrections. They don't exist just to catch you out. I wouldn't be concerned about contacting HMRC and ask for guidance with succinct factual questions.
Re paying the bills 50/50. Many couples wouldn't pay the household bills 50/50. I wouldn't worry about that.
I'd start off yourself and then instruct a solicitor if/when required.
You need to do what is best for you in the end. It doesn't matter what other people on the internet think. If you have no appetite for risk then the right thing to do is secure your position. I was just trying to put your mind at ease. I think what you have experienced already is that there is an amount of interpretation (even within professional circles) when it comes to the rules. I've even heard of the probate office giving wildly different advice to people.
The best thing to do is to get the ball rolling I think, but first educate yourself as best as possible. I managed to get through the IHT and probate forms myself. As an example for the IHT property valuation form, some people get 3 estate agent valuations, some get a RICS valuation and I just submitted 3 examples of similar properties currently for sale from rightmove because my dads estate fell just within the threshold including RNRD. That was accepted by HMRC. I made some mistakes initially when submitting information to the probate office, but they gave me feedback and I made the corrections. They don't exist just to catch you out. I wouldn't be concerned about contacting HMRC and ask for guidance with succinct factual questions.
Re paying the bills 50/50. Many couples wouldn't pay the household bills 50/50. I wouldn't worry about that.
I'd start off yourself and then instruct a solicitor if/when required.
alscar said:
Condolences to you and your Mother.
As regards the DOV it will be your Mother that needs to do this ie by reducing her share from 100% to 50% ( or whatever percentage she wants ) and giving you a share - currently 50% as per your thinking.
Whilst you can do this DIY I would strongly suggest not.
Any IHT and potential CGT payable on your Dads estate and indeed probate will have already been paid by the time beneficiaries are paid so absolute no need for either of you at that point to contact HMRC about the change of will dictates.
Many thanks for your reply. I think the best plan is for my mother to reduce her share by 50% and for my mother and I to become joint tenants. Initially, the solicitor suggested that my mother signs the entire house over to me but I don't really like the sound of this, partly in case my mother outlives me and also I am pretty sure that if my mother signed the house over to me fully and still benefited from the house from living there, she'd have to pay me rent. As regards the DOV it will be your Mother that needs to do this ie by reducing her share from 100% to 50% ( or whatever percentage she wants ) and giving you a share - currently 50% as per your thinking.
Whilst you can do this DIY I would strongly suggest not.
Any IHT and potential CGT payable on your Dads estate and indeed probate will have already been paid by the time beneficiaries are paid so absolute no need for either of you at that point to contact HMRC about the change of will dictates.
I totally agree about not doing it DIY! While the deed of variation has to be carried out within 2 years, I assume that as long as the deed is carried out within 2 years, I assume that the Land Registry does not need to be updated with the joint tenancy of my mother and I within 2 years as sometimes they can take months to update their records. It maybe worth updating the records with the Land Registry at the point of starting the deed of variation.
Many thanks for confirming that HMRC don't have to notified of the deed of variation. Would I need to tell HMRC the value of half the property so the balance remaining of the RNB can be transferred to my mother? If for example, my father's half of the house is worth £200k and HMRC aren't notified at the point of the deed of variation, how will they know how much to deduct from the £1m remaining after my mother passes? Would it be advisable for me to retain examples of similar houses for sale at the point of the deed of variation?
Aside from my father's half share of the house, he also left a relatively small amount of savings to my mother (my mother held most of the parents' savings for tax on interest purposes). Would it be advisable for the deed of variation to leave my father's savings directly to me as much like the half share of the house, this would "lock-in" that amount at current IHT thresholds. One account my parents' held was in joint names so I'd imagine this account would have gone automatically to my mother so it probably wouldn't be possible for the deed of variation to leave any savings in a joint account to me.
I'm still distraught from my father's unexpected passing so I have taken many months going around in circles on deciding whether the deed of variation is worthwhile! I think it all hinges on whether my parents' joint tenancy can be severed (which apparently it can, it certainly has been done before in many cases). The other major factor is whether varying my father's will adversely effect the £1m RNRB but I'm pretty sure the £1m RNRB isn't adversely effected (besides the value of half the house) as long as the beneficiary of the varied will is a direct descendent. Then the smaller details such as paying bills 50/50, whether the property needs to be valued at the point of deed of variation so the balance of the £1m RNRB remaining can be established and what would happen if my mother and I decided to move house (unlikely but possible) - presumably we'd need to open a joint account together to receive the proceeds of the house and to buy the new house from the balance of a joint account.
Another advantage of varying the will is that I presumably wouldn't need to go through probate if I outlive my mother so I would be able to renovate the house and possibly sell it without any CGT complications whereas if the will isn't varied, I'd have to go through probate and then the renovated house value would be higher than the probate value. In that case, I'd still imagine that the main residence CGT exemption would apply so no CGT would be due over the probate value but however I look at it now, it does seem beneficial to vary the will and become a joint owner with my mother. Although I'd never even considered care home fees before, this could also be seen as another reason to vary my father's will.
Many thanks again for all your help and apologies for such a long post!
Sanderling said:
Thanks Hal3210.
You need to do what is best for you in the end. It doesn't matter what other people on the internet think. If you have no appetite for risk then the right thing to do is secure your position. I was just trying to put your mind at ease. I think what you have experienced already is that there is an amount of interpretation (even within professional circles) when it comes to the rules. I've even heard of the probate office giving wildly different advice to people.
The best thing to do is to get the ball rolling I think, but first educate yourself as best as possible. I managed to get through the IHT and probate forms myself. As an example for the IHT property valuation form, some people get 3 estate agent valuations, some get a RICS valuation and I just submitted 3 examples of similar properties currently for sale from rightmove because my dads estate fell just within the threshold including RNRD. That was accepted by HMRC. I made some mistakes initially when submitting information to the probate office, but they gave me feedback and I made the corrections. They don't exist just to catch you out. I wouldn't be concerned about contacting HMRC and ask for guidance with succinct factual questions.
Re paying the bills 50/50. Many couples wouldn't pay the household bills 50/50. I wouldn't worry about that.
I'd start off yourself and then instruct a solicitor if/when required.
Many thanks for your reply. I really appreciate the point that it doesn't matter what other people on the internet think! I totally appreciate that most will say I'm overthinking it and that I'll never have to pay any IHT as the estate is well below £1m so why bother varying my father's will but I do feel quite vulnerable at the moment as if IHT thresholds change substantially I could potentially be homeless in the future so the idea of securing my current position and becoming a joint tenant with my mother does give me a sense of some security and it will also possibly ensure I don't have to go through probate when the time comes, assuming I outlive my mother!You need to do what is best for you in the end. It doesn't matter what other people on the internet think. If you have no appetite for risk then the right thing to do is secure your position. I was just trying to put your mind at ease. I think what you have experienced already is that there is an amount of interpretation (even within professional circles) when it comes to the rules. I've even heard of the probate office giving wildly different advice to people.
The best thing to do is to get the ball rolling I think, but first educate yourself as best as possible. I managed to get through the IHT and probate forms myself. As an example for the IHT property valuation form, some people get 3 estate agent valuations, some get a RICS valuation and I just submitted 3 examples of similar properties currently for sale from rightmove because my dads estate fell just within the threshold including RNRD. That was accepted by HMRC. I made some mistakes initially when submitting information to the probate office, but they gave me feedback and I made the corrections. They don't exist just to catch you out. I wouldn't be concerned about contacting HMRC and ask for guidance with succinct factual questions.
Re paying the bills 50/50. Many couples wouldn't pay the household bills 50/50. I wouldn't worry about that.
I'd start off yourself and then instruct a solicitor if/when required.
I'm not surprised at all by the probate office giving wildly different advice to people! I have spent a lot of time looking at HMRC's online forums and different members of staff seem to give different answers to the same questions so I think they have made the tax system so complicated that even some of their own staff don't fully understand it or interpret it differently!
I definitely need to get the ball rolling, I have spent a lot of time trying to educate myself as best as possible although naturally a lot of advice has been conflicting! At the end of the day though, I try to look at things from the "worst possible scenario" these days and I can't really see any downsides to varying the will and having the security of inheriting my father's half share of the house now rather than inheriting the entire house in hopefully several years when IHT rules and house prices could be very different! It's highly unlikely that house prices will increase by over double in the next ten years but if they did and the RNRB is still frozen at £1m, I would have to sell the family home.
It's great to hear you got through the IHT and probate forms yourself and that HMRC accepted 3 Right Move ads rather than needing a RICS valuation or 3 estate agent valuations! I came across the point about needing 3 estate agent valuations in my research and frankly having to see 3 estate agents after a recent bereavement would be one of the last things anyone needs! I haven't ever had to go through probate myself but a couple of friends found it a ridiculously lengthy process and as I say, dealing with HMRC whilst bereaved is literally the last thing anyone needs whilst going through such an awful time.
Another advantage of varying my father's will is that by becoming a joint tenant with my mother I don't think I will need to go through probate - this in itself is a bonus as I'm the last of the line so if I outlive my mother, I won't have anyone else to support me re: all the post death paperwork so the thought of not having to go through probate alone further pushes me in direction of varying the will.
My solicitor tells me that I don't need to notify HMRC re: varying the will as the value of the inheritance is way below the threshold - however, if HMRC aren't notified, I'm not sure how they know how much to deduct from my father's £500k RNRB should I outlive my mother? This is something I need to definitely find out although I suppose I could keep records/ads of similar houses to show that the value of half the house wouldn't be more than £200k.
Many thanks for confirming that paying bills 50/50 won't be an issue - that is an excellent point that many couples don't pay the bills 50/50 and looking at the worst case scenario, if my mum pays all the bills and HMRC sees this as a gift, naturally the sum total of all the bills for several years certainly wouldn't push the total estate value anywhere near the £1m RNRB!
I'll definitely instruct a solicitor very soon as I've 99.9% made up my mind to vary the will, apparently the actual work required to vary the will isn't a lot but the main work seems to be all the research I've carried out prior to making my decision!
hal3210 said:
alscar said:
Condolences to you and your Mother.
As regards the DOV it will be your Mother that needs to do this ie by reducing her share from 100% to 50% ( or whatever percentage she wants ) and giving you a share - currently 50% as per your thinking.
Whilst you can do this DIY I would strongly suggest not.
Any IHT and potential CGT payable on your Dads estate and indeed probate will have already been paid by the time beneficiaries are paid so absolute no need for either of you at that point to contact HMRC about the change of will dictates.
Many thanks for your reply. I think the best plan is for my mother to reduce her share by 50% and for my mother and I to become joint tenants. Initially, the solicitor suggested that my mother signs the entire house over to me but I don't really like the sound of this, partly in case my mother outlives me and also I am pretty sure that if my mother signed the house over to me fully and still benefited from the house from living there, she'd have to pay me rent. As regards the DOV it will be your Mother that needs to do this ie by reducing her share from 100% to 50% ( or whatever percentage she wants ) and giving you a share - currently 50% as per your thinking.
Whilst you can do this DIY I would strongly suggest not.
Any IHT and potential CGT payable on your Dads estate and indeed probate will have already been paid by the time beneficiaries are paid so absolute no need for either of you at that point to contact HMRC about the change of will dictates.
Apologies for format but quicker just to quote and add my comments after each para.
I think your Solicitor should be the one to advise about how to hold the house with your Mother although I think I agree with you in terms of the joint tenancy.
I totally agree about not doing it DIY! While the deed of variation has to be carried out within 2 years, I assume that as long as the deed is carried out within 2 years, I assume that the Land Registry does not need to be updated with the joint tenancy of my mother and I within 2 years as sometimes they can take months to update their records. It maybe worth updating the records with the Land Registry at the point of starting the deed of variation.
The first job is to do the DOV which in itself will be pretty much a one page simple document with your Mother simply amending her share from 100% to 50%.
Tbh I don’t know the mechanics of LR but assume your Solicitor will advise.
Many thanks for confirming that HMRC don't have to notified of the deed of variation. Would I need to tell HMRC the value of half the property so the balance remaining of the RNB can be transferred to my mother? If for example, my father's half of the house is worth £200k and HMRC aren't notified at the point of the deed of variation, how will they know how much to deduct from the £1m remaining after my mother passes? Would it be advisable for me to retain examples of similar houses for sale at the point of the deed of variation?
Assuming your Solicitor is applying for probate then they will be the ones that either do this or not and will also advise you what you need to do. I would doubt you need to keep records of similar house examples.
I would suggest that within probate calculations for IHT etc the value of the house currently will appear.
I strongly suggest not to overthink this bit and also try not to get ahead of yourself and what the future may be in terms of your Mothers life.
I recently was Executor for my Aunt and my Solicitor managed to salvage the remainder of my Uncles IHT allowance unused from 45 years ago.
And his affairs were complicated not helped by the fact he didn’t leave a will and his estate was contested by his parents !
Aside from my father's half share of the house, he also left a relatively small amount of savings to my mother (my mother held most of the parents' savings for tax on interest purposes). Would it be advisable for the deed of variation to leave my father's savings directly to me as much like the half share of the house, this would "lock-in" that amount at current IHT thresholds. One account my parents' held was in joint names so I'd imagine this account would have gone automatically to my mother so it probably wouldn't be possible for the deed of variation to leave any savings in a joint account to me.
The “ standard “ DOV in effect once completed as we have been discussing leaves 50% to your Mother and 50% to you of everything which would include savings - the DOV would read something like 1 share to her and 1 share to you.
However also possible for the DOV to split up things as you wish ie won’t be one line as it will be split house , savings , car or what ever.
It’s in simple terms down to your Mother ( led by you ) to allocate your Fathers wishes.
Again the solicitor will draft according to her wishes and advise if something cannot be done.
Once drafted she signs in front of an independent witness and then the solicitor gets on with the estate handling.
I'm still distraught from my father's unexpected passing so I have taken many months going around in circles on deciding whether the deed of variation is worthwhile! I think it all hinges on whether my parents' joint tenancy can be severed (which apparently it can, it certainly has been done before in many cases). The other major factor is whether varying my father's will adversely effect the £1m RNRB but I'm pretty sure the £1m RNRB isn't adversely effected (besides the value of half the house) as long as the beneficiary of the varied will is a direct descendent. Then the smaller details such as paying bills 50/50, whether the property needs to be valued at the point of deed of variation so the balance of the £1m RNRB remaining can be established and what would happen if my mother and I decided to move house (unlikely but possible) - presumably we'd need to open a joint account together to receive the proceeds of the house and to buy the new house from the balance of a joint account.
Grief should never be under estimated and absolutely you need to also find time to think of yourself.
Don’t be tempted to bottle things up - no good will come from that.
There are various stages of grief and the only thing I can say with any certainty that things will get easier.
My own Father died nearly 19 years ago and even just typing this is a bit upsetting - wow.
Another advantage of varying the will is that I presumably wouldn't need to go through probate if I outlive my mother so I would be able to renovate the house and possibly sell it without any CGT complications whereas if the will isn't varied, I'd have to go through probate and then the renovated house value would be higher than the probate value. In that case, I'd still imagine that the main residence CGT exemption would apply so no CGT would be due over the probate value but however I look at it now, it does seem beneficial to vary the will and become a joint owner with my mother. Although I'd never even considered care home fees before, this could also be seen as another reason to vary my father's will.
As above try not to get too far ahead of yourself.
Think of handling your Fathers estate and the DOV etc as steps or small boxes.
Often thinking of the entire “ job “ is simply too daunting.
Breaking it down into constituent parts is much less so.
You are paying your solicitor so make use of that !
Best wishes.
Many thanks again for all your help and apologies for such a long post!
Many thanks for all your help and support alscar, it is very much appreciated.
I think a joint tenancy with my mother is the best way forward as then in theory, the survivor will automatically inherit the other half of the house without having to go through probate. It's encouraging to hear that DoV itself is only a one page document as I'm quickly running out of time with the 2 year deadline looming! Time has gone surreally quickly since my father passed, it still only feels like yesterday.
There was very little involvement with my parents' solicitors when my father passed, everything was inherited by my mother so there was no probate or valuation of the house. I guess it is very different when assets are inherited by a spouse rather than a son as there is no IHT involved. I'm very inexperienced with inheritance paperwork as I was at uni when my grandparents passed so wasn't involved with the process. For peace of mind though, I probably need to ask the DoV solicitor how HMRC will establish how much RNRB will remain after the DoV is carried out. At least I only have a few questions now, a few months ago it felt as though I had dozens of questions swirling around my mind!
I'm really impressed that your Aunt's solicitor salvaged the remainder of your Uncle's IHT allowance from 45 years ago! Solicitors seem to vary a lot, the one who drew up my parents' will wasn't too impressive and was extremely expensive - my dad only used them as he used to do their accounts and knew the partners well. My dad bizarrely made his will over 35 years ago when was barely 40 and that was at an old address and the actual will looked like something from Charles Dickens's era! Thankfully, he made a new one a few years ago so at least everything is in place correctly will wise.
That all makes sense regarding the standard DoV being everything split 50/50 - it's probably worth changing this so I inherit all my father's savings and car (although the car is debatable as that is a depreciating asset so locking in the value of the car is arguably a bit pointless!)
I'm very sorry to hear you lost your own father 19 years ago. It is something that you never really get over but time is a great healer. I was very close to my grandfather and his passing still doesn't really feel real and that was almost 30 years ago! Unfortunately, dad only had a very minor illness (he was actually in far better health than my mother and I) and should have easily lived another 10 - 15 years so I'm also finally about to start a medical negligence case with the NHS - having this in the back of mind for nearly 2 years has hindered my progress with the DoV. It still doesn't really feel real what happened to dad as it was so unexpected so it is all a very strange time and that's probably why I feel vulnerable and a bit paranoid about IHT thresholds changing!
That makes perfect sense about breaking everything down into constituent parts, so many people told me to take things day by day after dad passed but I've always tried to plan ahead in life but admittedly, I tend to find the more I've planned things, the more things that are out of my control like health step in to ruin those plans so it definitely makes sense to take things stage by stage!
Many thanks again, wishing you all the very best.
I think a joint tenancy with my mother is the best way forward as then in theory, the survivor will automatically inherit the other half of the house without having to go through probate. It's encouraging to hear that DoV itself is only a one page document as I'm quickly running out of time with the 2 year deadline looming! Time has gone surreally quickly since my father passed, it still only feels like yesterday.
There was very little involvement with my parents' solicitors when my father passed, everything was inherited by my mother so there was no probate or valuation of the house. I guess it is very different when assets are inherited by a spouse rather than a son as there is no IHT involved. I'm very inexperienced with inheritance paperwork as I was at uni when my grandparents passed so wasn't involved with the process. For peace of mind though, I probably need to ask the DoV solicitor how HMRC will establish how much RNRB will remain after the DoV is carried out. At least I only have a few questions now, a few months ago it felt as though I had dozens of questions swirling around my mind!
I'm really impressed that your Aunt's solicitor salvaged the remainder of your Uncle's IHT allowance from 45 years ago! Solicitors seem to vary a lot, the one who drew up my parents' will wasn't too impressive and was extremely expensive - my dad only used them as he used to do their accounts and knew the partners well. My dad bizarrely made his will over 35 years ago when was barely 40 and that was at an old address and the actual will looked like something from Charles Dickens's era! Thankfully, he made a new one a few years ago so at least everything is in place correctly will wise.
That all makes sense regarding the standard DoV being everything split 50/50 - it's probably worth changing this so I inherit all my father's savings and car (although the car is debatable as that is a depreciating asset so locking in the value of the car is arguably a bit pointless!)
I'm very sorry to hear you lost your own father 19 years ago. It is something that you never really get over but time is a great healer. I was very close to my grandfather and his passing still doesn't really feel real and that was almost 30 years ago! Unfortunately, dad only had a very minor illness (he was actually in far better health than my mother and I) and should have easily lived another 10 - 15 years so I'm also finally about to start a medical negligence case with the NHS - having this in the back of mind for nearly 2 years has hindered my progress with the DoV. It still doesn't really feel real what happened to dad as it was so unexpected so it is all a very strange time and that's probably why I feel vulnerable and a bit paranoid about IHT thresholds changing!
That makes perfect sense about breaking everything down into constituent parts, so many people told me to take things day by day after dad passed but I've always tried to plan ahead in life but admittedly, I tend to find the more I've planned things, the more things that are out of my control like health step in to ruin those plans so it definitely makes sense to take things stage by stage!
Many thanks again, wishing you all the very best.
If you Google "iht grob house" Google AI returns this:
Google said:
Avoiding the Rule: To avoid the GROB rules, the donor would need to either:
-Stop living in or using the property entirely after gifting it.
-Pay the new owner a full market rent for living there, which must be a proper, regularly reviewed commercial rent.
-Live in the property with the recipient, provided the recipient uses it as their main residence and enjoys full possession and enjoyment of the whole property.
So the last point seems to be OP's option? -Stop living in or using the property entirely after gifting it.
-Pay the new owner a full market rent for living there, which must be a proper, regularly reviewed commercial rent.
-Live in the property with the recipient, provided the recipient uses it as their main residence and enjoys full possession and enjoyment of the whole property.
Unfortunately, I had issues logging in with my email (I've always logged in with my user name in the past, which doesn't seem to be an option now) so I am using this old account, it is hal3210 here.
I'm pretty sure that severing my parents' joint tenancy so that I inherit the half share of the house from my father for IHT and CGT purposes, rather than getting the half share gifted from my mother, solves any GROB issues.
If, for some reason though, HMRC views the half share as a gift from my mother, some solicitors still think that there will be no GROB issue or need to pay bills 50/50 but as I say, I'm aiming to use IHTA s142 (1)(a) to sever my parents' joint tenancy so the half share of the house will come from my father as inheritance and won't be considered a gift.
I totally agree alscar, time has gone surreally fast since I've lost my father, all extremely strange. So I am definitely contacting the solicitor on Monday!
I'm told that when my parents' joint tenancy is severed, I will automatically become tenants in common with my mother as I have been given 50% of the property, apparently this 50% share is contrary to a joint tenancy where both parties are considered to own the whole property, hence we automatically become tenants in common. It should however be possible to convert this joint tenancy with my mother by using a conveyancer. If I recall correctly, the advantage of being a joint tenant with my mother, rather than tenants in common, is that as a joint tenant I wouldn't eventually need to go through probate.
Anyway, I probably need to stop going over every last detail as if I do, I'll definitely run out of time re: the 2 year deadline! I think it's safe to say there is no real downside to carrying out the deed of variation in my circumstances, so I'll definitely contact the solicitor on Monday and get the ball finally rolling!
I only hope there are no changes in the Budget that will effect me but I'd imagine it is unlikely! I'm not sure how long the DoV will take but it's probably a bit optimistic to get it completed before the Budget now.
Many thanks again for all your help and support.
I'm pretty sure that severing my parents' joint tenancy so that I inherit the half share of the house from my father for IHT and CGT purposes, rather than getting the half share gifted from my mother, solves any GROB issues.
If, for some reason though, HMRC views the half share as a gift from my mother, some solicitors still think that there will be no GROB issue or need to pay bills 50/50 but as I say, I'm aiming to use IHTA s142 (1)(a) to sever my parents' joint tenancy so the half share of the house will come from my father as inheritance and won't be considered a gift.
I totally agree alscar, time has gone surreally fast since I've lost my father, all extremely strange. So I am definitely contacting the solicitor on Monday!
I'm told that when my parents' joint tenancy is severed, I will automatically become tenants in common with my mother as I have been given 50% of the property, apparently this 50% share is contrary to a joint tenancy where both parties are considered to own the whole property, hence we automatically become tenants in common. It should however be possible to convert this joint tenancy with my mother by using a conveyancer. If I recall correctly, the advantage of being a joint tenant with my mother, rather than tenants in common, is that as a joint tenant I wouldn't eventually need to go through probate.
Anyway, I probably need to stop going over every last detail as if I do, I'll definitely run out of time re: the 2 year deadline! I think it's safe to say there is no real downside to carrying out the deed of variation in my circumstances, so I'll definitely contact the solicitor on Monday and get the ball finally rolling!
I only hope there are no changes in the Budget that will effect me but I'd imagine it is unlikely! I'm not sure how long the DoV will take but it's probably a bit optimistic to get it completed before the Budget now.
Many thanks again for all your help and support.
Hal, as regards the DOV I told my Solicitor what I wanted to do and she drafted it for my approval before sending me an original to sign and get witnessed.
From memory all done in a couple of weeks.
Don’t forget it’s your Mum that is changing the will in terms of the percentage alteration so it’s her that needs to sign and get it witnessed.
It is a really straightforward procedure - odd as that may seem.
From memory all done in a couple of weeks.
Don’t forget it’s your Mum that is changing the will in terms of the percentage alteration so it’s her that needs to sign and get it witnessed.
It is a really straightforward procedure - odd as that may seem.
Many thanks again alscar, it's great to hear it's a fairly straightforward procedure that isn't too time consuming. Normally if I have a 2 year deadline for something, I'd be doing it with 23 months to spare but I am fast running out of time and have less than 2 months left so I'll definitely be contacting the solicitor tomorrow - ideally it would be great if I could get it done before the Budget but I'm hoping the Budget won't affect my scenario!
I was thinking about the importance of approving the draft as I've read that putting the "Section 142 (1)(a) Inheritance Tax Act, 1984" on the basis that the DoV comes within the words 'or otherwise' into the DoV document fully acknowledges the severed joint tenancy - it's still debatable whether this offers any protection re: care home fees but this isn't the reason for the DoV - I'm just trying to acquire some additional security in case IHT rules change.
Yes exactly, it must sound as though that I'm initiating myself this but it was actually my mother that was most concerned about my future domestic security and yes, it is my mum who is changing the will and it is her that is reducing her share to 50%.
As I say, apparently the DoV automatically makes mum and I tenants in common then but I'm told that joint tenants will be best as then I won't need to go through probate.
I've been fretting over all the details for far too long when I just need to get the DoV done in time! I'm hoping once this is done, I'll be a bit more dynamic again! The next stop is the medical negligence case so I need my old levels of energy back to tackle that!
Many thanks again for confirming it's a straightforward procedure - I must confess I didn't even know that wills could be changed until this year!
I was thinking about the importance of approving the draft as I've read that putting the "Section 142 (1)(a) Inheritance Tax Act, 1984" on the basis that the DoV comes within the words 'or otherwise' into the DoV document fully acknowledges the severed joint tenancy - it's still debatable whether this offers any protection re: care home fees but this isn't the reason for the DoV - I'm just trying to acquire some additional security in case IHT rules change.
Yes exactly, it must sound as though that I'm initiating myself this but it was actually my mother that was most concerned about my future domestic security and yes, it is my mum who is changing the will and it is her that is reducing her share to 50%.
As I say, apparently the DoV automatically makes mum and I tenants in common then but I'm told that joint tenants will be best as then I won't need to go through probate.
I've been fretting over all the details for far too long when I just need to get the DoV done in time! I'm hoping once this is done, I'll be a bit more dynamic again! The next stop is the medical negligence case so I need my old levels of energy back to tackle that!
Many thanks again for confirming it's a straightforward procedure - I must confess I didn't even know that wills could be changed until this year!
Gassing Station | Finance | Top of Page | What's New | My Stuff