Left a quarter share of Parents house - IHT tax?
Discussion
Hi everyone, hopefully someone with knowledge of IHT can help...?
My parents own two houses in the small village I grew up in - about 25 years ago they separated but never divorced, and these two properties are both owned as Tenants in Common not Joint Tenants so they could Will half shares to relatives upon death.
My father has just passed away and has willed his 50% share of both properties to me and my brother as 25% each. My mother still retains 50% ownership of both properties and is still in fact living in one of them (the property my father was living in is now vacant).
Am I correct is saying that, once the two properties are valued, IF half of the value of each property is less than the £325,000, then my brother and I would not be liable for IHT on that willed share of the property?
BUT am I also correct in saying that once half of the two properties values is added together, and the remainder of the Estate in monetary terms is added in, once that passes the £325,000 point, we would be liable for IHT at 40% on the amount once £325,000 is subtracted?
So, for example, if both properties are valued at £500,000, and the remainder of the estate is £100,000, then would I be correct is saying that the amount my brother and I would be liable for IHT on is £275,000 at 40%??
Cos that is VERY sphincter tightening.... or have I got it completely wrong??
Any help most appreciated.
My parents own two houses in the small village I grew up in - about 25 years ago they separated but never divorced, and these two properties are both owned as Tenants in Common not Joint Tenants so they could Will half shares to relatives upon death.
My father has just passed away and has willed his 50% share of both properties to me and my brother as 25% each. My mother still retains 50% ownership of both properties and is still in fact living in one of them (the property my father was living in is now vacant).
Am I correct is saying that, once the two properties are valued, IF half of the value of each property is less than the £325,000, then my brother and I would not be liable for IHT on that willed share of the property?
BUT am I also correct in saying that once half of the two properties values is added together, and the remainder of the Estate in monetary terms is added in, once that passes the £325,000 point, we would be liable for IHT at 40% on the amount once £325,000 is subtracted?
So, for example, if both properties are valued at £500,000, and the remainder of the estate is £100,000, then would I be correct is saying that the amount my brother and I would be liable for IHT on is £275,000 at 40%??
Cos that is VERY sphincter tightening.... or have I got it completely wrong??
Any help most appreciated.
This is definitely a situation where proper, situation specific advice is necessary. The precise wording of the will may have a major impact, as may the presence (or absence) of exempt beneficiaries e.g. spouse, charities.
However, in general terms the £325k allowance exists only once - at the estate level. It isn't per property or per beneficiary.
However, in general terms the £325k allowance exists only once - at the estate level. It isn't per property or per beneficiary.
ellroy said:
depending on date of death, there's the new principal residence allowance to take into account.
...
This is only relevant for deaths after 6 April 2017....
OP - I have seen a similar worrying situation resolved using something called a deed of variation. Your adviser (I'd strongly suggest a solicitor is needed here) should be abe to tell you about this.
lastexile69 said:
BUT am I also correct in saying that once half of the two properties values is added together, and the remainder of the Estate in monetary terms is added in, once that passes the £325,000 point, we would be liable for IHT at 40% on the amount once £325,000 is subtracted?
So, for example, if both properties are valued at £500,000, and the remainder of the estate is £100,000, then would I be correct is saying that the amount my brother and I would be liable for IHT on is £275,000 at 40%??
You and your brother aren't liable - your father's estate is. The tax is paid before it's dispersed.So, for example, if both properties are valued at £500,000, and the remainder of the estate is £100,000, then would I be correct is saying that the amount my brother and I would be liable for IHT on is £275,000 at 40%??
But, broadly, yes. If your father had assets of more than £325k, then IHT is payable. His assets include half of "his" house, and half of "your mother's" house.
If the properties are worth £250k each - £500k total between them - and there's £100k of other assets, then his half of the properties is £250k, plus £100k, so there's IHT on about £25k - or just under £9k.
If the properties are worth £500k each - £1m total between them - the IHT is on about £275k, or £110k. Basically, that's his "other assets" wiped out, and you can cover the £10k shortfall between your brother and you to prevent "his" house having to be sold to cover the tax bill.
Your mother's assets include the other half of the properties.
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