Inheritance tax planning to take property over from father?

by Readers Question

11:32 AM, 15th August 2016
About 3 years ago

Inheritance tax planning to take property over from father?

Make Text Bigger
Inheritance tax planning to take property over from father?

I was wondering if any one had knowledge or a solution for a property ownership issue with inheritance liability in mind.IHT

My father and I purchased a property approximately 2 years ago in the form of a joint tenancy. This property was a rental investment and has been let ever since. My father’s estate at present will be over 1 million.

I understand his allowance, which will go up to £500k (for home owners) gets passed to my mum. But with this property in terms of right of survivorship what would happen. My mum and dad are happy to let me have his share now and have asked me to look into this.

My dad’s health is not to good and he has had a heart attack a few years ago as well as other complications which would mean a life policy may be really expensive if not in possible to get. Also my personal circumstances are such that my property portfolio holds approx 900k equity so I am looking for a suitable solution looking to the future.

The property in question was purchased approx 2 years ago for £320k needing substantial works. The works and financing came to approx £70k and the current value is approx £580k-£650k

Any advice would be greatly appreciated.

Many thanks



Kay Liddel

19:08 PM, 20th August 2016
About 3 years ago

Thanks again guys I have a few meetings next week and will let you know If there are any other potential ways this can be played. I was just rereading over the posts and the post by puzzler posed a interesting point. If I did nothing and only this 100k equity left my dads estate by virtue of the property ownership type. This amount which was under the nil rate band would that mean that cgt or iht would not be payable as it's a inheritance. Is that correct or am I as my wife would say misunderstanding everything, the rest off the estate would pass to my mum and any IHT would be payble on her death (I hate being so morbid but I feel planing is a key thing).

S.E. Landlord

20:08 PM, 20th August 2016
About 3 years ago

Reply to the comment left by "Kay Liddel" at "20/08/2016 - 19:08":

My understanding is -

If the property is owned as tenants in common and your father leaves the property to you in his will then assuming no other inheritances to take him above the nil rate band no iht will be due - and no CGT.

If owned as joint tenancy then the property will automatically pass to you, again assuming no other inheritances no iht will be due - and no CGT.

As your father's estate is above a million pounds then he and your mother should be considering iht planning taking account of all their assets, they may decide to take no action but will do so having considered the various options.

Inheritance tax planning is a specialist area and not all IFAs will have the right knowledge, but those that do will also be able to advise on suitable products and trusts that may help reduce the iht payable.

S.E. Landlord

20:24 PM, 20th August 2016
About 3 years ago

Reply to the comment left by "allan wadsworth" at "20/08/2016 - 18:47":

Discounted Gift Trusts, pension funds and discretionary trusts are some of the products IFAs can arrange to help with IHT planning. IFAs with IHT specialist knowledge are worth consulting.

Charles de Lastic

12:04 PM, 22nd August 2016
About 3 years ago

Please do not regard the following as advice as that is not possible without full knowledge of your parents circumsatnces.

I am an IFA with a specialization in IHT for the last 17 years. (see my website I apologise in advance for talking around death of your parents but obviously it is relevant.

If your dad is ill there is no point in passing the property to you if he is not likely to live 7 years and so the gift will fall back into his estate for IHT calculation purposes. If the gift is less than £325,000 of course there will be no IHT if the rest of the estate passes to your mother. However this would use up his transferable NRB allowance which may be detrimental if your mother then lives for many years after his death.There would also be potential CGT issues.

If your mum is in good health your father could pass his share of the property to your mother and she could gradually pass her share of the property to you thus using her CGT allowances over a number of years. There would of course then be a potentail IHT problem on your mothers eventual death which can probably be easily avoided with early planning. No real need for life insurance if she is likely to live 7 years.

It is important you take good advice while your father is still alive as it is possible to easily avoid the IHT and also easier to ensure protection of the total estate.

Feel free to call me if you need help

S.E. Landlord

14:13 PM, 22nd August 2016
About 3 years ago

Reply to the comment left by "Charles de Lastic" at "22/08/2016 - 12:04":

If the father left is share to his wife in his will, assuming tenancy in common, would that reset the base figure for CGT purposes to the current value. If that is the position the mother could transfer the entire amount to the son immediately.

Charles de Lastic

14:20 PM, 22nd August 2016
About 3 years ago

Reply to @ S E landlord
Yes that is true leaving it in the will would reset the base CGT figure. However that benefit would need to be counter balanced against how long the surviving spouses life expectancy is. Of course ( and more so with elderly people) as this is never certain I would imagine the small extra costs of transferring the property gradually would be a worthwhile strategy. Like all other advice it depends on the persons over all needs.

Simon Lever

11:54 AM, 4th September 2016
About 3 years ago

Reply to the comment left by "Charles de Lastic" at "22/08/2016 - 12:04":

Seems good idea to me.

However mother could give property to son in one hit as long as she ws expected to live 7 years the gift would drop out of IHT account and would be rebased for CGT.

Also need to be able to show that this was not a series of pre-ordained transactions as this would mean the overall effect would be looked at and taxed as if only 1 transaction.

Need to take independent professional advice from a specialist. A modest fee now could save thousands in tax later. Always assuming the government does not change the tax rules - again!!!!!


13:12 PM, 4th September 2016
About 3 years ago

Assuming all the above is sorted, who is going to get the rent during the remainder of your father's lifetime? Will you be getting it or will continue shared as now (at least I assume that is so)? If so it will not fall out of the IHT set up as he retains the beneficial interest.

If this is a serious question in that you do plan to do this, please go and see a tax accountant or solicitor who specialises in this. Forums are all very well but you will need a specialist to implement this anyway so go there now. You get what you pay for.

When you have advice get another opinion.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?



Message To ALL Mortgage Brokers

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More