Inheritance Tax 2015

[modeller]

When my wife died in 1997 I was the sole beneficiary but I signed a Deed of Variation in favour of my two daughters ( at the time that was the advise to minimise inheritance tax then or when I died ) . My daughters now own half the value of my house I own the other half. Since this years budget that was an unnecessary move. However there were never any problems so it didn't matter.

I have now looked at all the 1997 paperwork with view of carrying forward any unused IHT threshold allowance from my wife's estate and realise that the Grant
of Probate includes her assets e.g savings but not the value of her share of the property which we ( my wife and I ) owned jointly. This may be a good thing or
not ,depending on when I die , I'm 88 .
I have waded through the Web but can't find any information which may help me decide what I should/could do now .

[ubasses]

There are 2 ways of owning a property 1 is as joint tenants which means the house would automatically pass to you and would therefore not be included in your late wife's Estate which ties in with probate. However this would mean that there would be no need for a Deed of Variation.

The 2nd is as Tenants in Common where you each own an agreed portion of the house and it would have appeared as part of her Estate for Probate.

Are you sure you did not gift half of your house to your daughters after everything had been completed to reduce your IHT bill when the time comes.
If you inherited everything and gifted your daughters the half house, your IHT threshold will be doubled. As more than 7 years have passed since the transaction took place, their will be no IHT due on the 50% value of the house but your daughters may have to pay CGT when sold depending on the increase in value.
If you have misread the papers and the house was included and you did sign a Deed then you will have the unused % of your wife's allowance the added to your threshold when you die. The CGT position remains the same.

[modeller]

As you may know the Grant of probate only shows the total value of the estate does not the details of how it is made up . H the

[ubasses]

OK, who was Executor of your late wife's Will, can you approach them for full details. At the end of the day, there is not much you can do now about the part of the house that has been given away, but the information would at least let you work out how much your own IHT threshold will be and work out if you want to give any more of your Estate away.
If you survive 7 years anything you give will not be brought back into the Estate for IHT and if you don't the liability will be reduced for every year you survive.
Just take care, if you need to go into a Care Home you cannot be seen to have given anything away that may make it look as if you are trying to avoid funding your care.

[modeller]

ubasses Thanks for your help. I don't want to involve the Inland Revenue at this stage.
As you may know the Grant of probate only shows the total value of the estate , not the details of how it is made up . In my case that value was my wife's gross assets , excluding property. I now notice that the grant of probate have included some other assets ( e g bank account ) that were jointly owned . However it is only the property that would materially affect my IHT . In the IHT 44 form the term jointly owned is used.
Another point, the Deed of Variation was done at the time of applying for probate , so I assume it would have applied when the probate was granted.

[ubasses]

There is no need to involve Inland Revenue at this stage as they will not have any interest at all. The most important information is how the assets were owned. Any asset that was in joint names would automatically be outside her Estate and would be placed in your name as the joint holder. The only exception could be the house as explained earlier.
To plan ahead you really need to see a breakdown of assets for Probate purposes and whoever Executed her Estate should be able to give you this information.

[modeller]

ubasses
It occurs to me daughters inherited the property from my wife . It was not a gift from me therefore how would CGT apply ? Also what would happen if they didn't sell the property but rather moved in ? Not likely, just a thought. !

[ubasses]

Does not matter whether inherited or a gift, when the property is sold they would have to pay CGT on the increase in the property since the date they acquired it. However they will only be responsible for 50% each and they will each have a CGT threshold currently £11100 before any tax needs to be paid. They would also be able to offset any costs involved in selling.
I am not overly knowledgeable on the subject of CGT nitty gritties and hopefully some one will come along who will know how moving into the property and for how long will effect any tax.

[Dogsbody2]

Well the simple answer to the CGT question arising is that each daughter will have a potential liability to CGT based on a proportion of the number of months that your house is not their principle private residence divided by the total number of months of ownership between 1997 and any date in the future when they cease to own it.

In other words, moving into it will not completely remove a liability to CGT assessment for each of them - it works in proportion to length of times occupied/owned.

There are several twiddly bits that could be added, like the final 18 months of ownership period are always discounted in any CGT liability calculation, one or both daughters may wish to elect the property as their 'principle private residence', but there are rules attaching and it would depend on the situation regarding their current home ownership.

None of what I have said impacts your IHT position, only their future liability to CGT due to ownership.

You might wish to take paid for tax advice to minimise this for the whole family - it doesn't look the decision to shift ownership to daughters in 1997 was all that clever, and it certainly has hindered since the Labour Chancellor changed the rules by doubling IHT bands for couples in about 2007.

[Peter Pedant]

O God I think you might have to pay a tax consultant to find out what the position is at present, if you die with your current will in place

are you planning to survive until 95 ? if the answer is no
then I am not sure if you CAN usefully do anything

if the property were jointly owned ( very likely ) then the omission from probate may have been purposeful. I cant really think the person who applied for probate 'forgot' she owned half a house as a joint tenant - and you dont need probate for a joint property to pass lawfully


I think the deed of variation was used to get around the interest in possession bit - if you had taken the whole house and then assigned the daughters half you would have had an issue with reservation of benefit. And if the deed of variation is valid then that is avoided as you never owned the half-interest that they ended up with ( your wife did )

I dont think there is anything that you can sensibly do now as I reckon you dont have time.... oops

I think probably the idea was to downsize at some point after your wife's death and you never got around to it .......

[Dogsbody2]

I`m wondering if there is a way of revoking of making another deed of variation to alter the impact of the first.
Even this long after the original. Requires a tax expert.