two brothers living in a co-owned house, inheritance tax implications ?

tangey

tangey

tangey

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In caring for our mother, myself and my brother never left home, and on her passing her 1/3rd of the house passed evenly to us, and so we now equally and jointly own the home which we continue to live in, just the two of us.

Our intention is that whoever goes first, the other gets their half of the house, and that is specified in our wills.

I can't recall how it was handled when my mother passed, but her estate was less than the threshold so there was no tax implication.

We are getting to an age where we need to start thinking about these things. Is it the case that whichever one of us dies, their share of the house will form part of the estate and therefore be potentially liable for inheritance tax, or is there any exemption in a situation such as ours that would take the house out of the estate for inheritance tax purposes ?
 
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I can't help you here. I have an entirely different issue.

One thing I'd say (based on my recent experience) is be open with each other and check you both understand what you're agreeing. It sounds like that's OK, so that's good.

Good luck.
 
tangey said:
We will be doing so, just wanted to check here in the event we were dealing with something that was bog standard
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My gut feeling is that standard inheritance tax rules would apply as I think the increased property exemption only applies to parents leaving property to a child. But yeah speak to a tax specialist.

There’s talk that a lot of inheritance tax rules will change in the near future as well so what the case is now might not be when the situation arises.
 
I believe standard IHT rules will apply since neither of you are leaving it to a child (your mother leaving it to you both would have benefited from this rule). Half the property'd value at the time of one of you passing will be liable to be added to the estate for valuation purposes to calculate IHT.

You also might be in a spot of bother if one of you needs long term care. If the other (healthy) party is over 60 then you'll be OK otherwise 50% of the value will be counted in any means testing for support for care.
 
If his estate is over the threshold then his estate will have to pay iht, I think he should be able to specify in the will that you get the house free and clear so that effectively his estate pays the iht before you get the house share. Assuming his estate is large enough to cover the iht due on the share of the house.

I am not a lawyer or accountant (I'm also not a shop)

Edit; just found this;

What are the new Inheritance Tax laws for siblings?​

The new Bill proposes to amend the Inheritance Tax Act 1984 to make transfers of property between cohabiting siblings exempt from Inheritance Tax in certain circumstances.

This can be approved if siblings;

  • have lived together for more than 7 years before the date of death
  • have lived together for more than 7 years before the transfer of the property if it is a lifetime gift
  • are over the age of 30 at the date of death
  • are over the age of 30 at the transfer of the property if it is a lifetime gift
They will then not have to pay Inheritance Tax on the property on the death of the first sibling.
 
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tangey said:
That bill would suit us very nicely, but it looks like it stalled due to the porogation and never went anywhere since.


under news "The 2022-2023 session of Parliament has prorogued and this bill will make no further progress."
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So yeah, it would be worth making a plan for how iht is going to be covered to make sure you retain the share of the property.
 
andybird123 said:
So yeah, it would be worth making a plan for how iht is going to be covered to make sure you retain the share of the property.
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We are both over 60 and have lives together all our lives, and are as tight as can be, so ownershiip when 1 dies isn't an issue, that's sorted in the wills. Was just trying to see if there was anything in the tax law that meant the survivor did not have to pay IHT, but that looks like it's not the case.
 
tangey said:
We are both over 60 and have lives together all our lives, and are as tight as can be, so ownershiip when 1 dies isn't an issue, that's sorted in the wills. Was just trying to see if there was anything in the tax law that meant the survivor did not have to pay IHT, but that looks like it's not the case.
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It's the estate that pays IHT, but yeah the allowance only applies to decedents not siblings. If the property is the only thing in the estate then it could become an issue, or if there is something else but that gets left to someone else then each person would only get the share of the thing minus iht.
 
Is your or your brother’s worldly assets plus half the value of the house more than £325K ? If so then as the law stands now the estate will pay 40% tax on the difference between that amount and £325K
 
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