I am helping my friend, whose mother has just died, sort out the family
>home. I am sure a solicitor may get involved at some stage but it would be
>useful to know what questions to ask.
>
> In 1986 the father died and the house passed through his will to his 3
> daughters stating in his will (drafted by a solicitor) that his wife had a
> life tenancy/right to live there. The house was registered in the names
> of the 3 daughters as tenants in common, by way of assent. The father's
> will effectively states the terms of the trust assumed by the tenants in
> common restriction.
>
copied to uk.finance in case my reply is utter tosh. I am sure someone there will know.
The house is now worth about 220,000 well below the current Inheritance
> Tax threshold and the savings are modest (about 8000). Probate will be
> necessary to release the bank accounts and the hand written will can be
> sorted out or discarded as appropriate
>
> Surely the house, although in the 3 children's names must be treated as
> held by them on trust or as nominees for their mother so they can inherit
> it at today's value to avoid incurring Capital Gains Tax based on 1998
> values. The 3 children are the next of kin.
I think that you will find that this is not the case and that CGT is payable.
AIUI, unless done correctly, what your father did is the worst of both worlds.
It is possibly ineffective for IT saving and probably does creates a CGT liability.
You need professional help to sort this out correctly.
I assume that if they were trying to avoid Inheritance Tax the law would
> assume that the mother had had full use of the house during her lifetime
> and the children only enjoyed a restricted ownership due to her occupancy
> and its value would be deemed to remain in the mother's estate. They
> would not be allowed to dodge Inheritance Tax by claiming they already
> owned it prior to death as they had moved out over 30 years ago. They now
> wish to set aside their father's transaction in their favour
If they wanted to do this they had an opportunity to make a deed of variation at the time of his death (within 2 years IIRC).
They cannot do it now.
and avoid Capital Gains Tax which seems reasonable.
The IR will think it is unreasonable, and so do I.
You can't enter into one contract to save tax in one way and then, when you have done that, retrospectively void that agreement and save tax in another way. The fact that you didn't actually acquire an IT liability is irrelevent (you can't pick and choose which is the best after you do know).
Would a formal document be necessary to declare these revised terms or
> could they just put the house on the probate form and keep it simple. You
> do not have to prove title to declare an asset on a probate form. >
> Any suggestions appreciated
Personally I think that you cannot avoid the CGT liability (you can perhaps avoid the tax by living in the property and waiting to sell).
tim
> Graham Brooker
>
>
>