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Family & Relationships0 min ago
Tenants in common
Our house is in my husband's name only. I've read that we should change to tenants in common to avoid inheritance tax. Has anyone done this, is it worth it, and how much does it cost? Are there any other implications?
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OK here�s how it works. Say H and W are married with children, the house (only asset), worth �400k is all in H�s name. If W dies first, no IHT. If H dies first, no IHT if assets all pass to W. However, say W then dies 4 years later. She has a house worth �400k. Unless she leaves her whole estate to charity, there will be tax at 40% for anything in excess of the nil rate band (currently �285,000). Lets suppose that H only owned half the house as a tenant in common and under his will left his half to the children. It is under the nil rate band so no IHT. When W dies, she can leave her half to the children too and there will also be no IHT.
The point of splitting assets between spouses is to make full use of BOTH nil rate bands on the death of each spouse.
Have never done it and no idea how much it would cost � I would imagine no more than a couple of hundred quid. However, what I would be inclined to do is to take tax planning advice now. There is nothing worse than trying to save IHT by way of a Deed of Variation once the first spouse has died since there are limitations as to what you can achieve.
The point of splitting assets between spouses is to make full use of BOTH nil rate bands on the death of each spouse.
Have never done it and no idea how much it would cost � I would imagine no more than a couple of hundred quid. However, what I would be inclined to do is to take tax planning advice now. There is nothing worse than trying to save IHT by way of a Deed of Variation once the first spouse has died since there are limitations as to what you can achieve.
There is no Inheritence Tax due when a spouse inherits - However, upon the death of the surviving spouse, any assets above the Inheritnce Tax threshhold will be liable.
This means your children (?) may have a large tax bill upon the death of the surviving spouse - especially with property prices as they are.
The 'Tenants in Common' approach means that each spouse has a separate share in the property / assets (usually half and half). Upon the first death, that spouse wills their share to someone other than their spouse (usually their children). The idea is that this half-share falls below the I.T. threshold, so no tax is due. Similarly, upon the death of the second spouse, the second half of the assets are passed to the children, again, below the I.T. threshold, avoiding the children inheriting the whole share in one go and being liable for Inheritence Tax.
There's quite a clear explanation here.
The bit about 'do you trust your kids?' is a valid point, though !
This means your children (?) may have a large tax bill upon the death of the surviving spouse - especially with property prices as they are.
The 'Tenants in Common' approach means that each spouse has a separate share in the property / assets (usually half and half). Upon the first death, that spouse wills their share to someone other than their spouse (usually their children). The idea is that this half-share falls below the I.T. threshold, so no tax is due. Similarly, upon the death of the second spouse, the second half of the assets are passed to the children, again, below the I.T. threshold, avoiding the children inheriting the whole share in one go and being liable for Inheritence Tax.
There's quite a clear explanation here.
The bit about 'do you trust your kids?' is a valid point, though !
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