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Joshua
Joshua, Lawyer
Category: Family Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I have 2 properties both worth around £280k each and small

Customer Question

I have 2 properties both worth around £280k each and small amount in savings - 15k.
I am divorced and have 2 grown up children. On my death I want each of my children to get one property each. But how to I draw up my will so I don't pay IHT and they don't have to sell one property or both to pay IHT. I am happy to put my son's name on my home. I live on my own. I'm 59 yrs old and in reasonable health.
Submitted: 2 years ago.
Category: Family Law
Expert:  Joshua replied 2 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

May I ask are the properties you own subject to any mortgages at present please?

Joshua :

From what you say do you wish to retain the rental income from the second property for the present or is this not of concern to you?

Customer:

No mortgages on either. Yes the other property is rented out and I need that income as that is my only income. Please also note my son is having marital difficulties. If I transfer part of my home to him can his wife claim it in a divorce settlement?

Joshua :

Thank. At this stage you will not be able to simply give your property to your son because this would deprive you of the rental income you say you need. In addition, from what you say, putting the property into your sons name would not appear to be sensible because it would allow his spouse potentially to make a claim against it in respect of any divorce settlement were that to occur. There are ways in which you can avoid inheritance tax in respect of your second property but unfortunately these all involve depriving yourself in one way or another of the asset in question which from what you say is not suitable for you at present. In addition you are still rather young to be considering such approaches to reduce your tax liability in respect of inheritance tax given the above as with any luck, you will have many years ahead of you during which time you will no doubt need the rental income. accordingly, you may wish to consider an alternative approach

Joshua :

given your age, it is likely that you will be better served by looking at term insurance policies in order to address any inheritance tax liability were you to pass away. These are policies that will simply pay out upon your life in the event that you were to pass away and you could choose a policy premium that provides a payout roughly equivalent to the tax charge your estate may suffer in the event of your passing. Given your age, you should find that such policies can be obtained relatively cost effectively though predictably such policies do increase in cost as one gets older for fairly obvious reasons.

Joshua :

such a policy would enable you to retain the benefit of the asset for the present together with its income but payout upon your death to cover any tax liability. As the policy premium creeps up over the years, you can reassess the position with regards XXXXX XXXXX tax at a later date. As you get older, you may find that you require less of the rental income to support yourself. In addition, were you to ever remarry in the future, this would give you further flexibility as it would enable you to effectively double the amount of inheritance tax allowance you have from £325,000 to £650,000

Joshua :

Term insurance can be sourced through most reputable financial advisers or even using online comparison sites to give you an indication of likely premiums.

Joshua :

is there anything above I can clarify for you?

Joshua :

Does the above answer all your questions or is there anything I can clarify or help you with any further?

Customer:

Yes that clarifies it. Can I come back to you if I have further questions?

Joshua :

Yes of course. If I can assist any further as the situation develops please do not hesitate to revert to me. You can do so just by returning to the thread.

Joshua :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though

Joshua, Lawyer
Category: Family Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
Joshua and other Family Law Specialists are ready to help you
Customer: replied 2 years ago.

I omitted to mention that at the moment I only own the rented property. Even though I don't own the other property I have been living there and my brother owns it outright. He wants to gift that property to me. So after that my estate will go from 280k to 560k and make my 2 children liable for a huge tax bill. They don't really get on with each other and it would mean having to sell both properties to pay the bill. I really don't want either property sold. As I said earlier I want to leave one property each to my children. Also I can't afford life insurance because I have health issues and policies are too expensive.


I have been reading about TRUSTS. Can my brother give the property I am living in with a life interest for me?? What are the risks involved with this?

Expert:  Joshua replied 2 years ago.
May I ask if you purchased the property your brother owns or if your brother purchased it please?
Customer: replied 2 years ago.

My brother purchased it but I paid the mortgage over the years and have lived in it.

Expert:  Joshua replied 2 years ago.
there are ways in which you can avoid inheritance tax complications however a life interest would notthe one of them because for inheritance tax purposes, a life interest is counted as being valued as part of your estate at the market value of the property.

You could potentially consider a discretionary trust with an overriding right of occupation in the property however there are tax consequences in terms of capital gains tax which need to be considered in relation to a discretionary trust.

At this point in your life, on the expectation that you have many years ahead of you, I would reiterate that term insurance can be a way to mitigate inheritance tax complications in terms of taking the property yourself absolutely and then considering the use of trusts at a later date in your life when such insurance will gradually become more and eventually prohibitively expensive however if you wish to look at the use of such trusts now, details financial planning must be undertaken before you commit yourself to the same together with worked financial examples in order that you can make a decision informed basis

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