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.
May I ask the approximate amount left owing on your mortgage please?
thank you. Would you wish to give your father in law some security in the home in return for his offer?
He has security in that we would never evict him. However, if it means that we would not be liable for a tax bill we would be willing to give him legal security. This would have to be signed over to his daughter (my wife) in the event of his death as there are two brothers who would benefit from the balance of his estate.
Thank you. It is not necessarilty that you would never evict him - the future is necessarily uncertain and if anything were to happen to you and your wife, it may be that the individual or individuals that your estate is left to would not feel the same way. In such circumstances therefore it is worth considering giving your father a formal life interest in the property as such a life interest would be binding on the matter what circumstances the future brings and give him security of tenure for the remainder of his life. however, this is very much a matter for him and you to decide between you. It is unlikely to make a great deal of difference to the tax position.
regarding the position in respect of tax, could you tell me approximately the total value of your father-in-law's assets including the money he intends to give to you to pay off the mortgage. would his assets in total exceed £325,000 do you think?
Thank you. Has your mother in law passed away? if so, were they married at the time of her passing?
Yes and they were married at that time.
Thanks. Finally did your mother-in-law to your knowledge leave most if not everything she owned to your father-in-law or did she make substantial gifts to other parties in her will?
It was all transferred to him
thank you. On that basis, your father-in-law will have an inheritance tax allowance of £650,000 being his own £325,000 allowance and the benefit of your mother-in-law's £325,000 allowance which under the law can now be transferred to a spouse if it is unused. Your mother-in-law may have used her allowance if she passed gifts to persons other than your father-in-law but from what you say she did not and therefore her allowance will be unused and would pass to your father-in-law as above
accordingly, when your father-in-law comes to pass away, his estate will be well within the inheritance tax allowance of £650,000 and no inheritance tax will be due.
The gift he proposes to make to you to enable you to pay off your mortgage will be treated as a gift with reservation if he is going to live with you and therefore for the purposes of inheritance tax it will be counted as part of his estate even though it has been gifted to you but as above, this makes no difference as his assets are well within the above allowances.
accordingly, there would appear to be no inheritance tax issue for your father in laws estate. As regards to capital gains tax...
Thank you that has been very informative.
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