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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 9338
Experience:  I have been practising for 30 years.
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My parents had their house as tenants in common, where each

Resolved Question:

Hi, My parents had their house as tenants in common, where each would leave their half to a trust for their children. My father passed away 2 years ago. I completed probate and his half of the house was worth less than the £325k Inheritance tax threshold, so there was no tax implications.
My mother who of course still lives there now needs to arrange some equity release from the house. The solicitors involved said that it cannot happen unless the deeds/land registry is changed to have her name as the home owner, so they are arranging this change.
However, my concern is the Inheritance Tax implications in the future when my mother also passes away (her will is the same - her half of the house goes to the children as well)........when I do Probate, I am worried that the value of her 'estate' will have to be put down as the whole house value, not half.
House value currently - £500k approx
House value at my father's passing - £400k approx
Can you please advise ?
Many thanks
Submitted: 9 months ago.
Category: Law
Expert:  F E Smith replied 9 months ago.

Thank you. You are right to express concern.

However, there is no reason why the solicitor that is arranging the transfer into your mother’s sole name cannot advise you in respect of this.

What you need to do is get your mother to exercise a deed of trust whereby although the property is in her sole name legally, the equitable estate (financial) of your father share still vests in the children.

To satisfy the revenue that this was not a sham created at some later stage to avoid paying inheritance tax on the whole price, it would be advisable to have the trust registered against the property as a restriction. That way, can prove that the trust existed at the time of the transfer and that it was only done for mortgage purposes.

Can I clarify anything for you? Please rate the service positive so that I get paid. We can still exchange emails. Best wishes. FES.

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Customer: replied 9 months ago.
Thanks for your response.
If I am understanding your reply correctly, I should have no issues with a future probate in the sense that I need to only apply a £325k IHT band to the value of the half of the house, not the full house value as long as we do the following if the deeds get put wholly in my mothers name for the sake of an equity release plan :a) DEED OF TRUST - specifiying the equitable estate is still only half of the property value
b) REGISTER THE TRUST AS A RESTRICTION - please advise how this is normally done, if it is costly, and will the equity release lenders have issue with this being done ?Many thanks