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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15914
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Wondered if you could help us. My partner and I sold 2 properties

Resolved Question:

Wondered if you could help us. My partner and I sold 2 properties and purchased our bungalow ( we are not yet married). We made Wills leaving each other Life Interests in the property. Should I die first I understand my two thirds share in the bungalow will be valued and added to my other assets for Inheritance Tax purposes. On the death of my partner I understand the value of the whole property is taken into account and added to her assets in calculating Inheritance Tax. Could you advise me if that is the correct interpretation of the law? Thanking you.
9
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Let me take a look at this and I'll get back to you in a short while.
Expert:  TonyTax replied 1 year ago.
Hi. Let me take a look at this and I'll get back to you in a short while.
Expert:  TonyTax replied 1 year ago.
Your understanding is correct. By doing what you are doing, you will be creating an interest in possession trust whereby your partner will have the right to live in the bungalow until she dies or renounces her interest. If you were married when you die, the transfer into the trust via your Will will be an IHT exempt transfer as the lifetime beneficiary of the trust will be your surviving spouse. The same applies if your spouse dies first. Therefore, IHT would not apply on the first death. See question 18 here for confirmation. On the second death, the value of the whole property will be included in the estate for IHT purposes. I hope this helps but let em know if you have any further questions.
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