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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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When My Grandfather died in 1970, in his will he left the house

Customer Question

When My Grandfather died in 1970, in his will he left the house (he had built in 1967 for my Mom and Dad and my brother and I to live to live in) to My brother and myself equally and gave my Mom a life interest in it, so she could live there until she dies.
inheritance tax was paid in 1970 on the house.
my question is will my brother and I have to pay inheritance tax on this property - or as it was left to us will it be exempt
Also will there be capital gains to pay.
The house was valued at £5000 in 1970 ... it is currently valued around £450,000... so we are concerned that if it was included in my mothers estate when she dies, it would push the total value well over the current IH threshold allowance , (Approx £1million if the above house is included in her estate).
My Dad has recently died and as he left everything to Mom, his total allowance will be added to Moms..
Mom is 78 and will hopefully be here for some years to come ..:)
Submitted: 2 years ago.
Category: Tax
TonyTax
Expert:  TonyTax replied 2 years ago.
Hi.

Firs off, while Inheritance Tax went under another name in 1970, if your mother was given the right to live in the house through her father's will, then that is an interest in possession trust and the value of the house will form part of her estate when she dies.

Alternatively, she could renounce her interest during her lifetime in which case she will be treated as having made a potentially exempt transfer to the ultimate beneficiaries, you and your brother but that would require her to live for seven years for its value to fall out her estate. The IHT charge will taper away starting from the third anniversary of the gift as you will read here. Your cost for CGT purposes will be the probate value if you take possession of the house when your mother dies.

As you say, your mother's estate will benefit from the nil-rate band of your late father but that will still leave a significant IHT liability to be paid.

I hope this helps but let me know if you have any further questions.
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Customer: replied 2 years ago.

thank you
Expert:  TonyTax replied 2 years ago.

Thanks.

 

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