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Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.
Was the interest in possession trust set up via a will. When did the first deceased die? Was the remaining party the wife of the first deceased? Who was the property left to after the end of the life tenancy according to the terms of the will? Can you explain who the parties are to the 50:50 Tenants in Common ownership? Was the life tenant a part owner of the property with the first deceased?
Leave this with me while I draft my answer.
Normally, if the 1st party to die owns 100% of the property and their will puts it into a trust with a life tenant (an interest in possession trust), when the 2nd party dies the whole value of the property is included in the estate of the 2nd party on their death for IHT purposes simply because the property avoided IHT on the 1st party's death.
As half the property was owned by the 2nd party and half by the 1st party I don't understand why 50% was used to calculate the value of the 1st party's estate for IHT purposes death as it was effectively left in trust for the ultimate beneficiary with a life tenant. Therefore, the whole value of the property should be included in the estate of the 2nd party. However, the terms of the original will stand and the 50% owned by the 1st party goes to the beneficiary named in that will. The other executor is simply wrong. The 2nd party does not own the whole house.
I hope this helps but let me know if you have any further questions.
Normally, the life tenant owns none of the property but it is still included in their estate for IHT purposes.
See the final paragraph under "Income and Capital" here.
I'm not sure of the law around being a life tenant as well as being a tenant in common. It may that the value of 50% of the house was included in the 1st party's estate for IHT purposes as the couple were not married and did not enjoy the tax breaks associated with marriage.
I doubt that HMRC will entertain a claim for the IHT to be reassessed on the first death but it may depend how long ago the first death was.
It is certainly not the case that the life tenant owns all the property.
Would you mind rating my answer before you leave the site please.
I would say you could if they got it wrong.
Normally, IHT only applies to lifetime transfers into trust, not via a will.