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IHT and property in trust

(6 Posts)
PetalMettle Sat 07-Jan-17 21:30:44

Hello.
MIL has small (just in 5 figures) savings and a property owned outright that would be over the IHT threshold. We have discussed the possibility (her suggestion) of signing over the house to DH and BIL, but continuing to live there. Does anyone know much about this please?

Pitapotamus Sat 07-Jan-17 21:39:57

Yes, it doesn't work for iHT purposes, Google "gift with reservation of benefit". Basically it will be treated for IHT purposes as if she hadn't given it away unless she pays market rent to live there. There is the new main residence nil rate band as well as the normal nil rate band available now. Have you considered that when working out whether her net assets will be over the threshold?

PetalMettle Sat 07-Jan-17 23:06:18

Thanks, no I hadn't - just reading this www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band and it seems as if there's an extra £100k involved? - so making it £425? I think that she would still be over as houses on her street are going for £600

Marmitelover55 Sun 08-Jan-17 08:53:07

I think it is increasing over the next few years to £500k per person, so a couple will have a total of £1m.

If you MIL only has relatively small savings how will she fund any care that she needs? She may need to sell her house to pay for it unfortunately.

PetalMettle Sun 08-Jan-17 10:36:01

Yes it is possible that the house will have to be sold in any case if she needs care, at which point it'll become academic. I suppose it's better to not do anything for now then

Pitapotamus Sun 08-Jan-17 11:19:16

Is she / was she married. If so and her husband died before her leaving everything to her she will have his nil rate band and main residence nil rate band as well as her own so you can effectively double the tax free allowance. If she moves into care and sells her home to fund that she will still get the main residence nil rate band strangely, provided she leaves her assets to her direct descendants.

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