Inheritance and family home

[AICM]

Hello!

Hope you can help.

I am 1 of 3 children. My dad passed away last year and everything went to mum.

Her will states a 3 way equal split between the 3 children. The house is worth about £450,000 and is mortgage free and mum has cash and investments of about £800,000 so inheritance tax will be an issue.

If the house is passed on to the child then I understand there is less inheritance tax to pay.

Here are my questions:

The house is not mentioned in the will. There is a family understanding that my sister will have it. I am happy with this and so is my brother but will it still reduce inheritance tax if the house goes to just one child?

Can the house be passed on in this way if it is not mentioned in the will?

Hope somebody cam help!

Thanks!

Why do you think inheritance tax is lower if the house is left to a child?

No. It doesn't work like that.

The value of the house is included in the estate for IHT purposes. However the allowance from your df is also used against her estate if she inherited his assets. Presumably if your dsis inherits the house she gets a lesser share of other assets so each share is even, unless stated otherwise.

My understanding is that the threshold rises to £500,000 for each partner in the marriage. So £1,000,000 for a married couple if the leave their main residence to their children.

That's one of my other questions LIZ.

If there is enough cash to ensure myself and my brother get an share equal in value to the house then that's fine. But if there isn't should we expect our sister to hand over cash to even up the inheritance before she gets ownership of the house?

I presume you are thinking of the extra Residence Nil Rate Band (RNRB) and the so-called Transferable RNRB. This is a reasonable explanation but the subject is quite complicated.

Considering the likely size of the estate, your mother might be well advised to (i) have her will professionally redrawn to clarify the situation regarding the house, and (ii) get some serious advice on estate planning.

I think you can use your dad's allowance as well if everything passed to your mum?

Won't your mum be spending those funds and they will decrease?

While your sisters asset will increase ?

You're correct about being able to transfer your df's allowance to your dm upon her death. But it really doesn't matter who then inherits from
your dm - child, random cousin or local charity - tax is payable on the value of the estate including property above the allowance.

This page explains IHT levels and how it increases if the main residence is left directly to a child:
www.moneysavingexpert.com/family/inheritance-tax-planning-iht/

So I think the OP is correct about there being approx £1m taxfree.

I can’t give advice on inheritance tax but I would leave the will as being a 3 way split of assets rather than leaving the house to one child. If your mother needs care later in life she may find her cash and investments goes down significantly while the house is likely to increase in value.

If at the time your mother dies the house is worth more than a third of the estate then yes I’d expect your sister to pay you and your brother some cash in order to even things up.

Thanks for the replies.

I do feel that yes in the long term my sister's inheritance (the house) will increase in value by more than cash even if it is invested well. That's why I am keen to ensure that if she does get the house she should give money to myself and brother to ensure that, at least at the point of inheritance, the shares are equal.

Just to point out we all get along well. There is no tension. I'm keen to avoid any family fall out at all. I just want things to be done fairly and legally. So I just want to know what is fair and legal!

My mother is no longer 'of sound mind' so I'm not sure where we stand with a new will. All 3 of us have financial POA but not medical.

Surely the house is part of the overall estate, and should be split three ways. Why is there an expectation that your sister should get the house?

See a solicitor for professional advice.

My mother's wish is that my sister should get the house. My sister owns her own home but never married. My mother thinks because she never married she should have the house. This seems a bit daft to me and my brother but if it can be done financially fairly we're both happy.

This wish is not in the will. The will simply states equal shares of the inheritance.

I agree Rose about a solicitor.

If it's not in her Will then how will your sister get the house. If her Will states her estate gets split 3 ways then wont the house get valued and added to her cash and investments and once all iht is paid the remainder gets split between the 3 of you. Does your sister even want another house if she already owns one. If your mother no longer has capacity then a new Will cannot be made anyway. If she needs care then that will need time paid for.

A wish is not legal.

If your mother’s will does not state that your sister gets the house, and she is no longer ‘of sound mind; as you put it, then the estate will be divided according to the will - ie split completely between all 3 children. It cannot be changed now to state the house goes to 1 child only.
So, the house will become the property of all 3 of you and any remaining cash will also be split 3 ways. If your sister wants the house for herself, she can then buy out your share.

I think your mother needs to re-write her will and clarify exactly who gets what. I can see this being a right mess when she dies, and I can assure you there is nothing more likely to cause long term resentment that people making assumptions about what a deceased wishes were. She needs to state them clearly in writing so that there is no argument.

@Brownlongearedbat

I think your mother needs to re-write her will and clarify exactly who gets what. I can see this being a right mess when she dies, and I can assure you there is nothing more likely to cause long term resentment that people making assumptions about what a deceased wishes were. She needs to state them clearly in writing so that there is no argument.

The OP has said her mum is no longer of ‘sound mind’ so a new will is not possible.

It's too late for her to write a new Will as she is no longer "of sound mind" according to OP.

@AICM

My mother's wish is that my sister should get the house. My sister owns her own home but never married. My mother thinks because she never married she should have the house. This seems a bit daft to me and my brother but if it can be done financially fairly we're both happy.

This wish is not in the will. The will simply states equal shares of the inheritance.

My understanding - not a lawyer - is if the will says split three ways, that's what happens.

Is your sister likely to object to a three way split on all assets?

Sorry, I should read more closely, I didn't see that she was no longer of sound mind.

Your mother may need long term care which will eat up her assets fairly rapidly.