Issues as DH Owns Half his Mother's House.

[DivinityDimbling]

DH is a joint tenant of his mother’s house, which was purchased back in 1989 (following his parent’s divorce). It has never been his principal residence and since Dec 1999 he had a mortgage on his own home, now paid off in full.

The reason for her making him a joint tenant was to avoid inheritance tax, he did not agree to this nor did he ever sign anything, he is named on the deeds though. It mean that whenever the house is sold he would have to pay capital gains tax of ~£50k (house is now worth £450-500k). He has a sister and we believe current arrangement would deny her any share of the house. The will leaves assets 50/50.

We are aware that the joint tenancy does protect half the value of the house from being used to pay for care home fees if these ever arose. However, the new care home cap (which has been delayed to 2025, but might never happen) would make that redundant and there would be no benefit to the joint tenancy - but there is still the CGT bill that would have to be paid on the house sale. The question is whether the potential CGT bill can be reduced somehow, by taking steps now (or in 2025)? Should it be changed to tenants in common so that part of the house can be included in DH mother’s estate? Plus how would he get money to his sister without issue. It’s a total mess obviously.

There was a query about something similar in The Times recently. I've screenshotted (sp?!) the article and will post, hopefully in the correct order.

Screenshot 1

2 and 3

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Appreciate that I could have sent a link but it's likely behind a paywall. Hope the article is useful.

Thanks I will show him. To be honest I have found the entire situation frustrating for many reasons, will show this to him this evening.

Surely his sister can inherit her mother's share if she makes a will accordingly.

OP says the house is owned as joint tenants. If that is the case, the house will automatically belong to her husband when his mother dies. None of it will go into her estate, so her will is irrelevant.

‘Oh what a tangled web we weave
When we practice to deceive’…..

If they are joint tenants, OP's DH doesn't actually own half the house. He owns the entire thing, and so does his DM simultaneously. When she dies he automatically becomes sole and full owner. She doesn't have an individual "share" to leave to someone else - that's a "tenants in common" setup.

So just to check, his mum paid for 100% of the house, but it is in joint names, essentially she has gifted him half? If so, it’s called a gift with reservation of interest and will be included in her estate on death unless she starts to pay rent to him.

The only way to mitigate his CGT liability on a potential sale would be if he (and you) moved into the property. There really isn’t anything that can be done otherwise. If the house is worth £500k and he paid £50k tax on his share, he would still be walking away with £200,000.

Did DH pay anything towards the purchase of the house? If not, surely the proceeds minus CGT are still a substantial sum.

CGT is levied on the gain in value of the asset, not the whole thing, and there is an allowance. Much depends on how he acquired the asset, at what value and in what form. I recently received £50k from the sale of my Mum’s house as a result of a similar thing set up years ago by my Dad, and as it turned out there was no actual CGT to pay (the ‘gain’ in the value of the asset was much less than £50k and fell below the allowance).

It's a tenants in common arrangement that protects from care home fees. The first to die leaves their house to whoever, protecting the asset, second person's half can be used for care home fees during their lifetime.

@Allthegoodnamesarechosen Exactly that, I can’t express how I really feel about it all. What is crap is he was a student at the time and signed nothing and didn’t agree to it. He was possibly on his travels around the world when it all happened.

Thanks to everyone who has responded, it is a substantial sum as the house is worth between 500 to 550k.

How does he feel about his sister being denied any share of the house? Will she receive an inheritance of equal value or is there a reason she is being excluded? This could cause a lot of ill will.

Do the rest of the assets in the 50/50 scenario add up to the same value?

If the house is going to be sold just pay the CGT you will have the cash to do that, the real difficult problems are caused when the property is being retained and a mortgage has to be arranged to pay the tax.

This arrangement is unlikely to help with inheritance tax. Get DH to look up "gift with a reservation of benefit".

Posted too soon. Your DH and his mum need proper legal advice on this arrangement. It's not too late to sort it out properly.

If DH gets his share, he can gift 50% to his sister. No issue with CGT as he will have paid it. Or IHT if he lives for 7 years. This can be sorted on death of mum but he’s definitely going to pay CGT. Whatever happens, there’s tax to pay.

… and when all’s said and done it’s a big chunk of money for doing nowt.

@DarkDarkNight she inherited the Fathers house already worth about 350k All in all they have an agreement to make good when all done 50/50. The Dad left her everything without telling anyone and the Mum was just very financially naive over 30 years ago.

I find parents baffling who don’t treat DC as equals.

The DD was clearly the Fathers favourite @TizerorFizz The Mum did it to try and limit inheritance tax the tax regs were very different then and she just didn’t realise the implications.