IHT on parents property

[Banksy56]

Will my mother's house need to be included in IHT?

My father / mother bought our family home over 40 yrs ago and it has been mortgage free for at least 25 yrs. My father passed 30 yrs ago and eventually 5 children moved out except our unmarried youngest sister who had no children or partner.

Sadly my sister has now passed after a short illness, without leaving a will.

She was added to title deed of my mother's house about 15 yrs ago, I believe as Joint Tenants. We have always planned to split the property equally if my mother passed but this was all verbally, my mother has no will. This is still the same now with no disagreements.

My sister moved out a few years back and all siblings then took turns to help my mother on a daily basis.

Thanks in advance.

[Sam101]

The intestacy rules means that the estate of your Mother is share equally between the children and that would be her half of the house. However, I believe that your sisters estate of half the home will be distributed to her siblings.

Provided your Mother's estate is not over the nil rate band allowance of her and your father, with additional residential allowances as well, then there will be no inheritance taxes to pay.

[Banksy56]

Thanks for the reply Sam.

Just to be clear my mother is still alive, so she will be next of kin, and lives at the property.

My sister's estate which will go just over the IHT threshold without including my mother's property. This includes my sister's own property and savings etc.

The confusion is regards to listing my mother's property as a joint asset even though verbally this was not the reason my sister was added to the property deed. Also she was not living there when she died.

Thanks.

[Sam101]

Sorry about the mistake with your Mum. Your sister's assets would not include her half share of the mothers home if it was owned a Joint Tenants as it would pass 100% to your Mother. Were it owned as Tenants in Common then it would be part of your sister's estate.

Your sister has an inheritance tax allowance of £325,000 plus a residential allowance before tax.

When your mother passes, she will have both her and your late fathers nil rate band allowance plus two residential allowances before tax. Hope this helps.

[sederunt]

I think that Sam101 might be incorrect.

There will be no entitlement to RNRB because your late sister had no lineal descendents.

And while the house share may pass to the joint owner by survivorship, I don't think that excludes the share being included in the estate for the IHT calculation

[Banksy56]

Thank you that's a great relief as I'm 90% sure they are listed as joint tenants.

Also do you know if the joint property needs to declared in IHT forms or can it just be ignored.

And regarding residential tax allowance I was under the impression you can only claim this if your a descendant of deceased? Can my mother claim this too on my sister's estate?

Thanks.

[Sam101]

I stand corrected thanks to SEDERUNT

[Banksy56]

Oh dear I feel the stress coming back.

We the siblings were hoping to fill and return the IHT forms ourselves but I think this seems too complicated and we may need professional assistance.

Thanks for the reply's.

[Sam101]

You might like to have a look at the online application for Probate. I have heard that it is reasonable easy.

Also before enlist costly solicitors, there are a number of PROBATE firms who quote a reasonable fee to handle the Probate application for you. Just don't give them complete control, just ask them to deal with the applications for you to handle the estate.

[Banksy56]

Thanks for advice we will surely check that first.

I'm just shocked my mum might need to pay IHT on my sister's share of her own property, which my sister or any other sibling had no hand in buying.

Paying tax on my sister's estate is not a problem and expected. But given the house prices in South East of England my mum's potentially looking at £100k + IHT for her own house whilst the death of my sister was out of her control, this seems totally unfair. And she's been mortgage free for at least 25 yrs.

No wonder the tax man is always laughing. Surely there's got to be a fairer solution to this.