Should we change my parents’ house details?
With inheritance tax in mind, is it time for this reader’s father to give up sole ownership of the family home?
Q My parents are ageing (in their 80s) and own their own home. However, the house is solely in my father’s name since its purchase some 60 years ago.
He has now agreed to consider putting the house in my mother’s name as well (and even joining my name as a daughter) to save on inheritance tax. Please can you explain the implications and whether seven years have to elapse for this to be valid. If he were to join her name or perhaps both our names, is it just a matter of a solicitor applying to the Land Registry with relevant forms and signatures or does a Deed have to be put in place?
A The first thing to say is this is not something that should be done in isolation. Your parents need to conduct a wider review of their wills and tax situation to make sure they are mitigating inheritance tax (IHT) wherever possible.
Presuming there is no mortgage, then to put your mum’s name on the property requires a simple deed called a transfer of equity. If there is a mortgage the lender will have to agree to the change of ownership. They also need to decide whether they both own 100 per cent of the property — known as joint tenants — or distinct percentages known as tenants in common. Since they are married there is no tax to pay on the transfer and the seven year IHT rule does not apply.
If your name is included, and depending on the value of the house, you may well be liable for stamp duty on your portion regardless of whether money changes hands. If they gift you the whole house, but continue to live there rent free, it would be seen as a gift with reservation and you would have to pay IHT whenever they passed. Alternatively they would have to pay you commercial rent, or you live with them, for the seven year rule to apply. Gifts made up to seven years before death pay a sliding scale of IHT. Capital gains tax may also be payable by your dad.
Helen Webster, solicitor at Irwin Mitchell, says: “If dad doesn’t want to transfer ownership then a will becomes key. He could leave the house to mum outright or with a lifetime interest and they could still potentially get the full IHT exemption [of up to £1m on the family home provided it is left to a direct descendent]. If she is not in good health and likely to need nursing home care, then giving her half the property may expose it to an assessment to pay care home fees, which is why the situation needs to be considered as part of a wider review.”
With no will, your mum is entitled to only the first £270,000 of dad’s solely owned assets with the remainder split half to her and half shared between you and any siblings.
I would strongly recommend getting professional advice before changing anything to make sure it is done in the most tax efficient way.
Rosanna Spero has been writing about money, property and small businesses for more than 30 years. She has worked for a range of magazines and newspapers, with much of her working life on the Money Mail section of the Daily Mail. She has also written a number of books on the subject. Email her with your questions at firstname.lastname@example.org