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Daily Mail
28-05-2025
- Business
- Daily Mail
I'm 80 and want to move in with my son and his family, will it create a tax trap?
My wife and I are 80. What are the tax implications and pitfalls, if we sell our house and buy another jointly with my son and his family in order to live together? What can we do to mitigate these? A.S, via email SCROLL DOWN TO ASK YOUR FINANCIAL PLANNING QUESTION Harvey Dorset, of This is Money, replies: Moving in with family can help people see enjoy their later years in comfort, with the help they need along the way from loved ones. Having grandparents on hand can also be a vital help for working parents too. Intergenerational living won't be without its tricky moments but it is a great way to spend precious years together as a family and see more of your grandchildren. It also allows families to pool their financial resources and potentially get a home, space or location, that they might not be able to alone. You are right to check up on the tax implications though, as this kind of joint ownership can have an impact on everything from stamp duty to inheritance tax. You don't state how much your existing home is worth or what the new one will cost. The financial advisers we spoke to explained this will make a difference to whether you need to worry about inheritance tax and how complicated things may be. Ian Dyall, head of estate planning at Evelyn Partners, replies: The two taxes you need to be aware of are inheritance tax and a form of income tax called 'pre-owned asset tax', which was introduced in 2005 as an anti-avoidance measure to target people who were managing to sidestep the inheritance tax rules. Let's talk about the principles of inheritance tax first and then we can apply it to your case. If you reduce the value of your estate by making an outright gift, that will only be effective in reducing your inheritance tax liability if there is no 'reservation of benefit'. You also generally need to survive the gift by seven years before it ceases to be included in your estate unless it is covered by one of the exemptions. A reservation of benefit occurs where you continue to use or benefit from an asset that you have given away, for example giving away a property but continuing to live in it. In your case, whether there is a deemed lifetime gift for inheritance tax will depend on who pays for the new property and how it is owned. If you take the proceeds of your current home and use it to help purchase the new property, but the property is owned solely by your son and his wife, then a gift has happened for inheritance tax purposes. However, if you then live in that property rent-free, it is likely to be treated as a reservation of benefit for inheritance tax purposes. The value would remain in your estate and will be liable to IHT on death, irrespective of how long you live after making the gift. If the new property is co-owned with your son in proportion to how much each of you have contributed, then there would be no gift and only your share of the property would be liable to inheritance tax on your death. If the property were solely owned by your son and his wife, you could avoid the reservation of benefit by paying a market rent for your use of part of the property. You would need to get a professional to determine a fair rental value of your use of part of the property, and your son would be liable to income tax on the rent, but in some cases that may be worth paying if you think you are likely to live seven years but not an excessive period beyond that. If you no longer own a share of a property on death, you may be worried that you will lose the 'residence nil rate band', which is an inheritance tax allowance that can be used if you leave your home to your children and grandchildren on death. However, 'downsizing provisions' exist to allow people to downsize or sell their home later in life without losing the allowance, so you should not lose any of the allowance that you would have been entitled to. Make sure you get ownership set up properly Patrick Haines, partner at Partners Wealth Management, replies: There should be no tax issues (other than potentially stamp duty) on the planned move to the new 'family home'. For inheritance tax purposes, you may have available a tax-free nil rate band each of up to £325,000 and an additional tax-free residence nil rate band each of up to £175,000 (certain conditions apply to the latter). This can provide a tax-free estate of up to £1million. Where your estate is valued within the above limit, there may potentially be no inheritance tax due on your estate on the last to die and your son and family could ordinarily live with you in the meantime without any tax implications. A properly drafted will should be arranged. For larger estates, inheritance tax is usually payable at 40 per cent on your estate in excess of these allowances. In this case, there are further considerations and these relate to how the property is legally owned from outset and also your life expectancy. To meet your objectives, the ownership of the property in this case could be arranged as tenants-in-common where you will typically own 50 per cent and your son would own the other 50 per cent. We would recommend an equivalent sharing of the running costs as well. You could then take advantage of a co-ownership discount, which HMRC permits where the co-owner is not a spouse or civil partner. Your son can remain in occupancy for a discount to apply. On the successful application following the death of the 50 per cent co-owners, a discount of up to 15 per cent of the value of the deceased's share can be applied. The other 50 per cent owners would continue to own their share. In our example, if you as parents pass away within seven years, the 50 per cent share you have given to your son on the purchase of the new property would fall back into your estate. Where the total estate value exceeds the available nil rate bands, then inheritance tax may be due on the excess. The gift to your son of the 50 per cent share is called a potentially exempt transfer (PET) and this gift will fall outside your estate for inheritance tax if you survive a seven-year period. For 'failed PETs' where the 50 per cent gift to your son is in excess of the available nil rate bands of £325,000 each, taper relief may apply to the excess which can reduce the tax payable. Be mindful that the inheritance tax on any failed gifts might need to be met by the beneficiaries. Inheritance tax on jointly owned property is rarely straightforward and whether or not tax has to be paid will depend on several factors, including the status of the person inheriting and their relationship with the deceased, how the property was jointly owned, the type of the property concerned and details of occupancy. Caution: tax planning around the main residence and joint property ownership can be fraught with danger, particularly where circumstances change or relationships deteriorate so professional legal advice from a qualified solicitor is strongly recommended. Help with financial advice and planning Financial planning can help you grow your wealth, sort your pension, or make sure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement and inheritance tax planning. If you are looking for help sorting your finances and want to work out whether you need advice, planning, or coaching, the following links can help you understand more: >Do you need financial planning or financial advice - and is it worth it? > Financial advice: What to ask and how much it might cost > Are you retirement ready? Take our quiz and get financial planning help > Inheritance tax planning - what you need to know to protect your wealth What is pre-owned asset tax? Ian Dyall adds: If you sell your property and give the cash to your son who uses the money to buy a property in his name, which you then live in, there is an argument that the reservation of benefit rules do not apply. In this case you could be liable to pre-owned asset tax. This is an income tax charge paid annually on the perceived value of your occupation of the property. You can avoid it by electing to have your contribution towards the property treated as a reservation of benefit, or again by paying a market rent. Its application is complex and it is easy to unwittingly fall within the scope of the tax through actions driven by motives unrelated to tax planning. The bulk of UK wealth is held in people's homes, so successive governments have made it difficult to mitigate the inheritance tax liability on your main residence, introducing new legislation to block loopholes when necessary. If your share of the new property is worth less than the proceeds from your existing home, then planning with the funds you have released by downsizing may be the simplest approach to mitigating inheritance tax. Get your financial planning question answered Financial planning can help you grow your wealth and ensure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement, tax planning and inheritance. If you have a financial planning or advice question, our experts can help answer it. Email: financialplanning@ Please include as many details as possible in your question in order for us to respond in-depth.
Daily Mail
27-05-2025
- Business
- Daily Mail
Can the council make me sell my mother's bungalow to pay for care?
My mother currently is in an elderly mental health ward suffering with depression and anxiety. Her £150,000 bungalow in Port Talbot has been put into a trust since 2015 with myself as the beneficiary and my mother remaining as a tenant. Should the need arise, and she needs to go into something like a sheltered housing complex, could the local authority make me sell her bungalow to cover any care and housing costs? S.M, via email SCROLL DOWN TO ASK YOUR FINANCIAL PLANNING QUESTION Harvey Dorset, of This is Money, replies: Care is something that many of us don't consider earlier in life, meaning that if or when this need arises we may not be ready or able to fund it without making financial life altering decisions. As many as 66 per cent of care seekers are self-funding, according to 2024 data from Just 16 per cent of care seekers were able to access funding from their local authority. For those who live alone, there is a risk that means testing could see their home's value used to pay for care. There has been forethought on your mother's part to place her property into trust. However, depending on the circumstances of this, it could still be deemed that the property can be used to fund any care needed. As discussed below, this largely relates to the decisions made in 2015 and the reasons they were taken. Yours is a complex issue. This is Money spoke to two financial advisers to find out what your mother needing care might mean for her property held in trust. Natalie Donnell, independent financial adviser at Flying Colours, replies: I am sorry to hear about your mother's illness. Having looked at your question, I think the key issue as regards the bungalow is intent. By that, I mean what was the intention from your mother when she placed the property into a trust in 2015? This is because if your mother were eventually to need full-time care, the local authority would conduct a capital assessment to determine who is responsible for funding the care (i.e. self-funding or funded by the local authority). When it comes to long term or full-time care, if the value of your mothers' assets is more than £23,250 (in England – it varies in other parts of the UK), she will be responsible for funding her care needs. This is different from the current situation, where I would think your mother's care, in a mental health ward, is being funded by the NHS. Intent comes into this because if the local authority deems that the property was put into trust in 2015 to reduce assets and avoid the eventuality of paying for full-time care later down the line, they could consider this this to be a case of 'deliberate asset deprivation'. That would mean they could treat your mother as still owning the asset (known as notional capital). They could also refuse to fund care (or assess your mother's situation as though she still owned the asset). In some cases, they could take legal action to challenge the trust. Whether the trust holds under scrutiny depends on several factors such as whether the trust was created at a time when future care needs were foreseeable, and the structure and type of trust (i.e. discretionary, life interest etc.). Trusts are a notoriously complex area so I would advise you to seek specialist independent advice on the likelihood of the current arrangement falling foul of the 'deliberate asset deprivation' category, and if so, to see whether there is any action you could take to mitigate against this. Get your financial planning question answered Financial planning can help you grow your wealth and ensure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement, tax planning and inheritance. If you have a financial planning or advice question, our experts can help answer it. Email: financialplanning@ Please include as many details as possible in your question in order for us to respond in-depth. We will do our best to reply to your message in a forthcoming column, but we won't be able to answer everyone or correspond privately with readers. Nothing in the replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Adam Johnson, director at SJP partner practice New Forest Wealth Management, replies: The first consideration is whether your mother's care will be funded by the NHS (such as through NHS Continuing Healthcare) or subject to means-testing by the local authority. If her needs are deemed primarily health-related — for example, if she is sectioned under the Mental Health Act or qualifies for NHS Continuing Healthcare — the value of her property will be disregarded entirely, as the NHS covers all associated costs. If, however, the care is means-tested, the local authority will assess your mother's income, savings, and assets. If her savings exceed £23,250 and her income is insufficient to cover care costs, her home could be included in the financial assessment, depending on her living arrangements. Property use and living arrangements If your mother continues to live in the property or moves into another owned property (such as sheltered accommodation) and receives domiciliary care, the value of her home is typically ignored. However, if she moves into residential care and no longer lives in the property, the local authority may then consider the value of the home — unless it is exempt for another reason, such as a dependent still living there. Trust ownership and deprivation of assets As the home has been placed in trust, the key issue becomes whether your mother has any rights to the capital value. If the trust structure means she has no such rights — and only a right to reside, with the capital ultimately passing to you — she may no longer be considered to "own" the property for assessment purposes and therefore cannot be made to sell it. However, this leads to the question of deliberate deprivation of assets. If the local authority believes the home was placed in trust to avoid future care fees, they could treat her as though she still owns it. Their judgment will centre on why the transfer was made in 2015. Since the arrangement did not benefit inheritance tax planning (due to her continued occupation), they may question what financial objective was being addressed, and whether placing the property in trust was a proportionate response. There is no statutory time limit on how far back local authorities can look for evidence of deprivation. Although a transfer made 10 years ago may be less likely to be challenged, it cannot be ruled out. The outcome will ultimately depend on the local authority's interpretation of the facts and the strength of the explanation for the trust. I recommend reviewing the trust documents in detail.
Daily Mail
07-05-2025
- Business
- Daily Mail
Our house is in my husband's name only: What does this mean for inheritance tax?
Our house is in my husband's name. He bought it before we were married 33 years ago and we have never got around to adding my name. When one of us dies, would my husband and I still be able to inherit each other's residence nil-rate bands of £175,000 each for inheritance tax purposes? What do I need to do to make sure that I do benefit from this? W.B, via email Harvey Dorset, of This is Money, replies: It is easy to overlook future tax decisions earlier on in life. Back in the mists of 1992, when you might have been heading to the cinema to watch Aladdin, or supporting your favourite football club in the first Premier League season, a future inheritance tax liability was unlikely to be at the top of either of your minds. But time moves fast. In the blink of an eye it is 2025, and as you say, your name still isn't on the house. Inheritance tax of 40 per cent is usually charged on a deceased person's assets worth over and above £325,000. This is known as the nil rate band. People are allowed to leave a further £175,000 worth of assets without them becoming liable for inheritance tax, if their home forms part of their estate and they leave it to direct descendants. This is the residence nil-rate band, and both this and the standard nil rate band can be transferred to a remaining spouse on death if they are unused by gifts to others. The two combined create a total allowance of £1million for a married couple. If your husband dies before you, then you will receive his residence nil rate band via spousal transfer. However, if you were to die first, your husband would not receive your RNRB as you are not a joint owner. This is Money spoke to two financial advisers to find out what you need to do to make sure your home is safe from the taxman. Chris Peters, independent financial adviser at Flying Colours, replies: If your husband pre-deceases you, then you should receive the property without any inheritance tax (IHT) liability. You will be entitled to spousal exemption regardless of being a joint owner or not. Once you took ownership of the property, you would also have your own residence nil rate band (RNRB) of £175,000, as well as inheriting the same RNRB from your husband, making a total of £350,000 that could be passed down directly to children or grandchildren on your death. It is worth noting that RNRB is only applicable if direct descendants - children or grandchildren - will inherit the property. However, if you pass away before your husband, then you would not be able to pass on any RNRB to him if your name is not on the deed and you are not a joint owner. To ensure that you're both recognised as owners for IHT purposes, you may want to add your name to the property deeds. This can help clarify ownership and ensure you both benefit from any potential IHT reliefs. Another consideration is whether you should become a joint owner and have your name added to the property deeds. This is because if both you and your husband were to pass away at the same time, then the estate would pass directly to your beneficiaries. If these were direct descendants, then only your husband's RNRB would be available. However, if you were to change the deed so that you became a joint owner, then the amount available to pass down would be £350,000 – a RNRB of £175,000 each, on the proviso that your total estate does not exceed £2 million. If it were to exceed £2 million the RNRB would be reduced on a tapered basis by £1 for every £2 that the net value of the estate exceeds £2 million. When owning a property jointly, there are two ownership structures available. Joint tenants: If you are joint tenants, the property automatically passes to you upon your husband's death. Tenants in common: If the property is owned as tenants in common, your husband's share will pass according to his will. If you inherit his share, you need to go through probate. You should also update your will to reflect your wishes. Make sure that your husband's will clearly states that the property is to pass to you upon his death and consider specifying that it will eventually go to your children or grandchildren. This can help you fully benefit from the RNRB in the future. If your husband's will leaves the property to you, you can inherit it, but it will require the probate process to transfer ownership. This can be avoided if you are joint owner. To avoid complications, it's advisable to be added to the property deeds while your husband is alive. This simplifies inheritance and ensures you have legal rights. I recommend that you consult a solicitor for advice on the best approach. Samantha Gibson, senior financial planner at Canaccord Wealth, replies: Whether your husband would inherit your nil-rate band would depend on a number of factors. The Inheritance Act 1984 stipulates that every UK resident has an inheritance tax nil rate band allowance of £325,000 each and this has not increased since 2009. In April 2017 an additional allowance was introduced called the residence nil rate band. This allowance is for homeowners where the value of the property can be passed to beneficiaries without this being subject to IHT. The requirements of this stipulate that the property needs to be your main residence, which will pass to 'direct descendants,' which includes a spouse or civil partner, children and stepchildren. So based on this, in short, the answer to the reader's question is 'yes', the husband can inherit your residence nil-rate band, providing you are married at the time and your husband dies before you. Joint tenants vs tenants in common This is an important consideration in estate planning and what it means for the nil rate band. If the reader is worried about the house only being in her husband's name, they might want to consider transferring the property into both names. This could be done in one of two ways. 'Joint tenants' is when people own the property together – when one person dies, their share automatically passes to the other – this is called the 'right of survivorship' and it doesn't go through the will or estate. There is usually no IHT at this point if they're married or are civil partners. But the first person's share doesn't use their nil rate band (because it doesn't go into their estate). 'Tenants in common' – this is when each person owns a specific share (often 50/50). When one dies, their share doesn't automatically pass to the other person – instead it goes to their estate and is distributed according to their will. They can leave their share to someone else (e.g. children) and it uses up their nil rate band potentially reducing future IHT. Have an updated will Regardless of what is done regarding house ownership, it is always advisable to have an updated will that details specific intentions after death. So, in this reader's situation, the will can specify that the home is left to her on death and not to someone who is not considered a direct descendant as this tax nil rate allowance will then not apply. As a spouse, any assets transferred under a will are exempt from IHT regardless of their value. When the RNRB may not apply There are occasions where the residence nil-rate band of £175,000 may not apply: If the property is under the value of £175,000 (£350,000 if joint allowance applies) then only 100 per cent of the value of the home will be eligible. For example, if the family home was valued at £150,000, the maximum RNRB will be £150,000. Downsizing: in the event the property has been sold to 'downsize' or move into rented accommodation, the RNRB could potentially still be claimed for the original property value up to £175,000 each - providing this downsizing occurred after 8 July 2015. However, the executors of the estate would need to complete a form via HMRC to claim for this (IHT400). Trust: if the reader's husband was to leave the property in trust in the event of death, there is a likelihood this allowance could also be lost as a trust is not considered a direct descendant. In this instance, he may forfeit this allowance unnecessarily. So to sum up, the reader shouldn't unduly worry – as the spouse, the house would automatically be passed to her and she should benefit from the inheritance tax nil rate band allowance. However, it is always advisable to speak to a financial adviser who can look at all the variables and suggest the smartest way forward.
