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Need some advice,
The mother in-law has been told that she can't pass her house over to her children is this correct.
She is 70 good health
House Value 200k
four Adult children
any advice please

Cheers
 

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Finally not a new member
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Your MIL can will the house to whomever she wishes provided she owns it off course.

Make sure she makes a will, much easier than not.

Dont be fooled into using a solictor for the estate. Its relatively easy to do it yourself especially if a will has been drafted first.

If there are complications about the house get some proper legal advice. Might cost a few quid but at least you will avoid family arguments later.

It might be she has been told she cant give it to the kids before she dies. She can but she would have to demonstrate that she is paying a fair market rent for living in the house once she doesnt own it. Unless she has bundles of cash under the duvet the estate is under inheritence tax threshold which I think is about £280k, but rises each year. The Revenue have a number of good free advice booklets. I'm not in the legal profession but have just dealt with the probate of the sis in law and father in law.
 

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She can 'sell' it to a trust fund. The trustees being her four children, so in a way she has no assets. But the trust fund pays a dividend which can be accessed by the trustees and given to her to spend.
PM me for more details.

Adam
 

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Just not enough dive time.
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Inheritance tax is based on the dead persons estate, currently (2006) it was 285,000 I believe, after that it attracts 40% tax liability, the estate includes life insurance etc(less funeral costs) and any goods in the house etc. Its possible the estate in this case goes over the limit, so the estate would attract inheritance tax, however before she dies she can give away the house to a trust fund, thereby reducing the estates liability. You need to balance the cost of doing this (through a solicitor) or paying tax over any amount over the threshold.

HTH
Matt

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285 thousand for this tax year. Awaiting my dad's probate grant as I type....

Chris
 

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It's unclear from your post whether your mother intends to remain in the house. If this is the case and the gifting of the property is intended to avoid Inheritance Tax then forget it. HMRC have successfully challenged such cases, I believe even when a market rent has been paid by the donor to the donees.
 

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The IHT nil-rate band is up to £285000 for tax year 2006/7, and £300K for the current tax year (07/08). 40% tax on any amount over the nil rate when the MIL dies.

Giving an asset away during the owner's life removes it from the estate for IHT purposes eventually. However, it is regarded as a Potentially Exempt Transfer (PET) until 7 years after the asset is gifted. If the donor dies during the seven year period, it ceases to be exempt and is counted as part of the estate. Note that the tax is levied on the estate (and not normally on the assets of the recipients - although it can get complicated if the estate doesn't have enough money left over).

It is also possible for an individual to give away £3,000 in any one year to individual family members and if this allowance was unused in the prior tax year then it can be carried back for one year so your MIL can give £3,000 under the 2006/07 allowance and £3,000 under the 2007/2008 allowance so reducing the potential inheritance tax liability.

There is another aspect to this question though. Where is the MIL going to live? If she is still to live in the house, this will probably count as a gift with reservation of benefit - which may well defeat the intention of avoiding IHT.

In addition, the transfer will probably be disregarded by Social Services when assessing any entitlement to social care costs etc.

Hope this helps a bit.
 
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