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Inheritance tax

Inheritance tax

We have an elderly married couple who own a property which could be worth about £1m.

They own this property outright. However, their daughter and son in law live with them in this property. The daughter and son-in-law have spent approximately £350k on improvements to the property.

The daughter and son in law are set to inherit the property on the parents' death. The question is, will the improvements that the daughter and son-in-law paid for be taken into account for inheritance tax purposes?

Thanks. 

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By mei
27th Feb 2013 12:41

Anyone?

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27th Feb 2013 13:59

Liability

Easiest option - If the parents owe the 350K to the daughter it becomes a liability in the parents' estate. The estate gets reduced by 350K and now becomes 650K.

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By blok
27th Feb 2013 14:49

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hkfinancials wrote:

Easiest option - If the parents owe the 350K to the daughter it becomes a liability in the parents' estate. The estate gets reduced by 350K and now becomes 650K.

I fail to see how the £350k has become a debt of the parents. 

The house has been improved by the expenditure and the improved value should be reflected in the parents estate.

Options.

Gift of house to children and paying of rent to avoid GWROB.

Insurance ?

Borrowing ?

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By LyneT
27th Feb 2013 14:17

The other alternative is for the parents to gift a share of the property to the daughter.

Provided the daughter remains resident in the property and the parents pay at least their share of the outgoings, the gift is not a GWR.

This of course is only worthwhile if the parents survive more than a few years.

 

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27th Feb 2013 17:08

@ blok

Don't you think the improved value is £1M?

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By blok
27th Feb 2013 17:31

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yes I do

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