Gardner Leader

The Complexities of Inheritance

We asked Robert Jobson, Associate in the Inheritance Protection Team at Gardner Leader Solicitors, to consider a situation that is becoming more common in these times of high property prices.

My father died last month and I have agreed that my mother should move in with me and my two sons. This will help me to take the next step up the property ladder and helps Mum as I will be on hand to provide her with the support she needs. Both Mum and I will be selling our houses and purchasing a larger property together. My brother is pleased that I will be able to keep an eye on Mum as she is now 85.  What issues should I be considering?

1 Declaration of trust
As you will be buying the property together, it is important that you consider setting out your shares in that property in a declaration of trust. The shares should be expressed as a percentage of the purchase costs you each provide. The declaration of trust will also set out the procedure for any subsequent sale of the property.

2 Your Will
You will need to update your Will to ensure that your sons and mother are adequately provided for, particularly if you should die before your mother.

3 Your mother’s Will
Your mother needs to make adequate provision for you and your brother in her Will and you will need to discuss what will happen with her interest in your property. You might be able to agree that her estate be divided equally between yourself and your brother, with part of your share being the value of her interest in your property. A difficulty will arise if your mother is investing the majority of her estate in the property with the result that you might need to sell the property to provide your brother with his inheritance. This is something that you will need to negotiate with your mother and brother so everyone is aware of the situation.

4 Conveyancing
You will need advice from a solicitor on the conveyancing procedure and production of “Home Information Packs”. It might be that you can’t time both the sales and the purchase to coincide, in which case you may need to consider renting or all living in one of your current homes for a short period.

5 Inheritance tax
Your mother’s interest in the new property will form part of her estate for inheritance tax. You will, therefore, need to consider the impact inheritance tax might have on her estate and how any tax liability would be funded. If the value of her estate exceeds £300,000 (the “nil rate band”) there will be an inheritance tax liability at 40% on the excess. However, if your father left his entire estate to your mother on his death then she will also benefit from his “transferable nil rate band” thus effectively increasing her inheritance tax-free estate to £600,000 (figures for the year to 5 April 2008).

6 Potential long-term care fees
You need to be aware that if your mother requires long-term care then her interest in the property will be part of her estate for any means-test conducted by the Local Authority when considering the funding of that care. If the value of her estate exceeds £21,500 then she will be obliged to pay for her own care.

7 Take advice
You and your mother need to take expert legal advice and, as you have separate (and potentially conflicting) interests, you should take separate advice.
I and my colleagues in Gardner Leader’s Thatcham office will be able to advise you on all the above issues.

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