Oct 2018
If you needed any further persuasion to plan ahead and consider your options for later life, you might the following interesting to know.
Two sisters have just been hit hard by death duties. They were co-habiting until 73-year-old Norah died from cancer, leaving her elder sister, Eileen, with a £500,000 tax bill at age 80 – to remain in her own home.
The cohabiting sisters had lived together for 43 years. They purchased their two bed flat in North London for £16,000 in 1973. They shared mortgage, council tax and all bill payments. They also took on any repairs to the property and were entirely, jointly, responsible.
When Norah died in 2016, the value of the property has since ballooned to more than £1.1m. It left Eileen facing a substantial tax demand on Norah’s share of the property they had lived in and owned for more than 40 years.
Norah and Eileen Gillow often joked about getting married, because they would be better off in the event of one of their deaths. They applied for a civil partnership in 2015 but were denied the right to it. Under current rules, there is no inheritance tax (IHT) to pay on estates given to a spouse or civil partner. Married couples and civil partners can also pass on their tax-free threshold to the surviving partner – but again, siblings do not benefit.
According to recent figures published by LV, 1 in 10 over 55s plan to leave their family home to a sibling in their will. This could see around 1.7m siblings over 55 missing out on tax breaks available to spouses.
We have come across a number of examples in previous blogs, where the law needs to be updated to apply to any cohabiting couples. There is no reason why the law shouldn’t also include siblings.
The Government is looking at consultation to review IHT associated with siblings who have shared property. It could help prevent more situations like these, where people face losing their homes, as well as a much-loved sibling.
This demonstrates again importance of planning ahead, considering all options and IHT implications, particularly in relation to Will provisions.
Post death it may be worth considering a Deed of Variation. This is where a beneficiary can give up their entitlements under the deceased’s estate in favour of the other person or a charity. There are strict time limits as to when this can be implemented. Any beneficiary who is considering this needs to be independently advised to make sure they are aware of the IHT implications. It is vital you seek advice from those in the know.
Downs Solicitors can help – contact us for more information.
