Intestate question re property

[NoPedigree]

Dear Fools,

I would be most grateful if anyone could give any advice regarding the following situation:

My father passed away earlier this year not leaving a written will. A couple of years ago he did tell all of us his intentions re his estate, us being my brother and his long time partner. He said he wanted the estate splitting three ways with a specific item identified to come to me and another to my brother and his partner to be able to live in the house for as long as wanted before sale and distribution of the sale price equally.

The estate is subject to IHT (the tax bill can be covered from bank accounts) and we are aware we will need to do a Deed of Variation (in place of a will) to allow the funds to be passed to the partner from his estate rather as a gift from us.

We have a solicitor acting for us all dealing with the probate and IHT but before we met again I’m wondering if there is any way we could word the Deed of Variation so as to make use of the nil rate band on the property by it coming to me and my brother but still splitting the estate equally. The nil rate band would save 50K of tax and while I’m begrudgingly happy to pay the dues. The solicitor has only so far suggested, via letter, putting the house into trust in the partners’ name which would not allow use of the nil rate band and would also attract further IHT on her estate on the event of her death.

Any ideas or pointers would be most welcome to help me feel prepared for the next meeting.

Regards,

NoPedigree

[hiriskpaul]

Does not sound sensible to me for the reasons you state. Another option would be for the house to pass to you and your brother, in which case the full nil rate band and residence nil rate band can be utilised (and possibly your mother's bands). Then, as a private arrangement, you let your father's partner live at the house rent free. AFAIK there should be no income tax issues if you let a house for no rent, but you would not be able to claim any expenses for the upkeep.

There would not be the same security as an interest in possession trust and there would be complications if say you and/or your brother died before your father's partner. I would have thought though that a rental contract could be drawn up to provide more security.

One potential downside of you and your brother holding a share in the house would be increased stamp duty should either of you want to move , assuming each of you currently hold only 1 property each.