AVOIDING INHERITANCE TAX ON THE FAMILY HOME

Most homes in England and Wales are held under a ‘Joint Tenancy’ which means that if one partner dies, the property passes directly to the survivor. This avoids the problems associated with dying intestate (without a will), in which case, a surviving partner may only be entitled to a small share of their partner’s estate.

However, for the purposes of avoiding inheritance tax, where a discretionary will trust has been set up, one can change this ‘joint tenancy’ to ‘common tenancy’ where both partners own half the value of the property each. In effect, this allows both partners to leave the value of their half of the family home to the discretionary will trust for the survivor and for the children to inherit half the family home from their mother and the other half, via the trust, from their father.

This allows property of up to £600,000 to pass to the children tax free, where otherwise, the tax due would have been £120,000 possibly forcing the sale of the family home.

In Scotland, the tax rules are the same, but property ownership rules are different. You will have to have a separate 'Deed of Evacuation of Special Destination' drawn up to allow both partners to leave their share in the family home separately if your Deeds nominate the survivor as sole owner.

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