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Property held by more than one person
made in the seven years before death). In a falling property market,
• Property held by couples, spouses or friends may be held as “joint
this means that beneficiaries may be paying 40% tax on a property
tenants” or “tenants in common”. The distinction here is important.
they cannot easily sell, and which may not realise the probate
If held as “tenants in common” each co-owner owns a specific
value. The tax on property can be paid by instalments, but interest is
percentage interest. This will be common for investment property;
still payable on the outstanding amount, and the rate of interest on
unmarried people in relatively new relationships, particularly if they
instalments is due to go up. Note if the property is sold for less than
are contributing uneven percentages of the purchase price or
the probate value within three years, in certain circumstances the
mortgage repayments; and as part of inheritance planning for
probate value (and inheritance tax) can be reduced.
spouses with high-value property. Property held as a joint tenancy
automatically passes to the survivor on death.
• If you have property abroad, you may have death duties under
local law as well. These may not exempt transfers between spouses.
• If a married couple dies intestate, the surviving spouse or civil partner
You will get credit against the UK tax for any overseas tax
receives the chattels (furniture), assets worth £125,000 plus a life
paid on a property.
interest in half the residue of the estate: the rest goes to the children.
This may not be enough to cover the value of the house if it is held
In some countries, including Spain and France, the local law
as tenants in common. A spouse may apply to the Court if this
requires a certain percentage interest in the property to go to your
provision is insufficient, but this means that the spouse is in effect
spouse and children. You cannot “over-rule” this with a UK will. It is
suing the children.
sensible to get advice on local inheritance laws ands tax and have
a “local law” will to deal with the overseas property.
• If you are “living together”, the position is worse. Your partner will get
NOTHING AT ALL under the intestacy rules, so if the house is owned
• Divorce rates tend to rise as the economy falters and can throw up
other than as joint tenants, s/he will become homeless.
a lot of tax issues. In the tax year of separation, assets can be
transferred between spouses free of capital gains tax, but after this
• If a parent moves into their child’s house and provided money for
period, capital gains tax will arise on transfers between divorcing
the deposit for that house, they may stray into the “pre-owned assets
partners. Property issues can be particularly complex: capital gains
tax” rules. This can impose tax charges on the parent. The rules here
tax and “lifetime” inheritance tax may arise. For “big money” cases,
are complex and specialist tax advice should be sought.
it is worth taking specialist tax advice to minimise the potential tax
payable and maximise the available main residence relief on the
former matrimonial home.
Death and divorce
• Inheritance tax is due on the value of a person’s assets at the date
Jan Ellis is tax partner at Blick Rothenberg accountants
of death. There are exemptions for transfers to a spouse or civil
partner and the first £312,000 of value (assuming no gifts have been www.blickrothenberg
This article is not meant as a substitute for advice on particular issues and is written in general terms. You should seek specific advice before
taking any action based on the information that this article contains.
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