The taxman, and many other parties, want to take money from the property in your estate. Today, we look at ways to stop them!
For a large proportion of the population, their property is their most valuable asset and most married couples tend to own their home jointly. Joint ownership means that both parties own the whole property and in the event of the death of one of the joint owners, the entire home automatically becomes the property of the survivor.
However, when one of the owners of a property pass away, the situation can often arise where the property is sold in order to pay for care home fees should the husband or spouse need to go into care. Another problem can also arise if the survivor remarries, creating the possibility of the house passing to their new spouse and disinheriting the children of the first marriage accidentally.
There are ways you can avoid the scenario of losing a large share of your property to the tax man.
It is worth considering whether to change the joint ownership of your home to ‘Tenants in Common’. This process is fairly straightforward and can be done even if your property is mortgaged. The Tenants in Common arrangement means that each of the owners own half of the property and can do whatever they wish with their share. This can mitigate against some of the problems caused by death in terms of Joint Ownership.
For example, this agreement allows you to leave your share to your children so that should your spouse remarry, they will only be able to pass their one share onto their new partner.
In a similar way, should you require care costs, the state will only be able to take them from your own share of the property. This will enable you to pass on at least half of the value of your property to your children.
Set up a trust
If you have a Tenants in Common arrangement in place, it’s a good idea to set up a property protection trust that will ensure that estate is distributed immediately. The surviving partner can continue to live in the home for as long as they wish and if they decide to sell the house, the chosen beneficiaries will still receive half of the value of the property.
Create a will
Making a will is the simplest way to ensure that your assets are distributed in the way that you wish after your death. A recent study has found that the cost of dying intestate – without a Will – or with an out-of-date Will can add up to an average of £9,700 in lost assets. A will sets out exactly how you would like your assets to be distributed after your death and is the best way to avoid any of your children or family members being disinherited under intestacy laws. It is also very important to update your will if circumstances change – for example, another family member is born or there is a divorce in the family.
Giving away property as a gift is another way to ensure you are able to pass on assets to your children. Before you die, you can give some of your assets away, but you must survive for seven years after you have transferred the property before they become free of inheritance tax. However, you must be aware that if you give away your home but continue to live in it rent free, the government still consider the property to be part of your estate. If your child lives with you and lives with you until you die or go into a care home you will be able to give your home to them provided that you both pay for the upkeep of the home.
These measures can aid in passing down your valuable property assets. With house prices rising considerably in the last ten years, many ordinary families are finding their property rising above the inheritance tax threshold. This has meant that now more than ever is the time to plan ahead to ensure you are able to protect a sizeable chunk of your property from falling into the hands of the taxman.