IHT - Joint property |
|
| |
|
| Introduction |
|
| This guide is designed to help our customers to obtain a grant of representation, complete an account of the deceased's estate, and pay any inheritance tax (IHT) which may be due. |
|
| |
|
| It also gives advice about lifetime gifts and the taxation of discretionary trusts. |
|
| |
|
| The proposals in the Finance Bill 2006 affect the meaning in this article regarding: |
|
- Gifts into certain kinds of trusts;
- The tax treatment of trusts, known as interest in possession trusts, in which the beneficiaries have a right to benefits;
- The ending of an interest in possession during a beneficiary's lifetime;
- The treatment of funds in alternatively secured pensions on death.
|
|
| |
|
| This article will be updated as necessary when the Finance Bill is enacted. |
|
| |
|
| How is joint property held? |
|
| In England, Wales and Northern Ireland, the two main types of joint ownership are joint tenancy and tenancy in common. The word 'tenancy' simply means ownership for this purpose. |
|
| |
|
| In Scotland, joint or common owned assets usually pass under the Will or intestacy rules. But, if the title to the asset says that it is owned in the joint names of 'A & B and the survivor' the asset may pass to the surviving owner under the 'special destination' in the title and not under the Will or intestacy. |
|
| |
|
| What do joint assets include? |
|
| The assets that most people hold in joint names include: |
|
- Bank and building society accounts;
- Stocks and shares;
- Land and buildings, such as a house.
|
|
| |
|
| How do you determine shares in joint assets? |
|
| When a person who had a share in assets held under a joint tenancy dies, the deceased's share of that asset will be in proportion to the number of joint owners, including the deceased, before the death. For example, if the deceased was one of three joint owners, their share will be one-third. |
|
| |
|
| The extent of any share in assets held in tenancy in common will be that stated in the document which created or evidenced the joint ownership. This does not apply to joint money accounts, where the following rules apply. |
|
| |
|
| What about bank and building society accounts? |
|
| Sometimes people own money accounts jointly with another person, but only one person provided all the money in the account. When a person dies who had a share in a joint money account, the share to be included in the estate will usually be the same as the deceased's contribution to that account. |
|
| |
|
| How do you treat joint assets for inheritance tax purposes? |
|
| A person's share in joint property is treated as part of their estate for inheritance tax, both on transfers on death and on gifts made during their lifetime. |
|
| |
|
| If the deceased's spouse or civil partner is the surviving owner (or is one of them), spouse or civil partner exemption will usually apply to the deceased's share to the extent that it passes to the spouse or civil partner. |
|
| |
|
| How do I value the deceased's share in joint assets? |
|
| It does not matter whether the assets are owned as joint tenants, or as tenants in common, the starting point in valuing of the deceased's share is their share of the whole value. So, if the deceased was one of three people who contributed equally to a bank account with £900 in it and the account was held as a joint tenancy, the deceased's share will be £300. There are some special rules about valuing other types of asset. |
|
