The Civil Partnership Act 2004 was given Royal Assent on November 18, 2004 and will come into force on December 5, 2005. This will give same-sex couples, who register their relationship as a civil partnership, similar rights to married couples. In particular, the Government intends that transfers between civil partners will benefit from the same inherit- ance tax exemption enjoyed by married couples. The use of this exemption is particularly important in relation to any jointly-owned home.Your clients can own property jointly in one of two ways – as joint tenants or as tenants in common. A joint tenancy arises when four conditions are satisfied. First, each joint tenant must be entitled to possession at the same time. Second, each interest in the property must be identical and each joint tenant must be entitled to the whole property, having no exclusive right to any separate part of it. Third, each joint tenant must have the same title to the property and, finally, each joint tenant’s interest must vest and subsist at the same time. Where a joint tenancy exists, ownership passes automatically on the death of one joint tenant to the survivors and the last survivor then becomes sole and absolute owner of the property. The other form of joint ownership is a tenancy in common. Each co-owner may sell or dispose of his share in the property. Their share does not pass automatically on death to the surviving joint owners but forms part of their estate and thus devolves under the terms of their will. I am often asked whether a surviving joint tenant can use a deed of variation to alter the destination of property which has passed automatically to them because of the death of another joint tenant. You will be well aware that a deed of variation within two years of death can be effective for IHT and capital gains tax purposes by redirecting property which passes on death. The question is whether such a deed can effectively overturn the rights of sur- viving joint tenants by sev- ering the share of the deceased in a joint tenancy. There are special IHT rules for changes or variations made within two years after the deceased’s death. If a variation made within the two-year period satisfies certain other conditions, IHT is charged as though the deceased person had made the variation. The beneficiaries giving up any of their inheritance therefore do not have to pay tax. The main conditions are that the variation is made in writing and that the instrument contains a statement, made by all the relevant people, that they intend for the IHT rules to apply. Similar rules apply for cer- tain purposes of CGT. You will often find that beneficiaries – whether under a will or the rules applying to intestacy – wish to change their inheritances. Let us consider a family home owned by a husband and wife as beneficial joint tenants. On the husband’s death, his interest passes automatically to his wife, who then becomes the sole owner of the property. Can the wife, for IHT or CGT purposes, vary her inheritance of her husband’s interest by redirect- ing it to her children? The Revenue has confirmed that she can. It has stated that both IHT and CGT rules apply not only to dispositions or inheritances arising under a will or the law of intestacy but also to those affected “otherwise”. In the Revenue’s view, the word “otherwise” brings within the rules the automatic inheritance of a deceased owner’s interest in jointly-held assets by the surviving joint owners. Therefore, provided you meet the necessary formalities, a properly drafted deed of variation can tax-efficiently redirect the deceased’s share of prop- erty held on a joint tenancy which would otherwise pass automatically to the surviving joint tenant. This can be particularly useful if the deceased has not used his nil-rate band for IHT purposes.
HSBC Bank International
Eurozone Property Index Income Fund– CSGF 21
Close Investment is planning to raise £25m for its Close Aim IHT VCT, a venture capital trust which provides inheritance tax relief as well as the usual income tax relief.
John Hutton has been confirmed as the new Secretary of State for Work and Pensions, taking over from David Blunkett who resigned this morning.Hutton joined the Cabinet in May as Cabinet Office minister and was previously junior Health minister.He is seen as a Blairite who will look to push forward the Prime Ministers third term […]
Skandia Investment Management has established a multi-manager ethical fund that combines manager of managers with funds of funds approaches.
Different growth cycles require different investment strategies. In this short video, Trevor Greetham, Head of Multi Asset at Royal London Asset Management, explains how he implements this across the RL GMAPs using the Investment Clock. Click here
News and expert analysis straight to your inboxSign up
Latest from Money Marketing
A decade ago, I went through the pain of switching utility providers. Deterred by a catalogue of errors, it is only recently, after a house move, that I tried again. I was pleasantly surprised by how easy it was. It has made me think about how complex and expensive it is to switch in financial […]
It has never been more important to encourage saving. But advisers know only too well how challenging the complexities of the UK savings and pensions landscape make it for people. Any trends towards simplification would be welcome, but unfortunately recent developments have moved in the opposite direction. Take Isas, for example. Their simplicity has always […]
The FCA has confirmed it will consider if there needs to be better guidance around when it and the Financial Ombudsman Service can share information ahead of the FOS making its final decision. In a Complaints Commissioner final report, published on its website yesterday, commissioner Antony Townsend invited the FCA and FOS to discuss when […]