Q&As
H&W own their home as tenants in common. What are the IHT implications of transferring it into a trust of which they are the life tenants, with remainder to their children on the death of the surviving spouse?
Where a property is held as tenants in common, it passes by will or intestacy rather than automatically by survivorship to the co-owner. However, there is flexibility as to succession, in that a tenancy in common enables the first co-owner to die to leave his or her share to someone other than their surviving co-owner, ie a child of the deceased.
It is important to consider the tax implications in advance of implementing any trust or succession planning.
Relevant property for inheritance tax
The term 'relevant property' defines a category of trust property which is subject to a special regime for IHT. When taking into consideration the IHT treatment of trust, the property will fall into two broad categories:
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beneficial entitlement—trust property is subject to IHT as if it belonged outright to the beneficiary
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relevant property—has an independent tax life. Once it is effectively
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