We Are Family – how siblings may be able to avoid IHT
5 February 2020 by Andrea Godfrey
A bill called the Inheritance Tax Act 1984 (Amendment) (Siblings) Bill 2019-20 is currently before the House of Lords for debate. It has had its first reading. The effect of the Bill is that property transferred between siblings will be exempt from inheritance tax (“IHT) in certain circumstances. At present only property passing between married couples and civil partners does not attract IHT. The bill was introduced by Lord Lexden. The reasoning behind the proposal is to stop siblings who live together from being forced out of their homes because they cannot afford the inheritance tax (IHT) bill that arises when the first one of them dies.
In its current form, the Bill will state that any brother, sister, half-sister or brother must have lived in the same property continually for seven years and the survivor has to be over 30 years of age.
The matters was recently an issue in the case of two sisters who lived together for over 30 years. Catherine and Virginia bought their first flat together in 1985 and now live in London. When either die, there will be an IHT liability of over £140,000. So the survivor could face the situation that she would have to sell the house she has lived in all that time to be able to pay the IHT bill. They said they should be able to enter into a civil partnership so they can enjoy the same inheritance rights as other couples and the transfer of the house to the other on their death would then be exempt from the inheritance tax liability.
It may actually surprise some as to how common it is for this to happen. Siblings may not have a spouse, partner or children to give the family home to, however, they may be very close to their siblings and are living with them to provide care of even comfort.
There is still however no such protection for couples who cohabit.
It may take a while for the bill to become law but there are other ways to mitigate IHT and any members of our team can advise you on these.
If Fisher Jones Greenwood can assist you, then please contact us on 01206 700113 or email [email protected].