A reader seeking guidance on property ownership in a second marriage has raised questions about joint deeds, potential care home costs, and inheritance tax (IHT) allowances. The situation involves a couple, both pensioners, where the wife owns their £385,000 home solely in her name. She has two children from her first marriage, and her current husband has three.

Heather Rogers, a tax expert, clarifies key aspects of inheritance tax and property ownership, particularly relevant for blended families.

Inheritance Tax Allowances

Rogers explains that the main inheritance tax threshold, known as the nil rate band (NRB), is £325,000 per person, or £650,000 for a couple. An additional residence nil rate band (RNRB) of up to £175,000 per person (£350,000 for a couple) is available for those passing a property to direct descendants, provided the estate is valued below £2 million. This RNRB can be transferred between spouses if unused on the first death.

Crucially, the RNRB can be claimed even if the family home is solely in the name of one spouse. If the non-home-owning spouse dies first, their unused NRB and RNRB can be transferred to the surviving spouse's estate. Therefore, the reader's concern that her estate would not benefit from her husband's allowances because his name is not on the deeds is misplaced.

Property Ownership Structures

There are two primary ways to own property jointly: joint tenants and tenants in common.

Joint Tenants: In this arrangement, both spouses own the property together. Upon the death of the first spouse, the property automatically passes to the surviving spouse due to survivorship rules, overriding any provisions in a will. This can present complications in blended families where there are children from previous relationships.

Tenants in Common: This structure allows each owner to hold a specific, defined share of the property. Each individual can then decide what happens to their share upon their death, as it does not automatically pass to the other co-owner. This method is often accompanied by a restriction noted at the Land Registry.

Care Fees and Property

Generally, a family home is excluded from care fee assessments if the other spouse continues to live in it. However, if the property remains in one spouse's sole name and that spouse requires care while the other spouse is no longer living there, the entire property could be used to fund care costs.

To mitigate this risk, Rogers suggests transferring half the property to the husband, establishing a tenants in common ownership. Both spouses could then create an interest in possession (life interest) trust within their wills. This trust allows the surviving spouse to remain in the property for life, with provisions for downsizing if necessary. Such trusts are unlikely to be viewed as 'deprivation of assets' by local authorities and can protect the surviving spouse from the home being sold or misused. Upon the death of the surviving spouse, the value of their half of the property, along with the trust's assets, would form part of their estate for inheritance tax purposes.

Implications of First Marriage

Rogers also notes the potential impact of the reader's first marriage. While a residence nil rate band was not available at the time of her first husband's death, his unused nil rate band may still be available. Careful will drafting would be necessary to utilize this if applicable.

For personalized advice tailored to their specific circumstances, the reader is advised to consult a solicitor specializing in wills, trusts, and probate. They can assist with updating property deeds and drafting new wills to incorporate any chosen trust structures.