Around twenty years ago my parents amended the ownership of the family home so it was jointly owned one quarter each by my parents, my sister and I. At the same time they made wills stating that their estate should be evenly split three ways between their surviving spouse, my sister and I. Their home is their only real asset, is owned outright, and is now worth around £1m.
Both my parents continue to live in the same house, so I understand they retain benefit, but I don’t know (because of joint ownership of the home) how the reservation of benefit and nil rate allowance would apply when one, then the second, parent dies. Would the second parent’s estate be the entire value of the property as they would carry on benefitting by living there? Even though they will only own 1/3 of the property at that time?
My sister and I both have our own homes now, so does this mean that we will have to pay capital gains tax when the home is sold, for example to pay IHT on the death of the second parent? How can the whole property be seen as belonging to my parents for one tax, but part owned by my sister and I for another?
I have also heard that the local authority can still ‘take’ the shares of the house that my sister and I own to pay for any care home fees owed by my parents – is this correct?
How can we simplify matters and reduce the overall tax bill / care fees due to the family?