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7 year rule on gifting property
TrulyMadly
Posts: 39,754 Forumite
in Cutting tax
Can anyone give me advice please.
My parents put their house into my name over 7 years ago. My mother died in July 2009 and my father is now terminally ill. The pensions he receives will cover any care home fees should it arise. They have lived in their house without paying us any rent all of this time. The inheritance I receive from them will be under the inheritance threshhold.
My question is .... What will happen when my father dies?
As they have not paid us any rent from the property was the house "properly" gifted. ie Could we receive it as part of the inheritance and sell it without incurring any tax liability? Or as the house is legally in my name will we need to pay capital gains tax when we sell it.
Can anyone help as I am confused.
My parents put their house into my name over 7 years ago. My mother died in July 2009 and my father is now terminally ill. The pensions he receives will cover any care home fees should it arise. They have lived in their house without paying us any rent all of this time. The inheritance I receive from them will be under the inheritance threshhold.
My question is .... What will happen when my father dies?
As they have not paid us any rent from the property was the house "properly" gifted. ie Could we receive it as part of the inheritance and sell it without incurring any tax liability? Or as the house is legally in my name will we need to pay capital gains tax when we sell it.
Can anyone help as I am confused.
To do is to be. Rousseau
To be is to do. Sartre
Do be do be do. Sinatra
To be is to do. Sartre
Do be do be do. Sinatra
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Comments
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If the total inheritance from your father i.e. the value of the house (as it is a gift with reservations) plus any other assets is above the IHT limit (currently 325,000 or 650,000 if your mother left everything to your father), then there will be IHT payable: if it is lower then there will be no IHT payable
However, when you sell the house you will unfortunately have to pay capital gains tax.
So you may need to pay both IHT and CGT on the same property.0 -
The mother died 7 years ago at which time her estate would have been valued, if this value amounted to only (say) £200,000 then wouldn't the £650,000 upper limit be effectively reduced to £525,000?The only thing that is constant is change.0
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Thank you for this.
Sorry to be a bit thick but can you just explain further.
We originally put the house in my name to avoid paying care home fees should they arise. This will now not be the case. Would we therefore have been better leaving the house in my parents name and inheriting it after their death (total assets left will be less than £325K) or are you saying that regardless of our actions CGT will still be payable once we sell the house.
Thank youTo do is to be. Rousseau
To be is to do. Sartre
Do be do be do. Sinatra0 -
the house is legally owned by you and you don't live there
property is only exempt from CGT if it's your primary private residence (i.e. you live there)
so yes will will have to pay CGT on the difference between the sale price and the value when you were given it.
unfortunately the value when you were given it would have a low market value as your mother was living there and so would have reduce substantially the market value.
I'm afraid the fact that you only did it to default the taxpayer if your mother needed care is irrelevant.0 -
From what you say it would apper that there will be no inheritance tax liability.
When you dispose of your house in which your parents lived there will be a CGT liability.
Do you have a spouce to whom you could transfer half of this house prior to sale, this could reduce the CGT liability. Otherwise it sounds like bad news.
Did you get advice on this transaction?The only thing that is constant is change.0 -
zygurat789 wrote: »The mother died 7 years ago at which time her estate would have been valued, if this value amounted to only (say) £200,000 then wouldn't the £650,000 upper limit be effectively reduced to £525,000?
if your mother left everything to your father then his estate's IHT allowance would be 650,000 as his estate inherits the full allowance0 -
"Defaulting the Taxpayer" ouch.
Tell me Clapton would you not do the same?
Look me in the eye and tell me that you would gladly hand over almost all of your inheritance to the care home around the corner charging £1700 a month or are you really the sort who has never nicked a paperclip from the office.
Love and kissesTo do is to be. Rousseau
To be is to do. Sartre
Do be do be do. Sinatra0 -
TrulyMadly wrote: »"Defaulting the Taxpayer" ouch.
Tell me Clapton would you not do the same?
Look me in the eye and tell me that you would gladly hand over almost all of your inheritance to the care home around the corner charging £1700 a month or are you really the sort who has never nicked a paperclip from the office.
Love and kisses
lets clear the issue then
answer each question_
1. you were not willing to look after your mother yourself
2. you were not willing to pay to provide care for your mother either
3. you didn't want your inheritance used to look after your mother
4. you were willing for your mother to receive substandard care provided by the local authority rather than sacrifice your inheritance
5. you think it quite OK that other tax payers should pay rather than lose your inheritance
6. you normally don't approve of social securty cheats
and in answer to your question about my behaviour.. sadly the situation arose and I made different choices to you.
(and I never nicked paperclips but I did take a few pens!)0 -
zygurat789 wrote: »From what you say it would apper that there will be no inheritance tax liability.
When you dispose of your house in which your parents lived there will be a CGT liability.
Do you have a spouce to whom you could transfer half of this house prior to sale, this could reduce the CGT liability. Otherwise it sounds like bad news.
Did you get advice on this transaction?
I don't understand your question
if you inherit a house upon the death of your parents and then sell it, then there is no CGT only IHT if the amount is sufficient0 -
I might have had the energy to reply but have spent the entire day looking after my severely and ridiculously demented father. I tell a lie. I had a one hour break and paid an agency £12.20 plus travelling time while I ran around collecting his medication.
I looked after my Mother (in her own home)who had breast cancer for 2 years up until July 22nd when she died.
I am physically exhausted but not too tired to ask whether they were just Bic pens you nicked or something a bit more fancy. Whatever. I forgive you. Life's too shortTo do is to be. Rousseau
To be is to do. Sartre
Do be do be do. Sinatra0
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