MOTHER BUYING NEW HOUSE IN MY NAME - Help!

Izzy_Skint · 18 June 2017 at 7:07PM

Hello

I'd really appreciate some help with this as I'm very worried.

I'm married and live in a mortgage free property in Devon. The house is in my Wife's name as it was bought by her prior to our marriage.

Now the worry........

I already own 50% of my Mothers home in Manchester as i was added to the title deeds 25 years ago after taking out a part mortgage for it. She now wants to sell the house and buy a new home but want's it put solely in my name.

So we own the house to be sold 50/50 but buying another property to be put solely in my name.

She will live at the property rent free but will be paying the bills.

I'm worried about any TAX i'd need to pay if the house is to be put solely in my name? It's awkward because i already own 50% of the property being sold, she will be passing her 50% to me in way of putting the new house in my name.

I'd very much appreciate some help & advice.

Many Thanks
Izzy_Skint

00ec25 · 18 June 2017 at 7:28PM

you are right to be worred

1. SDLT - the new property is not your main home where you live with your wife therefore, despite the fact you do not co-own your own residence with your wife, the new property will be classed as an additional property for you and the higher rate SDLT will be payable on the purchase price.

2. GWR - your mother intends to gift 50% of the value of the property to you but will then live there rent free herself. That is classed as a Gift With Reservation of benefit, and so the 50% will remain part of her estate until she dies, at which point her estate may (or may not) have inheritance tax to pay depending on her total estate value, and what the rules are when she is dead. You, as the recipient of the gift, do not have to pay any tax now as there is no tax payable on the act of giving.

3. CGT - you are selling 50% of a property you do not live in. You are therefore liable to Capital gains tax on the sale of the current property. How much you have to pay depends on how much it sells for and therefore what the gain has been since you became an owner of it 25 years ago. You would have "acquired" it at its then market value 25 years ago as you were a "connected person" in that it was a transfer from your parent. The gain is the difference and the only thing you can offset that with is your £11,300 CGT allowance. You wlil then pay CGT at 18% and 28% depending on how much your total "income" (including the gain) is for the tax year.
CGT basics: https://www.gov.uk/capital-gains-tax/overview

Izzy_Skint · 18 June 2017 at 7:38PM

Hello 00ec25

Thanks for a very well detailed reply, that was VERY helpful.

I'm just about to go out but i will make a detailed reply this evening and give you some figures. I'd most thankful if you could reply again to my next reply.

Many thanks
Izzy_Skint

G_M · 18 June 2017 at 8:23PM

To add 00ec25:

CGT: if/when you sell the new property (eg when mum dies, or next moves), you'll have to pay CGT again on that property as it's not your main residence.

Landlord liablibities: as a landlord (yes, you'll be a LL) you have legal responsibilites. Do you want them? Do you understand them?

Insurance. You'll need landlords insurance

Deprivation of Assets. If mum needs togo into care in the future it is likely the Local authority will consider her gift to you of the (new) house to be DOA (ie getting rid of asets in order to try to meet requirements for LA care costs.

Is there still a mortgage on the house she is selling? Will there be a mortgage on the new house?

cte1111 · 18 June 2017 at 8:27PM

Did you ever live in the house that is being sold? If it was at some point your main home, then you can claim Principal Private Residence relief for that period, plus the last 18 months that you owned it.

Why does your Mum want her home to be in your name? If it is being done in order to avoid potential care costs, then it is likely to be regarded as a 'deprivation of income', so be taken into account anyhow.

You also need to think about what would happen if you were to die, divorce or need residential care yourself, as any of these unfortunate circumstances could end up leaving your Mum homeless. I know none of us imagine we are going to outlive our children but sadly it does happen (2 of my aunts died before my Grandmas) and the loss would be compounded if there were a further financial cost.

Keep_pedalling · 18 June 2017 at 8:34PM

The tax issue is on the sale of the current house rather than gifting the rest of it. If your share of the house has risen in value over your annual CGT allowance (£11,300) then you will have CGT to pay.

One, if not the main, reason people do this is to avoid care costs, please do not let her do this as it is idiotic to give away you main asset to be left with no choice if ever residential care is needed. She would also be in a very vulnerable position if you got into financial difficulty through bankruptcy or divorce, or if you die before she does.

AdrianC · 18 June 2017 at 8:41PM

Your mother cannot buy a house "in your name". If the property is to be in your name, then you are buying it. You will need to sign all the paperwork, and you will need to prove your funds to the solicitor. Without you doing all of this, then this house is not going to be in your name.

xylophone · 18 June 2017 at 8:45PM

Is mother thinking of avoiding care home fees?

http://www.whentheygetolder.co.uk/care-fees-funding-and-deprivation-of-assets-the-rules/

Keep_pedalling · 18 June 2017 at 8:50PM

AdrianC wrote: »

Your mother cannot buy a house "in your name". If the property is to be in your name, then you are buying it. You will need to sign all the paperwork, and you will need to prove your funds to the solicitor. Without you doing all of this, then this house is not going to be in your name.

She can't sell the existing one on her own either.

xylophone · 18 June 2017 at 11:05PM

You might lend your mother your portion of the proceeds (after you've paid the CGT) to enable her to buy a new property in her sole name - you would register a first charge on the property in order to ensure that on sale, your loan would be repaid.

TBagpuss · 19 June 2017 at 9:32AM

Why is your mum wanting to do this?
In relation to the 50% of the current property which is already in your name, you are likely to have to pay CGT on any increase in value of the property since it was bought (over and above your annual allowance)

As xylophone says, it would probably then make sense for the new property to be in your mum's name but with you having a legal charge over it for whatever % of the value is represented by your share of the proceeds of the current house, so you effectively lend her your share.

This avoids you becoming landlord or having to pay the higher SDLT rate, it also means your mum won't get into any deprivation of issues problems, and the debt will be 'provable' in her estate which lowers the value of her estate for IHT.

If she is keen to simplify things when she eventually dies, then making an up to date will would be wise, and she may also want to consider powers of attorney to make things more straight forward in the event that she becomes unable to manage her own affairs.

You could of course have the new house in joint names like the old on, but you will still have the CGT and SDLT issues to deal with - the only advantage would be that if you own as joint tenants, the house would then pass automatically to you in the event of her death. It is worth bearing in mind, however, that the reverse is true - if something happened to you, the house would pass to her. If you go down the route of a loan then she has security (you can specify that the loan is repayable only on hr death or permanently easing to live in the house) but your share of the house value would be part of your estate and so would come back to your wife / children / other beneficiaries in due course.

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MOTHER BUYING NEW HOUSE IN MY NAME - Help!

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