If my name is on my mum's mortgage will I avoid inheritance tax?
M_Somers
Posts: 5 Forumite
in Cutting tax
Hi everyone,
My mum currently owns a Buy To Let property and her name, and my cousin's is on the mortgage (my cousin helped her buy the property).
Now, however, she wants to take my cousin's name off the mortgage and put my name on it instead, joined with hers. This is due to the belief that in doing so I will completely avoid inheritance tax if she dies, both of our names are on the mortgage and it is not stated in her will the property goes to me.
Does anyone know if this is true or not?
To make matters more complicated, my mum is still married to my father but they have been separated for the past 17 years. I'm pretty sure she hasn't left him anything in her will. However, if neither of our names is in the will regarding the property, could the property possibly go to him if they are still legally married?
My mum currently owns a Buy To Let property and her name, and my cousin's is on the mortgage (my cousin helped her buy the property).
Now, however, she wants to take my cousin's name off the mortgage and put my name on it instead, joined with hers. This is due to the belief that in doing so I will completely avoid inheritance tax if she dies, both of our names are on the mortgage and it is not stated in her will the property goes to me.
Does anyone know if this is true or not?
To make matters more complicated, my mum is still married to my father but they have been separated for the past 17 years. I'm pretty sure she hasn't left him anything in her will. However, if neither of our names is in the will regarding the property, could the property possibly go to him if they are still legally married?
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Comments
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It's not what's on the mortgage that's important, it's what's on the deeds to the property. Having said that, I think it's unlikely for a mortgage provider to agree to add someone to the mortgage if they're not on the deeds, as it's the ownership of the house that is acting as the security to the loan.
If your mother is proposing to give you half the house, then it's true that - providing she lives seven years after this and is not living in the property herself - that that half won't form part of her estate for inheritance tax purposes.
However, when the property is sold you will be liable for Capital Gains Tax on any increase in value, and if you don't already own a property to live in you will be charged an extra 3% stamp duty when you come to buy one. So financially she may not be doing you any favours.
If her estate is such that inheritance duty is a concern to her she'd be best off getting property legal advice on the actions to take to minimise it.0 -
As always in these cases - will your mother's estate exceed £325000? If not, there will be no inheritance to be paid by the estate in any case.
Secondly, has your mother made a will (it is not clear that you are certain of this)? If not, the rules of intestacy apply and her husband will inherit a sizeable chunk of her estate under those rules. If she has made a will and no provision has been made for her husband he will have no entitlement to the property.0 -
p00hsticks wrote: »It's not what's on the mortgage that's important, it's what's on the deeds to the property. Having said that, I think it's unlikely for a mortgage provider to agree to add someone to the mortgage if they're not on the deeds, as it's the ownership of the house that is acting as the security to the loan.
If your mother is proposing to give you half the house, then it's true that - providing she lives seven years after this and is not living in the property herself - that that half won't form part of her estate for inheritance tax purposes.
However, when the property is sold you will be liable for Capital Gains Tax on any increase in value, and if you don't already own a property to live in you will be charged an extra 3% stamp duty when you come to buy one. So financially she may not be doing you any favours.
If her estate is such that inheritance duty is a concern to her she'd be best off getting property legal advice on the actions to take to minimise it.
Actually CGT may be payable on the transfer of part of the property to to OP. There is also the issue of the rent. If the OPs mother continued to get 100% of the rent then this would be a gift with reservation and never fall out of the estate.0 -
[quote=[Deleted User];73274043]As always in these cases - will your mother's estate exceed £325000? If not, there will be no inheritance to be paid by the estate in any case.
Secondly, has your mother made a will (it is not clear that you are certain of this)? If not, the rules of intestacy apply and her husband will inherit a sizeable chunk of her estate under those rules. If she has made a will and no provision has been made for her husband he will have no entitlement to the property.[/QUOTE]
Presumably she also owns her home so she has an additional £100k from primary residence nil rate band, which will rise to £175k by April 2020, so if her estate is under £500k she has no real concern about IHT.
May be even higher if she remains married and he dies first without using all his nil rate bands.0 -
your mother appears to have no idea what she is doing or understand the implications of her proposals
- the property in question is a BTL, it is not mother's main residence. Therefore any change in ownership will trigger CGT
- does mother currently share the rental with your cousin? If not why not as cousin is party to the mortgage, and therefore, presumably a legal owner.
- will mother share the rent with you as a co-owner of will she retain the rent all to herself? That has implications for both her CGT and her IHT
- removing your cousin from ownership may mean your cousin will be liable to pay CGT on his disposal of his share of the property - depends if cousin can show he has never had a beneficial interest in the property from the outset0 -
p00hsticks wrote: »It's not what's on the mortgage that's important, it's what's on the deeds to the property. Having said that, I think it's unlikely for a mortgage provider to agree to add someone to the mortgage if they're not on the deeds, as it's the ownership of the house that is acting as the security to the loan.
If your mother is proposing to give you half the house, then it's true that - providing she lives seven years after this and is not living in the property herself - that that half won't form part of her estate for inheritance tax purposes.
However, when the property is sold you will be liable for Capital Gains Tax on any increase in value, and if you don't already own a property to live in you will be charged an extra 3% stamp duty when you come to buy one. So financially she may not be doing you any favours.
If her estate is such that inheritance duty is a concern to her she'd be best off getting property legal advice on the actions to take to minimise it.
p00hsticks, thank you for your reply.
I see - so even if my name is on the mortgage, but my cousin's is on the deeds of the property, it will still go to him.0 -
[quote=[Deleted User];73274043]As always in these cases - will your mother's estate exceed £325000? If not, there will be no inheritance to be paid by the estate in any case.
Secondly, has your mother made a will (it is not clear that you are certain of this)? If not, the rules of intestacy apply and her husband will inherit a sizeable chunk of her estate under those rules. If she has made a will and no provision has been made for her husband he will have no entitlement to the property.[/QUOTE]
Hi purdyoaten2, thank you for replying.
Yes, I think the property is worth approximately £450,000.
And yes, she's created a will and hasn't left anything to my dad.0 -
Keep_pedalling wrote: »Presumably she also owns her home so she has an additional £100k from primary residence nil rate band, which will rise to £175k by April 2020, so if her estate is under £500k she has no real concern about IHT.
May be even higher if she remains married and he dies first without using all his nil rate bands.
Hi Keep pedalling, this Buy To Let property is also my mum's primary residence. She owns no other property. And yes, she is living and renting in the same property. Do you know if this additional £100k nil rate still applies?0 -
Hi Keep pedalling, this Buy To Let property is also my mum's primary residence. She owns no other property. And yes, she is living and renting in the same property. Do you know if this additional £100k nil rate still applies?
I think that you need to provide considerable clarification - certainly I am at a loss! For example, 00ec25 has, in his previous post, made entirely logical assumptions based on the information that you have provided piecemeal which are clearly now incorrect (the house is not mother's main residence etc) Can you first accurately describe the situation regarding the property? Does she own it, live in it and rent out some rooms (in which case it is not a buy-to let property? In whose name(s) is the property held definitively? I am not interested in the mortgage.This is vital information without which no conclusions or suggestions can be drawn.
With regard to your father, I have no idea why you would assume that he has any claim given that he is specifically excluded in the will. The property must be being left to someone?0
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