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  • FIRST POST
    • Izzy_Skint
    • By Izzy_Skint 18th Jun 17, 7:07 PM
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    Izzy_Skint
    MOTHER BUYING NEW HOUSE IN MY NAME - Help!
    • #1
    • 18th Jun 17, 7:07 PM
    MOTHER BUYING NEW HOUSE IN MY NAME - Help! 18th Jun 17 at 7:07 PM
    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
Page 1
    • 00ec25
    • By 00ec25 18th Jun 17, 7:28 PM
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    00ec25
    • #2
    • 18th Jun 17, 7:28 PM
    • #2
    • 18th Jun 17, 7:28 PM
    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
    Last edited by 00ec25; 18-06-2017 at 7:35 PM.
    • Izzy_Skint
    • By Izzy_Skint 18th Jun 17, 7:38 PM
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    Izzy_Skint
    • #3
    • 18th Jun 17, 7:38 PM
    • #3
    • 18th Jun 17, 7:38 PM
    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
    • By G_M 18th Jun 17, 8:23 PM
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    G_M
    • #4
    • 18th Jun 17, 8:23 PM
    • #4
    • 18th Jun 17, 8:23 PM
    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?
    Last edited by G_M; 18-06-2017 at 8:26 PM.
    • cte1111
    • By cte1111 18th Jun 17, 8:27 PM
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    • #5
    • 18th Jun 17, 8:27 PM
    • #5
    • 18th Jun 17, 8:27 PM
    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
    • By Keep pedalling 18th Jun 17, 8:34 PM
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    Keep pedalling
    • #6
    • 18th Jun 17, 8:34 PM
    • #6
    • 18th Jun 17, 8:34 PM
    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
    • By AdrianC 18th Jun 17, 8:41 PM
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    • #7
    • 18th Jun 17, 8:41 PM
    • #7
    • 18th Jun 17, 8:41 PM
    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
    • By xylophone 18th Jun 17, 8:45 PM
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    • #8
    • 18th Jun 17, 8:45 PM
    • #8
    • 18th Jun 17, 8:45 PM
    Is mother thinking of avoiding care home fees?

    http://www.whentheygetolder.co.uk/care-fees-funding-and-deprivation-of-assets-the-rules/
    • Keep pedalling
    • By Keep pedalling 18th Jun 17, 8:50 PM
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    Keep pedalling
    • #9
    • 18th Jun 17, 8:50 PM
    • #9
    • 18th Jun 17, 8:50 PM
    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.
    Originally posted by AdrianC
    She can't sell the existing one on her own either.
    Last edited by Keep pedalling; 18-06-2017 at 10:39 PM.
    • xylophone
    • By xylophone 18th Jun 17, 11:05 PM
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    xylophone
    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
    • By TBagpuss 19th Jun 17, 9:32 AM
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    TBagpuss
    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.
    • Izzy_Skint
    • By Izzy_Skint 19th Jun 17, 2:03 PM
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    Izzy_Skint
    Hello!

    Firstly thanks to ALL who have replied to my original question, it has really opened my eyes.

    Here are the answers to some of the questions :

    1. NO, the house being sold does not have a mortgage. The title deeds are in both out names (mother & myself).

    2. YES, i did once live at the property to be sold for at least 28 years until i married 2 years ago.

    3. Mum is 80 years old and no longer wants the responsibility of filling in forms in the future, she just wants to live at the new property and enjoy life, it was no way a means to beat care costs.

    HERE'S SOME FIGURES

    Property being sold (owned 50/50 with my mum) is worth £450,000.

    The property she wants to buy is valued at £350,000.

    As mentioned the proprty to be sold is in both our names, so would it be a benefit to buy the new house in both our names again?
    I would surly then not be considered a landlord as my mother would still own 50% of the new property.

    I will of course obtain in depth solicitor help before proceeding but this is really helping me get a head start.

    Many Thanks
    Izzy_Skint
    • 00ec25
    • By 00ec25 19th Jun 17, 2:30 PM
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    00ec25
    your latest post only partly helps with working out your numbers....

    1. If mother's new house is purchased with your name on the deeds either as joint tenant or tenant in common the entire purchase price will be subject to the higher rate SDLT. At 350k purchase price that will be £18,000 SDLT.

    2. out of the 25 years you have been a co-owner of the current property and lived in it, was it your only/main residence for that whole time, for example, did you ever co-own another property such as the girlfriend's place before marriage?
    Once you got married the main residence automacticlaly becomes whereever you live together, if if only one of you owns that place. So, as you married 2 years ago, it was your only (owned) home for 23 years out of the last 25 and you will get a huge amount of Private Residence Relief (PRR) against your CGT. To give a more accurate figure we would need confirmation of:
    - no other ownership by you pre marriage
    - month and year you moved out, which of course may be earlier than the date you got married. If later, the date of marriage takes precedence.
    - value of the property 25 years ago when you first became co-owner

    the reality is that you get 100% relief for the PRR period. PRR is a) the time you lived there as your main home plus b) the final 18 months of ownership if not living there at that final period. The calculation must be in months, not years, but you can immediately see that with 25 years ownership and "approx" 24.5 eligible for PRR, there is apparently only 6 months when it is liable.
    In somewhat simplified terms the CGT calculation is:
    gross gain = (Selling price - original value) - associated buying and selling costs such as legal and EA fees
    taxable gain = gain x (liable period/ total ownership period) - CGT allowance £11,300
    tax payable = taxable gain x 18% and or 28% depending on the size of the gain

    in theory your liability will be small or could be zero, depends on the missing data...

    3. at 80 years old your mother would be highly likely to be regarded as having deliberately deprived herself of capital if she does end up needing state funded care if she gives you sole ownership of the new house. Being unwilling to sign some forms once when it is purchased is no excuse - it is not as though she has to sign forms "in the future"

    4 the better option for the new home would be: not to be a co-owner, take a charge, and accept that it may need to be sold for care home purposes at which point you will claim your money back. Whether your "loan" includes an interest clause is down to you. if it does that would of course be taxable on you.
    Last edited by 00ec25; 19-06-2017 at 2:57 PM.
    • xylophone
    • By xylophone 19th Jun 17, 3:10 PM
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    xylophone
    Mum is 80 years old and no longer wants the responsibility of filling in forms in the future, she just wants to live at the new property and enjoy life,

    There seems to be no reason why you should not lend your share of the sale proceeds to your mother against a first charge on the property, so that she can purchase in her sole name.

    I cannot see why she would think that owning a property in her sole name would involve her in extra form filling?

    She'll be paying CT/utilities/insurance in just the same way as she is now?
    • Mojisola
    • By Mojisola 19th Jun 17, 3:39 PM
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    Mojisola
    I cannot see why she would think that owning a property in her sole name would involve her in extra form filling?
    Originally posted by xylophone
    I'd echo this - we own our house but I can't think of any form filling that we've had to do because of that.
    • AdrianC
    • By AdrianC 19th Jun 17, 4:22 PM
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    AdrianC
    3. Mum is 80 years old and no longer wants the responsibility of filling in forms in the future, she just wants to live at the new property and enjoy life, it was no way a means to beat care costs.
    Originally posted by Izzy_Skint
    If that's her motivation, then the best route would be to get power of attorney, and use that so you can do the paperwork on her behalf.

    Do you own another property, your own home? If so, then you being an owner (part or joint) of her new place will cost 3% Stamp Duty.
    • Keep pedalling
    • By Keep pedalling 19th Jun 17, 4:37 PM
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    Keep pedalling
    If that's her motivation, then the best route would be to get power of attorney, and use that so you can do the paperwork on her behalf.

    Do you own another property, your own home? If so, then you being an owner (part or joint) of her new place will cost 3% Stamp Duty.
    Originally posted by AdrianC
    POA would be a very good idea whether this move of house happens or not.
    • Izzy_Skint
    • By Izzy_Skint 19th Jun 17, 4:38 PM
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    Izzy_Skint
    Hello

    Again THANKS for everyone's detailed replies, especially 00ec25.

    A)
    On the SDLT of £18,000, this could surly be argued if i was to buy the property jointly with my mother as yes it would be my second home of non-main residence BUT my Mothers main home of residence. She would own 50% of the new property and will be living there, why should she pay higher rate if it is her own main residence?

    B)
    Sorry, need to get my marriage date right! Blame the heat!
    We (me & mum) purchased the property to be sold in Nov 1992 for the sum of £175,000. It was both our main residence and we owned no other property. So on those dates i lived full time in the property for 21 years as i moved out after marriage in October 2013.

    C)
    I fully understand the care home situation so this of course could arise in the future no matter which name it is in. If purchased 50/50 then i can argue only her 50% share would be liable for the care costs surly?

    D)
    Regarding filling in forms after 80 years old!
    Mum is Mum, she worries.

    Please let me know if you need more details and again thanks for everyone's input.
    Izzy_Skint
    Last edited by Izzy_Skint; 19-06-2017 at 4:56 PM.
    • AnotherJoe
    • By AnotherJoe 19th Jun 17, 4:42 PM
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    AnotherJoe
    Another vote for POA.
    • AdrianC
    • By AdrianC 19th Jun 17, 4:52 PM
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    AdrianC
    On the SDLT of £18,000, this could surly be argued if i was to buy the property jointly with my mother as yes it would be my second home of non-main residence BUT my Mothers main home of residence. She would own 50% of the new property and will be living there, why should she pay higher rate if it is her own main residence?
    Originally posted by Izzy_Skint
    The 3% has nothing to do with her.

    It would apply because you are buying a property that is not your only property, and is not a main-residence-swap for you. It applies to the whole purchase price.

    I fully understand the care home situation so this of course could arise in the future no matter which name it is in. If purchased 50/50 then i can argue only her 50% share would be liable for the care costs surly?
    Given that you owned 50% of her previous place, and have done so for many years - very probably, yes.
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