Gift = inheritance tax or capital gains?

shortdevil

Hi hope someone out there can help.

I bought my mums house for her (from Scottish Council) 3 years ago, but it was all done in her name, however, at the time of buying, I drew up a minute of agreement with her and family solicitor stating that house could be transferred to me at anytime I requested. Mum now ill in care home. Fammily member has power of attorney. I wish to sell the house now, but not sure of my options.

do i transfer the house back into my name then sell it and if so will I have to pay capital gains on the profit?

or

do we sell it in my mothers name and then get her power of attorney to gift the money to me and if so will this be classed as some sort if illegal transaction?

it is worth noting that that power of attorney will do whatever is requested if it has no negative implications for my mother.

I know there have been alot of threads on capital gains and I have read as many as i could find but not come across a scenario as such, grateful for any advice.

Robert_Sterling_3

"I bought my mums house for her (from Scottish Council) 3 years ago, but it was all done in her name, however, at the time of buying, I drew up a minute of agreement with her and family solicitor stating that house could be transferred to me at anytime I requested."

OK: You enabled your mother to buy her home from the council.
Therefore your mother now owns her own home.

You have an agreement that you can have it transferred to you at any time you request it.

Family member has power of attorney.

At first sight the family member with power of attorney could sell the house on your mothers behalf.

"do i transfer the house back into my name then sell it and if so will I have to pay capital gains on the profit? "

You cannot, in my opinion, transfer it back into your name because it never was in your name in the first place.
If it were transferred into your name, by whatever process, there would be no capital gains tax due on it because it would be your mother who has made a capital gain and as it was her primary residence, I guess, it would not be subject to capital gains tax.

"Mum now ill in care home. Family member has power of attorney. I wish to sell the house now, but not sure of my options."

I would like to extend my sympathy to you in repect of your mother's current situation.

"do we sell it in my mothers name and then get her power of attorney to gift the money to me and if so will this be classed as some sort if illegal transaction? "

A Power of Attorney does not give to its owner a free rein to do what they will with the assets of the person for whom they act. I doubt whether in normal circumstances they can give that person's money away.

"it is worth noting that that power of attorney will do whatever is requested if it has no negative implications for my mother."

It does have negative implications for your mother. She might at some stage not be able to afford the costs of being in care.

Notes:

1.
This is not financial nor is it legal advice.
It occurs to me that a solicitor was involved in this business earlier on and might be the best person to advise you now.
2.
I feel as if underlying this problem is another one connected with Inheritance Tax.
Why did you not loan your mother whatever money she needed to buy her home.
Then if ever the need occurred and her home had to be sold by the Holder of the Power of Attorney that person would at that time return to you your loan together with any taxable interest thta had accrued.

I do not understand exactly what the solicitor had in mind.
That is likely to be because he does know exactly what he is doing and there is some advantage to you in what he arranged.
What that advantage is I do not know

Perhaps I have only added to the confusion

So

Consult the original or another solicitor.

Somerset

shortdevil

When I read your post a different thought occured to me. Ignoring I.T. and C.G.T., if your mother owns the house, and is in care ( symphaties about that ) then I think the powers that be will regard the house as her asset and may want it to fund her care package. If the legal agreement you refer to was a loan agreement that would come off the proceeds. But I don't understand what the 'minute of agreement' actually was. If it is what you said, that you can sell the house anytime, in the present circumstances of your mother's care, I think the social services 'right' to get an individual to contribute to their care costs, would over-ride your agreement. I MAY BE TOTALLY WRONG. I think you need to legally check that you are entitled to enforce your mother's house sale and that you are entitled to keep the proceeds.

Bossyboots

I think Scottish care rules are different to England, otherwise I was going to say the same thing.

The holder of a POA cannot just dispose of assets regardless of the so called minute of agreement which in actual fact sounds like an unfair contract and I would suspect would be unlikely to stand up in Court anyway if challenged. It would also be void if only one solicitor was involved in drawing it up and the parties did not seek advice independently of each other. Normally in a purchase of this type, the person putting the money up has a Deed of Trust to ensure their contribution is recognised and returned on the demise of the owner but any solicitor that advised this lady to sign a deed allowing someone to take her house at any time was IMO negligent. Even with a lifetime interest clause, this document on the face of what we have been told here was detrimental to the mother and the person holding the POA could be in trouble if they allow the property to be transferred off the back of the "agreement".

I would be interested to hear the reasoning behind the idea of it being transferred to the OP at any time.

shortdevil

Thanks to Bossy boots, Somerset and Robert Sterling for your replies and your kind wishes for my mum. I gave the money as a loan to mum to buy her house and the minute of agreement was drawn up to protect my interest in it from other less scrupulous family members! The deeds had to be in mum's name as this was her ex council property. The agreement was that mum would live there rent and bill free for as long as she wanted but if she became incapacitated or died then the house would be conveyed to me, this was all anotated in the minute of aggreement.The house is sitting empty now, and is costing a small fortune to insure. Just wanted other peoples opinions on my best options really before i go back to family solicitor. Social services were given copies of the minute of agreement and will not lay claim to any of the porceeds of the sale as I pay for my mothers care separately. I know that perhaps this doesn't read very well on my behalf but I would never do anything that would put my mother in any sort of distress hence going to a solicitor with all family members present to begin with.

Bossyboots

Your first post stated it could be transferred back when you chose, which is different from what you have explained now and it now makes more sense.

Armed with that minute of agreement, I would have thought the person holding the POA could now sell the property or transfer it to you without any problem.

The only caution I would now venture is to ask whether you are sure your mum will not be able to ever move back to the house. If that is the case (a sad situation for which you have my sympathies) then it all would seem to be in order for you to take over the property in accordance with the agreement.

If the property is sold now and she could come home in the future, you face the prospect of finding her housing which may prove difficult at that time.

shortdevil

Thanks again for replies but still not further forward on original questions,
a)if we sell the house in my mothers name and bank the proceeds will I get taxed on this? or
b) if the house is transferred (all above board) to my name before the sale, will I have to pay capital gains on profit?

margaretclare

shortdevil wrote:

Thanks again for replies but still not further forward on original questions,
a)if we sell the house in my mothers name and bank the proceeds will I get taxed on this? or
b) if the house is transferred (all above board) to my name before the sale, will I have to pay capital gains on profit?

I would have thought - but then I'm no expert at all -

a. If you sell the house in your mother's name the proceeds are hers and because it's her sole or main residence she won't have any tax to pay on it;

b. if it's transferred to your name and you sell it in your own name, then because it's not your sole or main residence then you would have CGT to pay on it.

I know you said your mother is ill, but I echo what Bossyboots wrote. Is she likely to come home, is that a possibility at all? And nowhere have you said what your mum thinks about all this, what she wants to happen.

Bit personal I know, but I really dislike so often when I hear of what seems like all decision-making, all choice, removed from people even if they're ill, just because they're 'elderly'.

Aunty Margaret

shortdevil

Thanks Aunty Margaret, as I mentioned before

"perhaps this doesn't read very well on my behalf but I would never do anything that would put my mother in any sort of distress hence going to a solicitor with all family members present to begin with"

from the limited information i have posted it does seem that my brother and i have taken all decision making away from mother, but at the time of buying the house she was completely agreeable and happy with the arrangement. It is only now that we have had to make decisions on her behalf and it's not because she is elderly (65) but because last year she had massive stroke which left her very badly disabled and sadly incapeable of any form of communication, if by some miracle she was to get better then she would not go back to live on her own but come to live with me.

margaretclare

shortdevil wrote:

Thanks Aunty Margaret, as I mentioned before

"perhaps this doesn't read very well on my behalf but I would never do anything that would put my mother in any sort of distress hence going to a solicitor with all family members present to begin with"

from the limited information i have posted it does seem that my brother and i have taken all decision making away from mother, but at the time of buying the house she was completely agreeable and happy with the arrangement. It is only now that we have had to make decisions on her behalf and it's not because she is elderly (65) but because last year she had massive stroke which left her very badly disabled and sadly incapable of any form of communication, if by some miracle she was to get better then she would not go back to live on her own but come to live with me.

I am so, so sorry.

I'm a bit sensitive I know - at 70 I still can't think of myself as 'elderly'! Your mum's state of health changes everything, not her age.

It's very likely that your mum will need 24-hr care for the foreseeable future given that she's now in a care home and not in hospital - presumably she was in hospital and they 'couldn't do any more for her'.

I am so sad for you and for your mum.

Incidentally, I'm just re-doing my Will given that I'm facing repeat major orthopaedic surgery 3 weeks from now. I don't want my nearest and dearest to have to make terrible decisions in case the worst should happen. I'm just in process of booking a woodland burial plot for my husband and myself.

With very best wishes

Aunty Margaret