My parents want to give us their house!

babyharry5

Hi
not sure if this is even posted in the right section ( if not, let me know)!

My parents are in their early 60's with a terraced property worth approx £125k ( conservative value)
They have spoke to myself and my brother and want to give the house to us both 50/50 now, rather than when they die.

Can anyone tell me the tax implications? or how we go about it? and what charges we are likely to incur?
They are both of sound mind and health and would stay in the property until both pass away.

Any help ( constructive) would be appreciated - thanks

david29dpo

Not sure on the tax but the land reg forms are simple to fill in yourself and will cost £75 for the transfer.

shaven-monkey

7 year rule
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm

and "You can continue to live in your home as your primary residence after giving it away, provided you pay a market rent to the new owner. Bear in mind that the new owner may have to pay Income Tax on the rent you pay them.
If you don't pay a market rent, the gift will be considered a 'gift with reservation of benefit' and the house may be subject to Inheritance Tax."
So, assuming they both survive 7 years after the gift is made, they give you the house and pay rent at market rate or there will be complications. The complications only arise if their total estate is worth more than the inheritance tax cut in value.
To avoid (not evade... ahem) inheritance tax they should write their wills so that their estates pass on to you and your sibling rather than to the other parent upon mortal coil off shuffling.
If the conservatives can actually form a government and do raise the "death tax" value then you likely won't have any problems at all. Then again it could have been a promise they can't afford to keep.

gauly

What are they going to gain from this? Or you?

£125k is well below the inheritance tax threshold for two people. If you receive the house now you will have to pay capital gains tax on any rise in value because it is not your main residence, so you would be better off inheriting it from them.

If you or your brother divorce the house could have to be sold as part of the divorce settlement. If you or your brother becomes bankrupt the house could be sold to pay off the debts. So, it's quite risky for your parents.

If your parents go into a nursing home then even then you may not gain anything. Nowadays they check for "deprivation of assets" and if it is considered that your parents gave their home away to avoid paying care home fees then they won't get any financial help.

00ec25

Gauly has said it all.
There is no benefit to your parents from doing this and it actually makes it worse...
- IHT is irrelevant with that value, and the fact it is a "gift with reservation", ie they continue to benefit from (live in) the asset means it will never be exempt from IHT anway

- CGT

- deprivation of assets

babyharry5

Hi all
thanks very much for all of your replies!
I have no idea why they really want to do this now other than that they think it will be easier to sort now, rather than when they are old and unwell. Their estate certainly wont exceed the inheritance tax threshold.

For the record, there is no chance of my brother or myself going bankrupt! divorce is a different matter lol:rotfl:

dansylvester

Also, a word of warning, if you ever find yourselve in a position to be unemployed, the house is counted as capital as if it was money in the bank and you therefore may not qualify for any/less state benefits

Person_one

babyharry5 wrote: »

Hi all
thanks very much for all of your replies!
I have no idea why they really want to do this now other than that they think it will be easier to sort now, rather than when they are old and unwell. Their estate certainly wont exceed the inheritance tax threshold.

For the record, there is no chance of my brother or myself going bankrupt! divorce is a different matter lol:rotfl:

Really? I bet there are a few bankrupt people who used to think that! You really do have to keep worst case scenario in mind when there is as much on the line as there is here.

I think your parents have nice intentions, but as Gauly pointed out, it really is much simpler all round for you to inherit the house from them.

bitsandpieces

babyharry5 wrote: »

I have no idea why they really want to do this now other than that they think it will be easier to sort now, rather than when they are old and unwell. Their estate certainly wont exceed the inheritance tax threshold.

It's sensible for your parents to do a will now, if they haven't already - it is easier to do this while well. Assuming their assets aren't complicated, this might take an hour or so (it took me less). Getting a will done will be much easier than transferring the house to their children, will likely be cheaper, and doesn't involve the same risks and complexities.

babyharry5

Person_one wrote: »

Really? I bet there are a few bankrupt people who used to think that! You really do have to keep worst case scenario in mind when there is as much on the line as there is here.

I think your parents have nice intentions, but as Gauly pointed out, it really is much simpler all round for you to inherit the house from them.

NO REALLY THERE IS NO CHANCE!!

bitsandpieces wrote: »

It's sensible for your parents to do a will now, if they haven't already - it is easier to do this while well. Assuming their assets aren't complicated, this might take an hour or so (it took me less). Getting a will done will be much easier than transferring the house to their children, will likely be cheaper, and doesn't involve the same risks and complexities.

Thanks I will let them know - I spoke to my parents yesterday and explained all of the info that you have kindly given me. My dad just wants to do his bit for us now. My brother or I dont need/want the house or money at all.
I will sort out the will

Person_one

babyharry5 wrote: »

NO REALLY THERE IS NO CHANCE!!

Woah! No need to shout!