Second home for children

CLAPTON

RosWright wrote: »

Reading through this again, if she gifted, we'd be liable to CGT now, and if something happened to her, then CGT on inheritance tax for the same gift???

No,

if she gifts it to you now then cgt is payable now

however, if she dies within 7 years then IHT is also payable hence the need to know the value of their estate

RosWright

OK, but would the estate now be less the second property, or does it still 'count' until 7 years are passed?
Maybe it would be better to have the house joint owned by myself/ mum so that we come in under the CGT allowance (or even joint mum/dad then do the gift?)
see why i need advice! It feels like a bad game of chess..

CLAPTON

how much is their estate worth?

RosWright

I think their current home could be 250 - 300 thousand, hard to tell as no-one in their close ever seems to sell. Last property in the street went for 270 in 2005, and it was quite different, extensions and new fittings inside, theirs seems to be the same as in 1980, no new kitchens, bathrooms, clunky central heating etc..

Cannon_Fodder

Beware deprivation of assets rules, on transfers/gifts, too.

CLAPTON

currently the IHT allowance is 325,000 per person
a spouse can 'transfer' their allowance to their spouse so in practice the allowance is 650,000 before IHT is due

is it likely that their combined estate is going to be greater than 650,000? if not then there is no point in their worrying about something that will not happen

RosWright

How do you transfer an allowance? I assume you do that before anyone dies

And if i inherited the house instead, am I in a new territory of CGT on sale of the house?

Isn't there a possibility to transfer half the second house so that her 10,000 CGT allowance is used for this year, and her assets are reduced? I think the conservative government has worried her that things might change in the future. I found advice as below

BE KIND TO YOUR CHILDREN If you plan to pass property to your children, let them become joint owners now. They have their own CGT allowance, so a family with three children could have a £50,500 allowance between them. Speak to an accountant about legal implications.

Read more: http://www.thisismoney.co.uk/tax/article.html?in_article_id=505572&in_page_id=11#ixzz0u9y3T8Jx

CLAPTON

RosWright wrote: »

How do you transfer an allowance? I assume you do that before anyone dies

And if i inherited the house instead, am I in a new territory of CGT on sale of the house?

Isn't there a possibility to transfer half the second house so that her 10,000 CGT allowance is used for this year, and her assets are reduced? I think the conservative government has worried her that things might change in the future. I found advice as below

BE KIND TO YOUR CHILDREN If you plan to pass property to your children, let them become joint owners now. They have their own CGT allowance, so a family with three children could have a £50,500 allowance between them. Speak to an accountant about legal implications.

Read more: http://www.thisismoney.co.uk/tax/article.html?in_article_id=505572&in_page_id=11#ixzz0u9y3T8Jx

no you don't actually transfer anything as such

On the first death and if the deceased leaves everything to their spouse, then when the second person dies, their estate has twice whatever the IHT allowance is at that time .. currently that would mean £650,000.
So if their total estate is less than 650,000 there is no IHT, no cgt, no tax at all.

Now if they had given a house away during the last 7 years, then
at the time the house was given away cgt will be payable
and the value of the house (or any gifts) would be added back to the value of their estate for IHT purpose.

RosWright

I think the penny is dropping, thanks for your patience

I'm not sure she can gift to her husband into joint ownership of the second home without CGT
If she did this, and gifted me half, then the sums might be..

113 - 44 (current price - original price) = 69
gifting half - so 34.5
CGT allowance for the year = 10,100, so 24.4 difference
CGT at 18% = 4,392 to pay

versus making sure the wills are very clear, and deciding if one persons share of the estate should be left to myself and my brother, so that the surviving spouse still retains half

If they divide up their main residence now, there are possible IHT issues anyway (Gifts that you continue to benefit from)

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

Leaving your home in your will

If you and your spouse or civil partner own your home as joint tenants, the surviving spouse or civil partner will automatically inherit the home and there will be no Inheritance Tax to pay on the property when the first partner dies.
If you own a property as tenants in common with another person, you each own a portion of the property. You can pass your portion on to your children when you die. Dividing your property between your spouse and grown-up children in this way reduces the future size of the taxable estate when your surviving spouse dies.
It is a good idea to discuss the implications of changing the way you own your home(s) with a solicitor if your estate is worth more than the Inheritance Tax threshold. You’ll find some links below to professional organisations - though not all professionals are registered with them.

CLAPTON

what is the value of their estate???????????????????????????????????????????????????????????