Transferring Deeds to another house member

tashemily

Hi, this is my first post so hope I am in the right section. I have read many posts on here about parents wanting to transfer the house into their children's names when they live separately but cant find anything on the situation if the daughter and mother share the house. My mother would like to transfer the house into my name in full or part although if 'ethical' we would rather transfer it in full dependant on pitfalls. I also live in the house with my children. The intention would always be to look after her in later life (she is 76 now) but am aware of the 7 year rule to avoid Inheritance tax so need to do something sooner rather than later. Her solicitor is not the most helpful and will only advise her although we went jointly for advice. I do intend to get separate advice but would be interested in any comments of experiences with this. I have no other property, am the only child and would be full beneficiary on her death. Thank you!

puddy

she wouldnt escape care home fees if this is the intention, there is no time limit on deprivation of assets

tashemily

No not the intention at all because as I said in post we aren't considering care homes in the equation.

CLAPTON

how much is her estate likely to be worth
can the estate take advatage of her husbands IHT allowance?

tashemily

There is no husband and the Estate probably worth between 0.5 and 0.75m. The house as been passed down through a couple of generations. Nearly all the estate is the house and there is minimal 'cash'.

CLAPTON

the difficulty here is that if your mother gives you the property but continues to live there (without paying a market rent) then for IHT purposes the HMRC will see the gift as being one with reservation. this effectively means that IHT will be payable as if no gift was made.

tashemily

What is the maximum % she could give without this happening? What we want to avoid is for me to have to sell the family home to pay the IHT after she has gone. What would happen if she transferred 100% and I gave her cash to give me rent? Apart from being on very iffy ground is that feasible?!

BitterAndTwisted

You should both seek separate legal advice.

"Her solicitor is not the most helpful and will only advise her although we went jointly for advice."

Her solicitor is entirely correct: for obvious reasons you cannot both be advised or represented by the same legal professional.

tyllwyd

I wonder if it would work if she gave you 50% of the house, so that you became tenants in common, but hopefully her half of the house would be below the inheritance tax threshold? And if you were both living there, that might make it OK in terms of gift with reservation of benefit. That's what it implies here.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/InheritanceTaxEstatesAndTrusts/InheritanceTaxwhenpassingonmoneyorproperty/DG_179363

(but please don't take my word for it, I'm only suggesting it as something to look into !!)

kingstreet

tashemily wrote: »

What is the maximum % she could give without this happening? What we want to avoid is for me to have to sell the family home to pay the IHT after she has gone. What would happen if she transferred 100% and I gave her cash to give me rent? Apart from being on very iffy ground is that feasible?!

There is no maximum percentage. The maximum which can be given away under the Annual Gifts exemption is £3,000. That's one gift, or several, upto the £3,000 limit.

Any amount above that becomes a potentially exempt transfer if the donor survives for seven years after the gift. If death occurs during that period, all or a proportion of the tax may be payable depending on the proximity of the gift.

A gift where the donor retains an interest in possession, ie giving you a property then continuing to live in it would fall foul of the 'gifts with reservation' rules. Effectively, the gift would remain in your Mother's estate and full Inheritance Tax would be payable on it if applicable to the total estate.

If she gifts you the property then lives in it while paying you full market rent out of her normal income, HMRC may view this as a potentially exempt transfer. You need legal and tax advice on this issue to ensure HMRC is happy with the arrangements you make. You could buy the property from her and she pay you rent, but this would mean she simply exchanged the property for a lump sum leaving her back at square one with an asset still in her estate but in a different form.

To mitigate any liability, a whole life assurance written in trust can be used to pay any inheritance tax. Take a policy for 40% of the value of the house and you use that to pay the tax yourself. A seven year decreasing term policy can be used to cover the potentially exempt transfer, giving you the amount needed should death occur during the seven years. The premiums for these contracts must be affordable from the applicant's normal income.

This really needs professional, expert help. I'd get in touch with a specialist estate planning IFA and/or solicitor. It's been a few years since I've looked at something like this, so apologies if I'm "rusty."

tashemily

Thank you - that is of great help. The letter from her solicitor says
'I confirm that any gift of the property will be disregarded for inheritance tax purposes as long as you live for a further 7 years from the date of the gift and provided that your daughter continues to live with you in the property'.
I think she needs a new solicitor too as this, to me, indicates that any percentage of that property will be exempt from the tax if after 7 years!