inheritance question

farkkraf

Hi

My question is around inheritance between siblings in repect to a house. My father is terminally ill and has a house he is wanting to leave to myself, my two siblings and my nephew. My mother died a few years ago so there is nobody else to leave it to and the house is worth around £250,000.

My father wants the house to stay in the family so he me to have it to live in with my partner. He then wants to give my 2 siblings £60,000 each and £20,000 to my nephew. His idea is for him to leave a will with the house in my name with some kind of clause for me to give the above amounts to the family members.

Ill need to remortgage the house to give them this sum, either in one payment or two payments over the years. What would be the best way to go about this without having to pay a lot of tax?

Can we all inherit the house with a clause for me to give them these amounts over the years and not pay CGT on the amount I give them? I was thinking I could buy a house for one of the siblings, get a mortgage on it and gift this to them? If I gift the house to a sibling whilst I still pay the mortgage on it does this fall within the 7 year rule and would I actually be able to do this? Would it be best to buy a house now, start repaying the mortgage, when my father dies transfer the mortgage onto the new property and gift the other house to my sibling then?

Any advice would be much appreciated!

BitterAndTwisted

Your father needs to make a will now while he is still able to. If he doesn't the siblings will inherit collectively and the nephew will get nothing.

If his wishes really are that three people should get a cash sum then however that is arrived at is up to all of you. You buying a property now and transferring it to another person will not work unless it is mortgage-free at transfer.

kingstreet

Provided this is your father's principal private residence, there is no capital gains tax payable upto the point it is transferred to you. If it becomes your PPR, you'll have no CGT to pay even if the property grows in value from the point it becomes yours.

Provided your father's total estate is worth less than £325k, there will be no Inheritance Tax payable either, so you appear to have no taxation problems.

As long as you are credit worthy and satisfy a lender's LTV and affordability criteria you should be able to buy out the other beneficiaries with no problem.

If he hasn't already done so, does your father have the mental capacity to make a will? If not, the property and your father's other assets will be left to you and your siblings in equal shares under intestacy rules.

farkkraf

Thanks! He is going to get a will done soon but we thought it best to get advice prior to this. Ok so the mortgage idea is out of the question unless I can pay it off before the inevitable. Can I however transfer the mortgage from one property to another thus making the bought house mortgage free?

farkkraf

@kingstreet

So if my father was to leave a will stating the house would be left to myself but the respective amounts are due to the other benefactors I can just get a remortgage on the house and pay the sums to the other family members? If this is the case are there any tax implications on the sums I would pay the others? Are there any time restrictions on paying them and tax due as I may not be able to get a mortgage to cover the full amounts in one sum..

My father is mentally capable of making a will so there is no problems there

CLAPTON

there isn't enough information here

the house 250,000
what other assets does he have
what debts does he have

what ages are the you and the sibling and the nephew?
what are their approximate incomes?

why are you thinking of buying a house for one of the siblings .what's the logic there
are you in a position to get a mortgage of 140K?

kingstreet

farkkraf wrote: »

Can I however transfer the mortgage from one property to another thus making the bought house mortgage free?

No. You may be able to transfer a rate from an old mortgage with one lender to a new mortgage with the same lender but there is no ability to transfer a mortgage from one property to another.

On the other question, there are no Inheritance Tax or CGT issues if you own the whole property and there is no other property or assets in the estate. If he leaves the property to several beneficiaries there may be stamp duty implications when you purchase the shares of the others.

You are going to have to get a good solicitor to properly draft this will, so I'm going to leave my opinions there.

holly_hobby

farkkraf wrote: »

Hi

My question is around inheritance between siblings in repect to a house. My father is terminally ill and has a house he is wanting to leave to myself, my two siblings and my nephew. My mother died a few years ago so there is nobody else to leave it to and the house is worth around £250,000.

Current IHT nil rate band is for net estates valued up to 325k. This includes not only any property but all assets, capital and chattels owned by the deceased (less liabilities and funeral costs).

If the total net value of his estate on death, is less than 325k (current nil rate band), there is no IHT liability.

Of course, in any event, the writing of a will to speed up the probate element, and to ensure Dads wishes are adhered to, is preferable.

farkkraf wrote: »

My father wants the house to stay in the family so he me to have it to live in with my partner. He then wants to give my 2 siblings £60,000 each and £20,000 to my nephew. His idea is for him to leave a will with the house in my name with some kind of clause for me to give the above amounts to the family members.

Ill need to remortgage the house to give them this sum, either in one payment or two payments over the years. What would be the best way to go about this without having to pay a lot of tax?

Well the issue is whether you would able to actually secure a mortgage in the first place for the reqd amounts, as and when reqd - if you can't secure one, you are unable to adhere to the terms of the will, unless the property is sold - which may of course be the end result.

farkkraf wrote: »

Can we all inherit the house with a clause for me to give them these amounts over the years and not pay CGT on the amount I give them?

If the property is bequeathed to all parties, you are all joint owners (or tenants in common if the ownership is to be apportioned on a differing % basis).

If there is any transfer of equity from them to you i.e you buy their share for a capital sum, the sum will be liable to a cgt calcualtion (less personal annual cgt allowance), on any gain realised upon disposal - which may not necessarily result in a CGT liability to pay (depending on the figs). You may be liable to SDLT.

farkkraf wrote: »

I was thinking I could buy a house for one of the siblings, get a mortgage on it and gift this to them? If I gift the house to a sibling whilst I still pay the mortgage on it does this fall within the 7 year rule and would I actually be able to do this?

Yes, thats for a dependant relative, your income would ned to be sufficient to service the mortage, and you could only gift it to them when the mge debt has been repaid. (as until that time the mortgagee (lender) will have first charge on the property, and you must have life assurance to repay the debt on death.

Potential PET if YOUR net estate is liable to exceed the nil rate IHT threshold during the proceeding 7 yrs. Any potential bill is able to be provided for by effecting a gift inter vivos policy (written on life of another), or effecting life assurance (all pols written in trust if your net estate is liable to exceed nil rate IHT band of course).

But what about the other sibling and nephew ?

farkkraf wrote: »

Would it be best to buy a house now, start repaying the mortgage, when my father dies transfer the mortgage onto the new property and gift the other house to my sibling then?

Any advice would be much appreciated !

You are unable to simply transfer (port) mortgages between properties - any portablility is subject to the terms of the lender, your status, and product chosen - which may change with lender requirements.

My personal solution, would be from outset to effectively purchase the property from the estate, the estate then providing the other beneficiaries with their bequesthed shares. Which would be at an effective pch price of £140k (i.e 60k x 2 siblings + 20k x 1 nephew).

Effective, Will, IHT and Estate planning, requires the services of a suitably qualified IFA or Solicitor - I suggest you book an appointment asap due the circs of your post.

Hope this helps ..

Holly

farkkraf

CLAPTON wrote: »

there isn't enough information here

the house 250,000
what other assets does he have
what debts does he have

what ages are the you and the sibling and the nephew?
what are their approximate incomes?

why are you thinking of buying a house for one of the siblings .what's the logic there
are you in a position to get a mortgage of 140K?

Not much else. There is the furniture in the house, vehicles worth a few thousand and maybe £5000 savings which he will probably spend. No debt at all and the house is fully paid.

All are over 21 and the nephew is 16. My siblings are on benefits in council houses and have no income!! I have just left university and have a basic income of around £18k + bonus/overtime, I have £10k save up from the past year.

My logic around buying a house is that my father could leave the inheritance to myself alone. I could then buy a cheap house respectively for both siblings and gift this to them. No AGT would be due on either house if I live more than 7 years so I would have the main house and they would each gain a house to live in worth £60,000, effectively splitting the inheritance as originally proposed.

What my dad does not want is for the house to be sold and split between us, which would probably be the case if left as is. My siblings have no money so they would force this. Its a beautiful house in a good location and he wants myself and my partner to make a home of it but he does not want my other siblings to be without.

Mojisola

farkkraf wrote: »

All are over 21 and the nephew is 16. My siblings are on benefits in council houses and have no income!!

I could then buy a cheap house respectively for both siblings and gift this to them.

If I was on a low income or benefits, I wouldn't want to give up a council property for all the costs involved in maintaining my own property unless the council house was in a really bad area.

On the other hand, your siblings may lose all their benefits if they inherit £60,000 in cash.

farkkraf

For my nephew my father does not want him to have the money right now, He is at the age where he will spend it on usless things. He has a saving account or such my father is going to give him at 21 which is already in his name. I would gift him the max amount per year into an ISA account until said amount is paid. My father understands I may not be able to provide the amount of money to everyone at once but is happy for me to give them it over the next 5-10 years.

@holly hobby

Thanks for your detailed reply!! I do not understand the last paragraph fully tho. How would I go about purchasing the property from the estate and what exactly does this mean! Uf you can explain in simpler terms your solution please!