Tax efficient way of transferring property.

andybuk99

Hi all and first of all thanks for any help that is offered.

I currently live in a property that my parents own and which I (i'm an only child) will receive when they pass away, they want me to enjoy the benefits of the property now rather than in the future. They also own the property they live in and again I will be left that property in the future.

What is the most tax efficient way of them transferring the properties to myself?

Fire_Fox

Welcome! It's worth running an advanced search, issues of this nature comes up regularly. http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm
Depending how old your parents are read up on 'deprivation of assets' in relation to care home costs. This may not be a major issue if your parents are retaining one of their properties.

00ec25

it depends on whetehr their estate will be more than £650,000 when the second one of them dies

the most tax efficient way is NOT to transfer them at all but for you to inherit them when they die provided there is no IHT to pay

if there is IHT to pay then the alternative is to do a transfer now but becuase it is from parent to child then there will be CGT implications as follows:

- house you live in - parents will have to pay CGT on the gain since they bought it at the point they transsfer it to you - this is becuase it falls under the "connected person" rule

parents house - they will continue to live there so it will be a "gift with reservation" meaning that it remains liable for IHT as they continue to benefit from it by living there. ALSO as you would then be the legal owner YOU will become liable for CGT since you do not live in, therefore when you eventually sell it , then at that time you will have to pay CGT for the period you did not live in it

as Firefox says parents also need to be aware of the deprivation rules

passing assets from parent to child before death is a very complex business and if you want to do this properly then pay for professional advice, you need proper planning to avoid IHT

andybuk99

Thanks for the responses so far.

I will of course seek legal advice but I want to know if people have had similar experiences so that when professional advice is offered it sounds similar to other peoples advices that has been given, so at least I know if I am at the right solicitors.

The idea of transferring the house to me now is so that I can then use the equity in the property to advance on the property ladder by renting the property and using some of the equity as a deposit on a new house.

Fire_Fox

Please don't become a landlord until you have done loads of research, there are reams of legislation you would need to comply with. You also need to consider how you would fund two mortgages if your tenants trash the place or do not pay rent, you fall ill or injured and cannot work - the second income and second asset may make you ineligible for means tested benefits.

andybuk99

Fire_Fox wrote: »

Please don't become a landlord until you have done loads of research, there are reams of legislation you would need to comply with. You also need to consider how you would fund two mortgages if your tenants trash the place or do not pay rent, you fall ill or injured and cannot work - the second income and second asset may make you ineligible for means tested benefits.

. As with regards to renting my parents originally rented out the property in question for 10 years prior to me moving in so they have a wealth of experience.

Fire_Fox

The legislation has changed significantly over that timeframe, please research anyway.

Werdnal

Fire_Fox wrote: »

The legislation has changed significantly over that timeframe

And so have the financial penalties for getting it wrong!