Most efficient way of trans parents house into my name?

JOM01

Can anyone advise on what the most efficient way is of transfering my parents house into my name (they still would be living there)?
And what the complications/implications might be.

HappyMJ

The question is why? Are you trying to avoid inheritance tax? Nursing home fees?

Possible implication is that you die and the house is sold and the proceeds given to your dependents.

kingstreet

Is there a mortgage on it?

Mojisola

This crops up so often, perhaps there should be a sticky about the complications!

Just a few -
If your parents sign it over and carry on living there without paying you rent, they will have a beneficial interest in the property.

If you take rent from them, you will have to comply with all the landlord legislation and pay tax on the income.

If you die, get divorced or need to claim means-tested benefits, there will be problems.

JOM01

HappyMJ - simply parents wishes, prob supported by the things you have mentioned

King - no mortgage

Mohisola - so is the best option to take rent? can you laymans terms explain what beneficial interest would mean?
The rent given in income tax could just be a £1 could it? is there a min amount etc?

Thanks for the help so far

Mojisola

They really need to take advice on this because you probably wouldn't want to give out all the information necessary in a forum. Their reason for handing over the house would also matter.

Their ages and state of health would be relevant particularly if they start to need care.

If they are hoping to avoid care home fees, take them around some local care homes. See if they would be happy spending their last years in the homes that the LA will pay for.

If they are trying to avoid inheritance tax but continue to live in the house without paying a market rent, the value of the property will still be included in their IHT assessment because they will have retained a beneficial interest in it. They won't be able to claim any help with the rent because they gave away the house.

You would also need to put in writing who is going to be responsible for maintenance and repairs. Will you always be able to afford to maintain two properties?

zzzLazyDaisy

You need to take specialist advice.

First you need to explore the issue of 'deprivation of assets'

See here for info recently published by Age UK

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS40_deprivation_of_assets_in_the_means_test_for_care_home_provision_fcs.pdf?dtrk=true

In simple terms, if they sign the house over to you, and later go into a home, the Local Authority can treat them as still owning the property for the purpose of assessing care home fees. It is a simple matter to track down if/when they owned the house, by way of a two minute landregistry search.

In any case, if ONE goes into a home, and the other is still living in the house, then the property is not taken into account for means-testing purposes (though this could change in the future)

Re IHT - if they transfer the house to you but continue to live there rent free, they retain a beneficial interest. What this means is that the property will still fall into the estate for calculating IHT, but in addition, you are also liable for CGT on the profit when you sell the house as it is not your primary residence. From an IHT point of view, it may also be a pointless exercise unless the parents are fairly wealthy, as (provided they are married) when one dies the survivor inherits any unused portion of their IHT allowance. So if they leave it all to each other, when the second parent dies the estate would have to be worth more than £650,000 (at todays rates) before IHT becomes an issue. Also remember that if you charge rent to avoid the IHT complications, you will be liable to pay tax on the rent recieved, and you will also have the expense of meeting the legal obligations of a landlord.

JOM01

I think pretty much all of the above are concerns.
Who would be the best person to seek specialist advice from?

Logically given the same position as a parent myself I would want my sons to gain the most, and be burderned the least.
Only 1 of my parents is still alive and as in latter years of life then things like these are a source of anxiety and are increasingly stressful and knowing the best or most efficient option is already in place is a huge weight lifted off.

JOM01

In simple terms, if they sign the house over to you, and later go into a home, the Local Authority can treat them as still owning the property for the purpose of assessing care home fees. It is a simple matter to track down if/when they owned the house, by way of a two minute landregistry search.

^^^ do you know if that has a time span where it can not apply after? so if I passed my children my own house 1 year ago, then i needed care they would be able to take the house from my children?
Or if this happened 5years later would it still apply, even 10 years later? Is there a time limit where they could use the house for means testing?

Thanks again - I think specilist advise is what we need me getting a heads up here will helps get a handle on it first.

Tixy

JOM01 wrote: »

^^^ do you know if that has a time span where it can not apply after? so if I passed my children my own house 1 year ago, then i needed care they would be able to take the house from my children?
Or if this happened 5years later would it still apply, even 10 years later? Is there a time limit where they could use the house for means testing?

Have a read of the link in LazyDaisy's post.

Also given your thread on the other section of the forum - I would be wary about any potential impact transfering your parent's property in to your name could have on that issue. If you owned 2 properties in your name then that could make it more likely that a judge would allow a forced sale of your existing property to repay the charging order.

holly_hobby

The house wouldn't be taken from your children, but you would not be eligible for any state assisted long term care - so in essence your family will have to find fees as determined.

This may be provided for by effecting long term care policy - see your IFA.

Time scales, well the LA will look at whether at the time of your donation it was reasonable to assume that in the short term you knew, or anticipated, that you were likely to require care - and despite that knowledge, still gifted your property away.

As a comment to an earlier post, unused spousal IHT nil rate band is not inherited or automatically transferred to the suriving spouse - it has to be applied for by the executors on death of the surviving spouse, using HMRC form IHT216.

If there is an IHT issue (max nil rate band of 650k 2012/13 - if on 1st death parent their full nil rate band survived, and via nomination via IHT216) - then your parent gifting you the property, but remaining as residence is relevant - as it will be termed as a Gift With Reservation for IHT purposes, and as such does not qualify as a Potentially Exempt Transfer (PET) with associated PET regs.

To which and as discussed, if full market rent is not paid to you by your parent, upon their death the property as a GWR, will be treated for IHT purposes as remaining part of the deceased's estate (along with certain trusts and unexpired PETs).

An IFA and/or family solicitor will guide you through the ramifications of IHT, and indeed if your Parent's estate is likely to be exposed, how they/you may provide for this via proficient estate planning with policies such as term assurance (if affordable and parent is below max entry age), and gift inter vivos policies (utlised in respect of PETs).

Hope this helps

Holly