giving a house to a child

Barbaras_3

I own a house that I bought (£65,000) with money left to me by my father with the thought of renting it out. My son then moved in with his partner (at a reduced rent!). I am now thinking of giving him the house as an 'early inheritance' therefore no money would change hands. Am I able/allowed to do this with reference to CGT implications for me and any other implications that forum members can come up with would be useful before I go ahead. Don't want to do anything that will either get me in trouble or indeed cost me or them in the future. Also I will need to do something similar (cash only) with my daughter but with an equivalent value - implications on this please too!

martinsurrey

a few questions first if you dont mind.

what is the house worth now (realistic sales price)?

how long ago did your father pass away?

have you ever lived in it?

Tixy

As you have never lived in the property they you will pay capital gains tax on any capital gain between what you paid for it and the deemed sales price (that is the current open market value of the property). Whether there would actually be any tax to pay would depend on its value now and whether that is greater than the CGT annual exemption (and whether you have any other capital gains).

Other possible implications could include deprivation of assets if you were to need care and be unable to fund it yourself from remaining assets.

Or possibly if you went bankrupt.

Plus there would be potential inheritance tax to be paid on the gift (paid from the estate not by son) - thats only if you died within the 7 years - but on a reducing basis from now until 7years time.

In terms of any implications for him - unlikely but possibly if they get any means tested benefits they would need to consider if these would be affected.

00ec25

as Tixy says HMRC views such a gift as a disposal (ie sale) for CGT purposes because you are "connected persons"

again as tixy says IF there is a net gain when you take off the allowance and other costs then the tax is payable in the tax year you gifted it. therefore you will need the cash to pay the tax bill

a further (but remote) implication is if you ever moved into the house at a later date whilst it was still owned by your son, you would fall within the rules associated with "pre owned assets"

Barbaras_3

martinsurrey wrote: »

a few questions first if you dont mind.

what is the house worth now (realistic sales price)?

how long ago did your father pass away?

have you ever lived in it?

Hi my dad died 5 years ago. I have never lived in the house and the house probably be worth around £80,000.00 today. Thanks for your reply

xylophone

http://www.hmrc.gov.uk/cgt/property/basics.htm
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm
http://www.hmrc.gov.uk/inheritancetax/

Assuming that you are fit and well, and not doing this with the intention of avoiding care fees I do not see deprivation of assets as a major concern - at that rate nobody would ever gift anything to anybody?

martinsurrey

Barbaras wrote: »

Hi my dad died 5 years ago. I have never lived in the house and the house probably be worth around £80,000.00 today. Thanks for your reply

Okay, if the house is worth £80k, and you bought it for £65k, add on purchase legal’s, take off selling legal’s (so fees for transfer to son) and you get to around £77k.

take off purchase price, get to £12k take off capital gains personal allowance £10.6k and you have a very small capital gain subject to tax, (£1.4k in this case). So CGT is not a major issue, and could very easily be made to legally disappear.

No stamp duty issues, only issues would be inheritance tax (but only if you died in the next 7 years and have an estate of over £325k (after adding back the £80k for the house))

Another consideration is deprivation of assets for social care, which I doubt would apply in this case.

http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

As detailed here, the reason for the disposal has to be to deliberately avoid care fees, and as you are healthy now (and are not looking at care in the near term) they could not claim that you deprived yourself of the asset to avoid care fees.

So from the info given, the only real costs would be legal costs, and a potential small CGT charge (but I would guess not). And there would be very little effect going forward.

InMyDreams

Would you be OK with your son sharing his gift with his partner? As in them putting the house in her name too? Same goes for the money you intend to give to your daughter and her partner (or a future partner).

My parents are planning something similar (having unexpectedly inherited some money from their parents, late in life). I've made it clear that anything given to me is given jointly to me and my husband.

ognum

InMyDreams wrote: »

Would you be OK with your son sharing his gift with his partner? As in them putting the house in her name too? Same goes for the money you intend to give to your daughter and her partner (or a future partner).

My parents are planning something similar (having unexpectedly inherited some money from their parents, late in life). I've made it clear that anything given to me is given jointly to me and my husband.

This is a good point and givers should understand that once something is given it belongs to someone else and the receiver can decide what to do with it so if in the future they sell up and travel the world it's theirs to do with as they choose!

getmore4less

Tixy wrote: »

Plus there would be potential inheritance tax to be paid on the gift (paid from the estate not by son) - thats only if you died within the 7 years - but on a reducing basis from now until 7years time.
.

THis is incorect taper relief only if the gifts, all of them in the previous 7 years, are over the nill rate band of £325k-£650k(depending if there is any transferable nill rate band) and ONLY on the bit over that with the oldest using up the band first.

Barbaras_3

Wow so much to think about! Many thanks for all your help.