Implications of parents putting share of new house in son's name?

Rummy_2

Hello all. This is actually an old question, but spurred by a thread about parents buying a new house and putting it solely in their daughters name as per here(apparently to keep it being sold for care) - https://forums.moneysavingexpert.com/discussion/4561593


Compared to that, what are the implications of parents buying a new home and putting a 1/3 share in one of their children's name? So that it's owned as tenants in common, with mother, father, and son all owning 1/3rd each?


Mostly what are the implications for the son anywhere down the line? Just wondering, cos that's me! I live there.


(also as a secondary, what are the implications for me when buying my own property down the line...which is kinda nowish, having lived here for just over 3 years)

EDIT: I also don't know if it matters, but it was a cash buy - no mortgage. I'll be getting a mortgage for my new/own house, though.

dimbo61

You are not a FTB ( first time buyer) but that is really not important.
there is no outstanding mortgage so that should not be a problem when applying for another mortgage as long as you have a deposit.

xylophone

At some point your parents bought a house and gifted you a third of it?
You are currently living in the house so at the moment it is your principal private residence. This could be important for CGT purposes if the house is sold.

The gift could have IHT implications for your parents.

You are moving into the house you are buying with a mortgage - this will become your principal private residence?

What is going to happen to the partially owned house - rented out? Your income tax position?

You will be a landlord with landlord's responsibilities.

A lot to think about and discuss with your solicitor/accountant?

holly_hobby

IHT on their tsfd share if their net estate on death exceeds 325k pp or upto 650k joint (on spousal tsf) - http://www.hmrc.gov.uk/inheritancetax/paying-iht/who-pays.htm.

CGT you will be exposed to tax on any gain, if the property is sold more than 36 mths after your vacation, but will be mitigated by PRR relief (for period it was your primary residence), plus last 36 mths of ownership (regardless of residency), plus annual unused CGT exemption, and lettings relief if it is let before disposal.

Mge wise - if the property is unencumbered it will have no negative effect to affordability re your own mge application, although it may be assessed under 2nd property criteria and your max LTV restricted to max 75%-85% dependant on lender.

Assume it wil remain parents home post your vacation.

Hope this helps

Holly

Rummy_2

Yep parents will still be living there but my new house will be my principle private residence. I don't have a solicitor/accountant and this was done by them with little involvement from myself, hence I was wondering the implications down the line. I've heard vaguely about this '7 year' thingy, hopefully nothing will happen to my parents for a long time; but if it becomes 7 years since the third of the house was gifted to me(assume for the latter 4 of those I've lived somewhere else), does that then change anything?


(had a read of the page about GWR...I can't say I'm totally getting it though?)

paddedjohn

Another question to ask and I don't know the answer, would it have any affect on claiming means tested benefits if you had to claim in the future?

MobileSaver

Rummy wrote: »

Yep parents will still be living there ... but if it becomes 7 years since the third of the house was gifted to me

Because your parents still live there it is a "gift with reservation of benefit" which means that the 7 year rule does not apply. In other words IHT will still be payable on the full value of the house even though 1/3 has been gifted to you.

InMyDreams

If he was living there at the time of the gift then they could have gifted him as much as 50% without reservation of benefit. So the 7 year rule *would* still apply. But I don't know what effect subsequently moving out has. Does the clock just stop ticking? Or not? Or does it revert back to 0 as if he'd never lived there? I've no idea. Does it make a difference if he lives there for more than 7 years?

xylophone

Because your parents still live there it is a "gift with reservation of benefit" which means that the 7 year rule does not apply. In other words IHT will still be payable on the full value of the house even though 1/3 has been gifted to you.

They gifted him a third of the house and he lived in it as his PPR.

It seems to me that the OP needs to discuss the possible CGT/IHT/IT on any rent etc with solicitor/accountant.

http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm14332.htm

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

http://www.hmrc.gov.uk/cgt/intro/basics.htm

Rummy_2

Thanks for the response guys. I was living there(well, we all moved there together) when it was bought, so we all went on the deed together as three of us, tenants in common with a third share each, as far as I'm aware. Of course at the time I didn't know I would be moving out now, and it isn't a pressing issue; more just a curiosity of the implications for me down the line. Is there much point in seeking more thorough advice from an accountant/solicitor now, given the transaction took place 3 years ago and nothing has really changed? Like is there anything that could be done now, that would prevent facing problems down the line?