Gifting Help...

makemoneynotwar

Hello Everyone,

i was wondering if anybody could help me with my situation...

My mother has been in discussions with me about taking over the deeds of their house.

this would essentially mean that i have the opportunity to take ownership of our family home. obviously with the intention that they will stay in the property indefinitely, but with the advantage of me owning a property which i could then use as capital for other purposes.

i would like to know if this is a simple process of changing a name on some paperwork, or whether the tax office would have any involvement?

i really know very little about this topic, but would like to understand what the situation could entail.

many thanks

C

Lokolo

If the property is mortgage free then no Stamp Duty would apply.

There are other things to consider, such as future possible care home fees (deprivation of assets) and inheritence tax depending on the value of the property and the health of your mum currently.

CLAPTON

why are they considering this?
how old are they?

they can give you the house but

-it will still be part of their estate for IHT purposes as it will be considered a gift with reservations

-when/if you ever sell it then you will pay capital gains tax (as well as IHT)

-if you die then your beneficiaries will own your parent home

-if you get divorced it will be part of the spoils to be divided.

-it will be ineffective to void paying for their care costs

basically, unless you have a specific reason for doing this with a well thought out plan, then basically a very bad idea

xylophone

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm
http://www.campionssolicitors.co.uk/id57.html

makemoneynotwar

thanks for the wonderful comments!

the plan was to use the gained equity to act as a guarantor on another mortgage, also in the event of their passing (not planned any time soon) the property would be in my name so no IHT - from your replies, i understand this is not the case... could you please explain further.

an extract from the above website states:

Giving your home away and continuing to live in it

You can continue to live in your home as your primary residence after giving it away, provided you pay a market rent to the new owner. Bear in mind that the new owner may have to pay Income Tax on the rent you pay them.
If you don't pay a market rent, the gift will be considered a 'gift with reservation of benefit' and the house may be subject to Inheritance Tax.

question :

what would be considered a market rent? is this an arbitrary figure, defined by the landlord? (AKA me)

atush

it would have to be a reasonable amt, based on similar houses- you cant set it too low.

and you would have to pay tax on it.

Not the best idea

Yorkie1

If you use the gained equity as a guarantor on another mortgage, you do realise that if that mortgage goes wrong, you are putting your parents' residence at risk?

This is such a bad idea from your parents' perspective.