Transfering 2nd property to daughter

Casper55

Hi all. I am 58 and mywife is 54 we are both retired my wife through ill health and I am a full time carer. WE have two homes. The one we live in which has an outstanding morgage which our daughter pays us and will be finished in 6 years time.Our daugher lives with her partner in our other home. Once the morgage is complete now £22,000 we wish to transfere the property she lives in to Our daughters name. Is there any come back to us if either one of us goes into care at a later date. Don,t expect this to happen for some time but who knows. If there is, is ther anyway we can get around this. Best regards Dave. Sorry if this is in the wrong section

Brock_and_Roll

No, there is no easy way to get around this and local authorities, under obvious financial pressure are actively digging deeper and further back in time to find evidence of deprivation of assets. That said, as the years pass by the chances of this happening reduce.

As you may have heard the government is going to put a £70k cap on care home fees. The reality of the situation however is that unlike 20 years ago people go into care much later, and to be honest on average last less long than they used to - so £70k per person in most cases is likely to be sufficient.

There is also a moral dimension here - by seeking to shift the asset to ultimately give your children an inheritance, you are putting the costs on to every other taxpayer who it could be argued are much less responsible for you than your own children. Furthermore, in many cases the argument that "I have paid my tax on this money" is not very relevant as much of the value of the estate may come from house price rises over time - i.e. untaxed and "unearned" wealth.

My family are just selling up from our involvement in the care sector after 25 years but this is an issue/debate that we see on a daily basis with no easy answers.

dimbo61

This already seems complicated so without all the information I think you should seek professional advice from an accountant and solicitor

TrickyDicky101

You will need to account for CGT on the transfer of this second property.

How much money (in total) has your daughter provided to you by way of paying the mortgage? This could be treated as a loan, settlement of which could be in the form of the 2nd property transfer.

Doesn't get around the CGT but could offset the issue of Deprivation of Assets.

I agree an accountant would probably be a good idea.

Casper55

Thanks Guys for some decent replies. Both properties do no reach the threshold for CGT. My daughter will have paid aproximaetly 1/3 to 1/2 what the second house was bought for. House prices have done little in the way of going up in this area. As you say advice from an accountant will be the way to go. Perhaps if I sold the property and help my daughter buy another property in the way of cash might be a way forward as I think she would like to move up the ladder but not sure if this would work. Best Regards Dave

Thrugelmir

Casper55 wrote: »

My daughter will have paid aproximaetly 1/3 to 1/2 what the second house was bought for.

Sounds more like tax evasion.

How much is the selling price below open market value?

holly_hobby

Hi,

Yes there are several issues here ..

1. Deprivation of assets (DOA)- this would where the LA were able to prove or it be deemed reasonable to asssume that you were aware at the point of gifting, that you may later seek state assisted LTC.

2. I think you're getting confused with Inheritance Tax (IHT) re not reaching threshold comment ..... Capital Gains Tas is based on the gain an asset realises on disposal or transfer for reduced/nil value between connected parties. The difference is based onthe market value of the property, compared to what you paid for it (less permitted fees, deductions).

I've no idea if you have any Primary Residency Relief available on this unit, but assuming not, unless the market gain realised as a couple is LESS than £21,800 (ike 2 x each persons £10,900 annual CGT exemption), you WILL be exposed to CGT on the transfer.

3. IHT - if your net estate is likely to exceed the available nil rate threshold on death, then the gift as a Potentially Exempt Transfer (PET) needs provision (gift inter vivos policy or such like). Assuming you survive for 7 yrs post donation, there's no IHT issue, but if not its value will be assessed as part of your estate for IHT and will cause a reduction in value to beneficiaries.

4. If you sell the property, and purchase daughter another one, wholly for her use with no further interest/benefit to yourself - the DOA, IHT and PET issues remain. If you retain any use or benefit of the dwelling, it will fall under POAT regs (which is an futher issue).

Without going any further, and given the obvious complexities here, I really do think you should discuss this with an IFA (chartered preferably) and/or a Tax Adviser.

You'll also find that trying to write up a loan arrangement as a post script (ie some time after the arrangement commenced) either as a CGT or IHT mitigation exercise, will probably be investigated by HMRC inspectors accordingly, so tin hat time.

Hope this helps with the basics

Holly