Parent gifting house & remotgage!

booksurr

swanslegend wrote: »

I understand the concerns surrounding the other beneficiaries, however we will pay approx. £80k and the other remaining £20k shortfall will be to ensure he lives in the property until he dies. So we are buying the house from him and therefore its not being gifted. If we were not going to do this he would have to sell the property and pay rent for the remaining years of his life which could amount to a large sum wasting his inheritance. This way he gets to enjoy the money he has invested in his home.

Is there any mileage in transferring the current property to my name and putting the new property into my partners name, changing her address to my FIL address and claiming its her PPR?

OK misunderstood - so you plan to pay for the property in 2 tranches such that at the end of the day you will have paid its "full" value? In that case the remaining 20% would be 20% of its value at that time, not the £20k balance remaining out of the £100k it was originally valued at

your CGT exposure will remain but your acquisition cost will be based on (80% x market value 1) + (20% x market value 2)

I will assume that "partner" means you're married, as such under tax law her PPR is the same as yours - try what you propose above and it would be illegal tax evasion.

If you are not married then she would have to be its sole owner, would have to reside in it at some point to establish occupation, would have to retain access to at least a room there to establish ongoing ability to reside there whilst she remained an owner and would have to elect to have it classed as her PPR, meaning she would pay CGT on her ownership share of the house you and her currently live in

there is no way to evade CGT if you own 2 properties

swanslegend

booksurr wrote: »

OK misunderstood - so you plan to pay for the property in 2 tranches such that at the end of the day you will have paid its "full" value? In that case the remaining 20% would be 20% of its value at that time, not the £20k balance remaining out of the £100k it was originally valued at

your CGT exposure will remain but your acquisition cost will be based on (80% x market value 1) + (20% x market value 2)

I will assume that "partner" means you're married, as such under tax law her PPR is the same as yours - try what you propose above and it would be illegal tax evasion.

If you are not married then she would have to be its sole owner, would have to reside in it at some point to establish occupation, would have to retain access to at least a room there to establish ongoing ability to reside there whilst she remained an owner and would have to elect to have it classed as her PPR, meaning she would pay CGT on her ownership share of the house you and her currently live in

there is no way to evade CGT if you own 2 properties

Thanks, I understand. Are you aware of any mortgage companies that will allow me to do this?

swanslegend

Conrad wrote: »

Renting to a family member is classed as being a residential loan thus subject to normal FCA rules. Highly unlikely this will be accepted as you will not be resident thus this is in effect a buy to let, but will fail the buy to let rules due to him being a relative.


Furthermore FIL's lawyer will not recommend this. If you went bankcrupt / were in a coma etc, he would be turfed out of 'his' home due to your getting into arrears.


You also have to watch out for falling foul of the deprivation of assets rules his local council will have in place to stop people getting around state care home costs.

So there is no option for us in terms of gifting the property and re-mortgaging as no lender will entertain this?

swanslegend

I'm not so bothered about the CGT when we eventually sell, my main concern is can we actually do it?? Can we transfer the house to me and my partner, re-mortgage and then pay my FIL?

Realopinion

Please be careful buying any property under value or trying to illegally not pay taxes.

There are strict guidelines on the process that you are looking to undertake so speak to both a tax specialist and a mortgage adviser. The HMRC are aware of the process of transferring/gifting property to avoid inheritance tax.

It sounds silly, but your father-in-law should be paying you a market rent to live in the property after the transfer, however this is just one of the many things you need to account for if you are going to do this. A good account will advise you on the nuances of this.

Good tax planning is a must when it comes round to managing your assets. Be sure to know that if you get it wrong the costs are high and we all know there are only two certainties in life, death and HMRC.

Conrad

swanslegend wrote: »

Can we transfer the house to me and my partner, re-mortgage and then pay my FIL?

You can transfer the house but your FIL's solicitor wont recommend it - as I said above if you get divorced / go mad / become a drunk / loose your job and get into arrears, he would be turfed out.


If you did manage to enact the transfer you would then struggle to raise a remo because FIL has a right to remain in the home, thus rendering a repossession impossible thus they could not lend.


Why aren't you suggesting he does a nice simple equity release loan so he can enjoy his money this way? Why do you want to be the owner and lend to him?

Conrad

Realopinion wrote: »

The HMRC are aware of the process of transferring/gifting property to avoid inheritance tax.

.

This has nothing to do with inheritance tax after all the asset is well below the IHT threshold.

Cisco001

Stupid question: do OH's father actually need that a sum of cash?

If you remortgage the house you need to pay interest to the bank.

Is it possible her father just add your OH name on deed to make it joint owner? In return, you paying a sum of money to her father every month for next 25 years (may be £350? + inflation every year)

However, I don't know the implication of taxation in future if you do so...

swanslegend

Conrad wrote: »

You can transfer the house but your FIL's solicitor wont recommend it - as I said above if you get divorced / go mad / become a drunk / loose your job and get into arrears, he would be turfed out.


If you did manage to enact the transfer you would then struggle to raise a remo because FIL has a right to remain in the home, thus rendering a repossession impossible thus they could not lend.


Why aren't you suggesting he does a nice simple equity release loan so he can enjoy his money this way? Why do you want to be the owner and lend to him?

Equity release is a really expensive way of lending as you probably will know. So we are looking at alternative options

swanslegend

Cisco001 wrote: »

Stupid question: do OH's father actually need that a sum of cash?

If you remortgage the house you need to pay interest to the bank.

Is it possible her father just add your OH name on deed to make it joint owner? In return, you paying a sum of money to her father every month for next 25 years (may be £350? + inflation every year)

However, I don't know the implication of taxation in future if you do so...

Well at this point he doesn't need the large lump sum, however he does need a small lump sum say £15k. However it would be nice to give him a large lump sum so he can do as he wishes whilst he is still quite young