pay off childrens mortgage

keatouba

Apologies if this is in the wrong thread

My assets are under the inheritance tax threshold (including house value which I own outright)

I have enough money to live comfortably.

I would like to either pay off or give both my sons a lump sum towards their mortgage.

Am I or my sons liable to any tax penalties if I do this?

I have looked but all I find are inheritance tax answers

thanks in advance

amnblog

It is an inheritance tax question.

enthusiasticsaver

Providing you live for 7 years then there will be no inheritance tax liability for your sons. It is called a personal equity transfer and my mum has done this three or four times with me and my sister and brother with the aim of reducing the size of her estate. She started in her sixties and is now almost eighty and we got the last lump sum five years ago so will be out of the seven year period in two years time. We are now doing the same with our daughters.

amnblog

enthusiasticsaver wrote: »

personal equity transfer .

Potentially exempt transfer


http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm

macca1974

If you make an outright gift to your sons (of cash) then there would be no tax to pay as there is no tax on gifts. They would be a Potentially Exempt Transfer for IHT purposes (which is where the whole 7 year thing comes in). If you dies within 7 years of making the gift, then they would be counted to use up the first part of your "Nil rate band" for IHT purposes. If as you say your estate is below the nil rate band (currently £325,000) then there wouldn't be any tax to pay in the event of your death.

getmore4less

enthusiasticsaver wrote: »

Providing you live for 7 years then there will be no inheritance tax liability for your sons. It is called a personal equity transfer and my mum has done this three or four times with me and my sister and brother with the aim of reducing the size of her estate. She started in her sixties and is now almost eighty and we got the last lump sum five years ago so will be out of the seven year period in two years time. We are now doing the same with our daughters.

It is extremely rare that any IHT ever becomes liable on a gift recipient. In nearly all cases the estate just gets a smaller nill rate band and has to pay any tax.