Sell or give property to children.

Dasa

We had our house built so kept the bungalow we were living in and ended up renting it out after it was empty for a while. This was 19 years ago. We're now thinking of replacing it with two semis and giving one to each of our children.(It will be their only property) Should we sell/give the plot to them and then build or build first and then give to them. Another idea is that we keep, build and rent out to them and then leave the houses to each of them in our wills. What are the tax implications? Just tossing ideas around in our heads at the moment.

Keep_pedalling

Without knowing what your net worth is and the value of the property you are considering giving away, the tax implications cannot be estimated.

Dasa

All are assets are in our property and don't really know how much either of them are worth but know the kids would have to pay IHT. Bungalow could be worth about £300,000 I suppose as is, houses when built could be £450,000 each possibly.

sidefx

How do you intend to fund the building of the two new properties?

agrinnall

The kids don't have to pay IHT, you (or rather, your estate) does. And if you've been letting the property for 19 years it's pretty likely that CGT will be due at disposal. I think you need proper professional advice.

Dasa

agrinnall wrote: »

The kids don't have to pay IHT, you (or rather, your estate) does. And if you've been letting the property for 19 years it's pretty likely that CGT will be due at disposal. I think you need proper professional advice.

Yes I know the estate pays the IHT but being as the kids are the sole beneficiaries it is them that are really paying it. Not rented it out for the whole 19 years probably about 12.

Dasa

sidefx wrote: »

How do you intend to fund the building of the two new properties?

Not decided yet. May borrow the money. Our son lives in his own house that he is doing up and then he could sell and use the profit towards it. We also might downsize and release equity as we have no mortgage on our house.. Daughter is working so could get a mortgage.We're thinking it might be best to given them the bungalow and then they fund the build.

saintalan

Dasa wrote: »

Yes I know the estate pays the IHT but being as the kids are the sole beneficiaries it is them that are really paying it. Not rented it out for the whole 19 years probably about 12.

Not so much the rental that'll cause the CGT, but not sure you have lived in it at all so Residence relief is going to be minimal.

CLAPTON

there re two main considerations

-cgt tax on you when you dispose of the properties (whether given away or sold)

-IHT should you die within 7 years of a gift

if you are in good health now, from a tax point of view probably better to give stuff away now and hope you live 7 years (you will however pay cgt)

Savvy_Sue

We're talking about significant sums of money, and potentially large tax bills. You really cannot afford NOT to take proper professional advice. You may have to pay for it, but there's too much at stake.