gifted property

sat56

Dad is tidying up his affairs after some medical news. He wants to transfer ownership of holiday home to his 3 adult children.

Background

House he lives in as joint tenants with his partner. Value £300k ish
He is not married to his partner.

Holiday house empty but for a few weeks a year, in his sole name. This is the house he wants to gift. Bought for 40k ish many years ago. Value I'm guessing around £200k.

He has no will. I want to push him to get professional advice but need to get my arguments straight.

Are my arguments correct.
If he gifts property he will be liable to cgt of £27 k
If he passes it in a will, then no cgt is payable and no iht is payable as his estate is under iht threshold.

Any advice or corrections gratefully received.

CLAPTON

sat56 wrote: »

Dad is tidying up his affairs after some medical news. He wants to transfer ownership of holiday home to his 3 adult children.

Background

House he lives in as joint tenants with his partner. Value £300k ish
He is not married to his partner.

Holiday house empty but for a few weeks a year, in his sole name. This is the house he wants to gift. Bought for 40k ish many years ago. Value I'm guessing around £200k.

He has no will. I want to push him to get professional advice but need to get my arguments straight.

Are my arguments correct.
If he gifts property he will be liable to cgt of £27 k
If he passes it in a will, then no cgt is payable and no iht is payable as his estate is under iht threshold.

Any advice or corrections gratefully received.

giving the property away is a disposal for cgt purposes

so gain will be 200,000 - 40,000 = 160,000 less buy selling costs
lest say 4000
he has a cgt allowance of 11,100

so net gain 160,000 - 4,000 -11,100 = 144,900

tax at 18% or 28% depending upon his other income
so between 26,082 and 40,572


IHT may be zero on death depending upon his will and his total estate at that time

Keep_pedalling

I assume your father is a widower, otherwise his share in the two properties would take him over the IHT limit, if that is the case then it would be a bad idea to gift his second home now, especially if his life expectancy is short.

His current partner will get his half of everything owned jointly, but if he wants her receive anything above that he must do a will. Any items he wants to give to named individuals again needs a will. Even if he does not want to do any of these things, he still needs a will to avoide making life difficult for those left behind, and to appoint executors he trusts to to make sure things are done as he would expect them to be done.

PS if he want you to have a share of the property he currently shares with his partner after her death, then they will need to look at converting to tenants in common as well as both sorting out wills.

getmore4less

What else is there, sitting at £350k(£200k + 1/2 of £300k) so far, that's over the single nil rate band.

Any transferable nil rate band available?

sat56

Thanks for replies

To Keep Pedalling.
Father is divorced from my mum. I believe everything he and his current partner own would be joint ownership, he wants his partner to keep his current home. She has a will, don't know what that states.

To getmore4less
My father is retired living off state and work pension. The impression I get is maybe a around £10k cash savings , but its unlikely he will have any investments or anything else major. I assume nil rate band relates to previous marriage no none available.

getmore4less

Asumed no debts or mortgage?

Simplest way to elimate the IHT is for them to get married and do a will for the holiday home so you kids still get it.

Property valuations can be quite variable but in practice currently they are static/going up in most areas so even if the cuurent valuse are optimistic it looks like he will be over the single nil rate band if not now at some point.

BY getting married there would also be some nil rate band transfered to the partner(or to him should she go first) and will trigger the new extended nil rate band for property.

withe a £300k house her estate could well be at risk of IHT as well.

Another option may be to sell you part of the holiday home each year to raise some extra capital to live off/spend.
Might hit some HMRC connected transaction rules on that one.

Keep_pedalling

Although joint assets automatically pass to the surviving partner, they still count as far as IHT is concerned, and based on what you have said his estate would be subject to 40% tax on £35,000. This is another reason a will is requires as it would determine which beneficiaries have the tax deducted from their share.

Getting married would totally prevent that, and may be very beneficial for his partner if your father's work pension provides for a widow. Getting married of cause means a will is an absolute must do otherwise his children would receive very little.

If marrage is not an option your father could reduce the tax burden by gifting his £3000 allowance for this and last financial year immediately then continue to do that in each subsequent year he survives.

getmore4less

Keep_pedalling wrote: »

your father could reduce the tax burden by gifting his £3000 allowance for this and last financial year immediately then continue to do that in each subsequent year he survives.

Not that easy when most of the assets are property.

getmore4less

Keep_pedalling wrote: »

Although joint assets automatically pass to the surviving partner, they still count as far as IHT is concerned, and based on what you have said his estate would be subject to 40% tax on £35,000. This is another reason a will is requires as it would determine which beneficiaries have the tax deducted from their share.

these might be relevent, lots of info in the IHT manual.

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM26123.htm
http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM26126.htm