Transfer of Equity

smartest_smarty

Hello all,


Hopefully someone can help.


If a family member, says that they want me to be a joint owner of their home. Do I have to pay tax for this?


They are currently mortgage free, and the only owner of the property.


The other option is they leave the whole thing to me in their will.
But I though this would incur more tax?


If I own half, what happens if they pass away? Do I only own half the home, or would I own it all?


Very confused. Not sure what's best.


Please help.

G_M

What is the aim? To avoid Inhertance Tax? Or what?

If you become joint owner, will you buy your half, or is it a gift?

if a gift, and the donor dies within 7 years, your share will be included in their Estate for Inheritance Tax purposes.

If you buy, there may be SDLT to pay (though I'm not sure - might be exempt for family transfer: anyone know?)

Will you live in the propety? If not, you'll be liable to Capital Gains Tax if/when you sell.

edit: looks like SDLT applies if it's a sale: https://www.gov.uk/stamp-duty-land-tax/reliefs-and-exemptions

Mojisola

smartest_smarty wrote: »

a family member, says that they want me to be a joint owner of their home.

Both of you need to take legal advice on this - the family member could be risking their family home by making you a joint owner.

Will you be living together in the same property?

xylophone

a family member, says that they want me to be a joint owner of their home

For what reason?

It would be possible for a person to gift you a half share in the home so that you would be tenants in common or indeed to make you a joint tenant.

Assuming that this is the person's principal private residence there would be not tax for either of you to pay at that point.

However, this transfer would count as a gift for IHT purposes and there could be IHT implications on the death of the donor.

Should the donor need means tested benefits/care at any point, there could be considerations regarding deprivation of assets.

As tenants in common, each person would own half of the house - either could will his half to the other tenant or indeed to anybody else.

As joint tenants, the house would automatically pass on death to the other, regardless of any will.

If the house were sold at any point before or after death, there would be CGT implications for the owner for whom it was not a PPR.

All in all, not a step to be taken without expert advice.

smartest_smarty

The aim would be to minimise tax to as little as possible.
The property could be left in a will, but I thought that would incur more tax?


If I was made joint owner, and the equity was gifted, as in I do not pay for it - and the current owner lives for more than 7 years. I heard this wouldn't incur any tax at all?


Also, I wouldn't be living there and have no intention to sell.

This would then be tax free right?

Pixie5740

Depends which tax it is you are talking about.

Will the person making the gift continue to live in the property?

Pixie5740

How much is this property worth?

smartest_smarty

Pixie5740 wrote: »

Depends which tax it is you are talking about.

Will the person making the gift continue to live in the property?

I'm talking about Inheritance Tax.


Capital Gains tax would only be on sale of the property right?


Property price is about £400,000.

Pixie5740

You haven't said whether the person transferring the equity will continue living in the property after the transfer so I'm going to assume that they will do. In that case then just transferring some equity to you won't make the property exempt from IHT even if the person lives for another 7 years.

https://www.gov.uk/inheritance-tax/passing-on-home

The person wanting to reduce the IHT liability of their estate needs to speak with a tax specialist.

booksurr

smartest_smarty wrote: »

I'm talking about Inheritance Tax.


Capital Gains tax would only be on sale of the property right?


Property price is about £400,000.

as it appears the giver will continue to live in the property (it's their "home") and gave it (or a share of it) to you free, it is a Gift with Reservation (GWR) of benefit so as far as IHT is concerned the 7 year rule does NOT apply as it has never left the giver's estate. It will therefore remain liable to IHT until their death. the 7 year rule will only apply when they move out of it themselves


as a part owner of a property you do not live in you will be liable to CGT when you sell it. If you are confident that you won't sell it so be it, however things change and after the giver dies your emotional attachment to the property may be different

so far all you are doing is setting yourself up for the "double tax whammy" of IHT and CGT which arises when you attempt to DIY inheritance planning without having sought expert advice

booksurr

G_M wrote: »

What is the aim? To avoid Inhertance Tax? Or what?

If you become joint owner, will you buy your half, or is it a gift?

if a gift, and the donor dies within 7 years, your share will be included in their Estate for Inheritance Tax purposes.the OP states that the transfer is of the giver's "home" so GWR is a distinct risk so best not to mention the 7 year rule yet

If you buy, there may be SDLT to pay (though I'm not sure - might be exempt for family transfer: anyone know?)

Will you live in the propety? If not, you'll be liable to Capital Gains Tax if/when you sell.

edit: looks like SDLT applies if it's a sale: https://www.gov.uk/stamp-duty-land-tax/reliefs-and-exemptions

as above (10 characters)