Passing a percentage of a property over..

pjjafc

Hi


Basically we have been renting a property from our grandparents for 8 years and they'd be happy to hand us over 40% of the value of the property.


Is that even possible? Do you know what kind of agreement we'd need to get drawn up and what is even called!?


Thanks in advance

Cakeguts

You need to do some research on what will happen if the house has to be sold to fund care home fees. Also who will be responsible for repairs? If you have a problem you won't be able to sell the 40%. The whole thing sounds like a bad idea.

Pixie5740

If there's no mortgage involved then your grandparents can gift you 40% of the property whilst retaining 60% themselves. You would be tenants in common with your grandparents and the transfer can be done by your grandparents using a form (can't remember which one) from the Land Registry.

However, before doing this your grandparents should take professional advice. The transfer will trigger Capital Gains Tax liability. Then there is also deprivation of capital which could be a problem further down the line as Cakeguts has pointed out.

kinger101

Actually, it might be a good idea, but you (and your grandparents) need to be aware of a few things. But your grandparents really need advice from an accountant to work out the financial implications, then a solicitor for the legal ones.

(a) deprivation of assets - though this doesn't automatically kick in just because old people give stuff away Read here

(b) CGT - your grandparents may have to pay CGT. The gain will be calculated based on the decrease in the properties value on transfer of the 40% share. That is, value of 100% property minus value of 60% of the property.

(c) IHT - If either or both your grandparents survive for seven years after the gift, it will fall outside of their estate. Otherwise, IHT may be due. It's helpful if it's made clear in the will who will be responsible for any IHT on lifetime transfers. HMRC can go after either estate or recipient.

(d) SDLT not payable, assuming no mortgage debt has been transferred.

One thing to think about is what happens when both grandparents have passed away? Will whoever owns the other 60% of the property be happy with being your landlord? Would they be prepared to sell it to you?

pjjafc

Many thanks for the replies. The other 60% will be transferred to the mother in law who will either pass on the other 60% or become our landlord.


The grandparents are in a very lucky position already owning 3 properties mortgage free so hopefully that will solve any potential tax implications on our 40%.

kinger101

pjjafc wrote: »

Many thanks for the replies. The other 60% will be transferred to the mother in law who will either pass on the other 60% or become our landlord.


The grandparents are in a very lucky position already owning 3 properties mortgage free so hopefully that will solve any potential tax implications on our 40%.

If you mean solve by them potentially giving you funds to pay any IHT should it arise, then yes. But you cannot rule out the possibility that HMRC will chase you for this. That's why the implications of any lifetime transfers made by your grandparents should be considered in their will.

Are they giving you just 40% of the property, or 40% of the property plus any IHT arising on this gift in the future? I'm not saying they will occur, but clarity in the will on this matter can also minimize the risk of any family disputes.

Pixie5740

pjjafc wrote: »

Many thanks for the replies. The other 60% will be transferred to the mother in law who will either pass on the other 60% or become our landlord.

How can she be your landlord if you will also own the property?

pjjafc wrote: »

The grandparents are in a very lucky position already owning 3 properties mortgage free so hopefully that will solve any potential tax implications on our 40%.

Them owning 3 other properties won't do anything about Capital Gains Tax if it's due. It also won't necessarily do anything about deprivation of assets further down the line. This is why I said the grandparents should take professional advice before doing anything.

What the grandparents are proposing can be done with a simple form. Whether or not they should do it or if it's the best way to do it is another matter entirely.

pjjafc

Thanks for all the advice. The 40% is the £200k we have spent on improvements and a large extension. Thanks again.

Cakeguts

pjjafc wrote: »

Thanks for all the advice. The 40% is the £200k we have spent on improvements and a large extension. Thanks again.

Your grandparents need financial advice. You have spent £200k on a house that doesn't belong to you. That will complicate things.

Mojisola

pjjafc wrote: »

Basically we have been renting a property from our grandparents for 8 years and they'd be happy to hand us over 40% of the value of the property.

pjjafc wrote: »

The 40% is the £200k we have spent on improvements and a large extension. Thanks again.

So what you mean is that your grandparents are repaying a £200k debt to you by transferring a percentage of the property.

Get proper legal advice or this could end up a real mess.

kinger101

What a mess. It's always good to get tax planning before committing to things. This will need a good accountant to unravel and mitigate taxes as much is feasible. With three rental properties, your grandparents probably should have already been using the services of one.