Renting to my father

gash

xylophone wrote: »

How's that again??




It is a solicitor's job to give clear and unambiguous advice, not leave you with a "fairly clear impression".

If the will in any way left money to a minor then any "change" ("deed of variation"?) would almost certainly have required the consent of the court.

https://uk.practicallaw.thomsonreuters.com/6-386-4134?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1

If the money belongs to you rather than to your daughter then you have made a gift/ are about to make a gift to your unmarried minor child- in effect this counts as a parental settlement, which has its own tax aspects.

https://www.professionaladviser.com/retirement-planner/feature/2300647/how-not-to-fall-foul-of-parental-settlement-rules

I am not at all sure that you can rely either on your current adviser or your own knowledge - take a second opinion?

Just replying to both yourself, and 00ec25.


I'm not gonna pretend I know the answer to all the things you've asked, because most of the above questions are what I'm paying the solicitor to deal with. I'm trusting my solicitor because I'm not financially or legally savvy, so what more can I do except ask further questions on here and presume I'm being advised correctly by my very expensive solicitor haha.


However, I do know the estate was below the £450k threshold for inheritance tax (threshold when leaving property to grandson). The house sold for £170k by the way. I don't know what the probate value was but what I do know is that my solicitor specifically said I wouldn't have to pay any tax. I do have another meeting with him next week where I will probe exactly how this is going to work with my daughters 'share'. Because if its going to have tax implications further down the line, I need to work out what's best, and what's actually possible. For instance, if I am 'gifting' this amount I can understand why there'd be taxes to pay. I may be better not doing the house/rental thing. It just seemed, and still seems a good idea if its possible. Or maybe I'd be better transferring an amount each year to her junior ISA. But I suppose that's a discussion for another thread.


Why isn't life simple


Thanks for your help

00ec25

gash wrote: »

I'm being advised correctly by my very expensive solicitor haha.

excellent, then it may be best to let your solicitor advise you rather than you coming out with things you've seen but not fully understood

gash wrote: »

However, I do know the estate was below the £450k threshold for inheritance tax (threshold when leaving property to grandson). The house sold for £170k by the way.

no IHT was paid fair enough.

That however means in legal terms the value of the property at date of inheritance has not been "ascertained" and therefore the CGT liability has not been agreed by HMRC as they have not accepted the accuracy of the gain figure itself and may well substitute their own value and thus change the CGT calculation

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg32265

it appears the property stood empty between inheritance and sale. Do you already have to submit an annual tax return? If you do then the sale must be reported on it along with your CGT calculation. If you don't then, and only then, would you not need to report the calculation if, having done it correctly, you are sure there is no CGT to pay for either person - which brings us back to the trust situation - and you say there wasn't a will trust to stop you selling, but the will left half the money to your daughter, who is a minor, and therefore unable to manage her own affairs, hence the reference to a now existing bare trust with you as its trustee, and thus liable for the actions of the trust.

carry on talking to your solicitor.

gash

00ec25 wrote: »

it appears the property stood empty between inheritance and sale. Do you already have to submit an annual tax return? If you do then the sale must be reported on it along with your CGT calculation. If you don't then, and only then, would you not need to report the calculation if, having done it correctly, you are sure there is no CGT to pay for either person - which brings us back to the trust situation - and you say there wasn't a trust...

The will was in probate for over 3 years due to other issues - nothing to do with the property. The house only transferred to me in March of this year and sold in early May so that's for next years tax return (another thing I need to add to my list of things to mention for next weeks meeting). Re The 'trust', I'm gonna stop talking about that on here until I know more, because my memories not great so I need him to explain it again. It was something to do with the word 'Trust' having been in the Will with regards to the property, but there not being a trustee if I remember correctly. I'll check this for my own sanity.


EDIT: after just having seen your updated post.


There was no mention of money being left in trust to my daughter. I can remember it virtually word for word I've read it so many times.....the house is left in trust to Gavin, to live in for 10 years. Once the ten years is up, the ownership goes in equal share to Gavin and his daughter'

00ec25

gash wrote: »

The will was in probate for over 3 years due to other issues - nothing to do with the property. The house only transferred to me in March of this year and sold in early May so that's for next years tax return (another thing I need to add to my list of things to mention for next weeks meeting).

OK so it was sold by you as beneficiary of the will, not by the executor of the estate

on that basis CGT gain is based on the increase in value from date of death to date of sale, you inherited it 3 + years ago and then sold it in your own name so it was your gain

Given it appears the 10 year period was timed to mean daughter gets her share when she comes of age, it seems she is indeed a co-owner at point of sale so you need to sort out whether her share of the sale needs to be declared by her personally, or by her trust, for CGT purposes

gash wrote: »

There was no mention of money being left in trust to my daughter. I can remember it virtually word for word I've read it so many times.....the house is left in trust to Gavin, to live in for 10 years. Once the ten years is up, the ownership goes in equal share to Gavin and his daughter'

gash

BrassicWoman wrote: »

question: how is letting the property at a low rent, rather than the market rate, in your daughter's best financial interests?

Firstly there is no property yet, buying a house to rent is an idea. I haven't done it yet. If I buy a house for, for arguments sake, £75k, and its value increases to £100k over 14 years (it might, it might not), I'd consider that a decent return for her compared to bank rates.


I will also be receiving £350 rent p/m to go towards improving the property, and have an ultra reliable tenant. If I rent at market rate, I'll get an extra £100 p/m but possibly an unreliable tenant and possibly periods without any rent. I'm not really sure what the point is? Would you prefer I bought a house as an investment with the money, and just left it empty? I'm not keen on having a tenant I don't know because I have had a poor experience in the past.


I can't for the life of me understand why some people appear to feel I haven't got her best interests at heart. If you read the whole thread I think it's quite clear I do, and I'm just trying to make the best return with her money.

greendoor665

I don't think anyone is suggesting that you don't have your daughter's best interests at heart. The issue is that if you're not careful, you may inadvertently act in a way which legally speaking is not acting in your daughter's best interests, and that could get you into trouble and cause you issues down the line.

With a trust potentially being involved you need to be clear on what your legal duty towards your daughter is with this money, as other posters have pointed out. This could overrule what you think her best interests are. You need further clarification from your solicitor.

By the way I think you're not entirely correct about property being a safe investment but this is a common view here in the UK after the 25-year property boom we've had.

gash

greendoor665 wrote: »

I don't think anyone is suggesting that you don't have your daughter's best interests at heart. The issue is that if you're not careful, you may inadvertently act in a way which legally speaking is not acting in your daughter's best interests, and that could get you into trouble and cause you issues down the line.

With a trust potentially being involved you need to be clear on what your legal duty towards your daughter is with this money, as other posters have pointed out. This could overrule what you think her best interests are. You need further clarification from your solicitor.

By the way I think you're not entirely correct about property being a safe investment but this is a common view here in the UK after the 25-year property boom we've had.

Yes, I totally agree. I was only replying to a comment that the poster had actually already deleted when I'd replied. The post specifically asked why I thought it was in my daughters best financial interests to rent at a lower rate. Poster maybe removed it when they'd actually read the rest of the thread.

And I agree about house values. Nobody knows. Thanks

Sea_Shell

It seems to me that how the money came to be, is muddying the waters a little.

Is it fair to say that, at the end of the day...

You inherited your Grandfathers house, with no strings. (eventually, after some issues with his will and its wording)
You decided to sell it.
You currently "own" the money from the sale.
You want to "gift" 50% of this money to your Daughter, because that's what your Grandfather wanted.
You want to make the best "Investment" with this money, on behalf of your Daughter.

I don't know the ins and outs of what buying a propery with it may or may not entail, but does this at least confirm the money status....(sorry if i've completely misinterprited the situation)

gash

Pretty much Sea Shell. But the bit I need to clarify is if I'm gifting it or if it's hers already. Either way hopefully I'll have it sorted soon.

Thanks!

xylophone

You inherited your Grandfathers house, with no strings.

Even with the wording as stated ( surely a solicitor didn't draft this will?), it seems to me that actually there are "strings attached".

It would appear that the will did create a trust - what the OP seems to have had is a right to occupy for ten years at the end of which period ownership was to pass absolutely to the OP and his daughter in equal shares.