Joint Tenants and Tax implications

abi.jahan

I have a relative who wishes to add his son to the deeds of the house which is mortgage free and make him a 'Joint Tenant'. The relatives wants to know if by doing so, he or his son would become liable for Stamp Duty, CGT or Inheritance Tax. He did consider Gifting, but it would mean he would need to stay alive for more than 7 years for his gift to be Tax free. Is there anyone who could advise or clarify or confirm if there is any tax implication from adding a name as Joint Tenant to a property?

G_M

There are various implications:

* SDLT. This is payable on payment so if no money changes hands it is not payable

* Capital Gains Tax. If his son does not live there it's not his main home, so CGT would be due on the increase in value of his 50%, on sale of the property

* Inheritance tax. The 50% value of the property is a gift. If dad dies within 7 years the gift would be included in his Estate

* Inheritance tax. Also, if dad continued to live there it would be a 'gift with reservation', so would be included in his Estate beyond the 7 year point

* FTB benefits. Son will lose his entitlements to any Furst Time Buyer benefits if he wants to buy a property elsewhere

* Deprivation of Assets may become relevant if dad goes intolocalauthority care in the future

I may be a bit off with some of the above (I'm sure others will correct!) but it gives an idea and begs the question: what is the purpose behind this plan?

Keep_pedalling

What exactly is he trying to achieve by doing this?

This does not help in any way with IHT planning or avoiding care home fees. Even if he is unlikely to live another 7 years he should still look at gifting assets other than the house as the better way to help his son and make full use of his annual allowances.

abi.jahan

The relative and son decided this would be best, given that the son gave his father cash to help him buy the property back in 2007 and wanted a way to share 100% of the property and if any of them died the other one would automatically inherit the house, rather than it falling into the inheritance pot which could be fought over by stepbrothers and sisters and siblings.

The father is considering allowing his son to move into the house full time, as the father has a second home away from London near the coast in Brighton which he wants to move into, and occasionally visiting his son. There is no money changing hands and according to MoneyAdviceService there is no Stamp Duty or CGT to pay. The only issue is that he would have to hope the value of the house does not increase substantially over the IHT threshold.

The son might consider releasing equity from the property in order to renovate the house by putting a loft conversion extension and driveway. In regards to son & father having a joint Bank Account I have asked them to check how this is set-up, so as to avoid issues later in relation to tax.

The father will also be lending his son an interest free loan of £150,000 which can be paid back over 25 years by using a (Promissory Note) making his intentions clear legally and what happens if his father dies during the term of the loan.

If you can advise it would be most appreciated as my relative is illiterate and speaks only basic English so I have become his translator and family advisor trying to guide them using free resources from the government or website and forums such as this.

xylophone

Could you not find a qualified tax accountant and a solicitor who speak your relation's native tongue as well as English and could advise him and his son about the gift and loan and tax implications and also about his will?

abi.jahan

These relatives do not like speaking with professionals as they feel it will costs lots of money and they won't fully understand the jargon. They want someone else to find the information for free online or talk to an accountant on their behalf, then for that person to explain it in simple terms as if explaining it to a school child so as it is easy to understand, but they also want to stay anonymous.

foxy-stoat

Wish you all the luck, God willing.

xylophone

as they feel it will costs lots of money and they won't fully understand the jargon.

If they attempt DIY without understanding the tax implications it could cost them lots of money ......

Keep_pedalling

abi.jahan wrote: »

The relative and son decided this would be best, given that the son gave his father cash to help him buy the property back in 2007 and wanted a way to share 100% of the property and if any of them died the other one would automatically inherit the house, rather than it falling into the inheritance pot which could be fought over by stepbrothers and sisters and siblings.

The father is considering allowing his son to move into the house full time, as the father has a second home away from London near the coast in Brighton which he wants to move into, and occasionally visiting his son. There is no money changing hands and according to MoneyAdviceService there is no Stamp Duty or CGT to pay. The only issue is that he would have to hope the value of the house does not increase substantially over the IHT threshold.

The son might consider releasing equity from the property in order to renovate the house by putting a loft conversion extension and driveway. In regards to son & father having a joint Bank Account I have asked them to check how this is set-up, so as to avoid issues later in relation to tax.

The father will also be lending his son an interest free loan of £150,000 which can be paid back over 25 years by using a (Promissory Note) making his intentions clear legally and what happens if his father dies during the term of the loan.

If you can advise it would be most appreciated as my relative is illiterate and speaks only basic English so I have become his translator and family advisor trying to guide them using free resources from the government or website and forums such as this.

If he is worried about IHT and is expecting to live for 25years then why not just gift him the £150k? Making it a lone is not good IHT planning.

I can’t understand why any one would not want an asset to increase in value just in case it takes them into IHT territory. Their beneficiaries will stil get at least 60% of the increased value and 60% of something is better than 100% of nothing.

Tell him not to be stupid and take professional advice because it is blindingly obvious he is clueless on this subject and he is likely to make some seriously expensive errors DIYing his IHT planning.

Sounds like he need to sort out his will as well, and that should be a top priority.

kingstreet

He needs estate planning advice.

A family estate plan would cost about £1,500 and would do everything likely to be required.

G_M

Joint bank account? Another :eek:
Their finances will be linked as will their credit references.....


If the father is moving out, then capital gains tax is an issue for him (he cannot have two 'main homes').

if any of them died the other one would automatically inherit the house, rather than it falling into the inheritance pot which could be fought over by stepbrothers and sisters and siblings.

Why not just write a will? Much better idea.


As others have said, this is a complex subject and getting some amateur advice from wierd people like me on the internet is NOT an alternative to proper planning.

* tax
* estate planning and inheritance
* property management


Find a bilingual professional who is familiar with UK law.