Gifting home to child

TBagpuss

martinpaul1991 wrote: »

....just a thought, would it be cheaper when we factor in the cost of us both retaining a solicitor, and with this property only being worth approx 50k, if in good faith I just officially gift this property to my daughter and don’t make reference to the monies she had sent me (or will use to settle the small mortgage), obviously there is an element of risk there on her part re. IHT however we are still young and I can make verbal allowances to the other children should something happen to me. I guess even just transferring the deeds involves a solicitor?

I don't think this would be a good idea.

If you just transfer the proprty to her then it will look as though you transferred it to her at a significant undervalue - i.e. the 'gift' element would be £38K (£55K value less mortgage of £17K), rather than the £12K it would be on the true figures (£55 value less £25K+£17K which she has or will be paying)
It would theeofre create a higher liability to IHT, and could make it appear that she had had a gift from you which was more than you have gifted to your other children, which could result if bad blood in future.

Itwould also give you protection against any cohncerns over deprvation of assets should you need to cover care costs in future.

Far more sensible to have it properly and accurately recorded and documented as that way you will ensure that the risks of amy problems are minimised.

Since your daughter will presumably be taking ourt a mortgage to pay off the existiing mortgage, or funding that from savings, it is unlikelyto be diffiult for her to find another £1,000 or so to cover the legal costs.

getmore4less

Don't over complicate for a place worth £45k

She has loaned you £25k and plans to pay off the mortgage £17k.

Just sell her the house for £42k gift the difference which is covered by the annual £3ks

No PET left to worry about.

Just a CGT assessment for the disposal

Unless at deaths door deprivation won't be an issue for £3k

G_M

martinpaul1991 wrote: »

Is there a cheaper process than us both retaining separate solicitors to transfer the deeds?already asked and unswered.

In terms of the CGT amount and the gift element, we won’t have used out 12k allowance. The gift element may be upto 10-15k max based on valuation (ie. 25k given plus 17k to clear mortgage but house is valued at 55k max in current state),
£25K + 17K+ 3K = gift of £45K
Less £12K allowance = £33K taxable gain at 18% or 28%

I guess we will need to get it valued by a solicitor before the current tenants move out in its current state before any improvements are carried out by daughter.Solicitors do not value properties. RICS surveyors do.

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00ec25

martinpaul1991 wrote: »

In terms of the CGT amount and the gift element, we won’t have used out 12k allowance. The gift element may be upto 10-15k max based on valuation (ie. 25k given plus 17k to clear mortgage but house is valued at 55k max in current state), I guess we will need to get it valued by a solicitor before the current tenants move out in its current state before any improvements are carried out by daughter.

CGT will be based on the market value of the property at the date of the disposal to your daughter, so by your numbers that would be 55k, not G-M's 45k in his post above

that is because she is a "connected person" and therefore unless you can show she paid you its full price, your CGT calculation must be based on an estimated market value, not a discounted physical price paid . that is to address exactly what you are doing, passing down an asset to the generation below you at a gifted discount

G_M

My figures were based on a valuation of £45K as per post 1.


If the valuation is £55K then add £10K!


But that's for an RICS surveyor to determine.

martinpaul1991

Yes I’m purely basing the 45-55k figure on an estimate in its current state. On a separate note, we stay in an area right now where houses are valued much more than what they tend to sell for, I appreciate the CGT etc will be minimal when it comes to the value of the property vs the amount ‘sold’ to my daughter but wondering how that works in terms or true valuation?

jennifernil

Are the figures not getting a little confused here?

Daughter has already given Dad £25k, and will be paying a further £17k to clear his mortgage, so is effectively paying him £42k for the house?

If the house is realistically worth between £45k and £55k, Dad is gifting her between £3k and £13k. He, and his wife if she is also an owner, can each give away £3k in this tax year, so that would immediately reduce the gift by up to £6k for IHT purposes.

For CGT purposes, basically you subtract the buying price from the selling price, remember to include costs, and the tax is on the difference less reliefs, if any, and any personal CGT allowance(s) unused in the year.

Has OP given the buying price of the property?

davidmcn

martinpaul1991 wrote: »

Yes I’m purely basing the 45-55k figure on an estimate in its current state. On a separate note, we stay in an area right now where houses are valued much more than what they tend to sell for, I appreciate the CGT etc will be minimal when it comes to the value of the property vs the amount ‘sold’ to my daughter but wondering how that works in terms or true valuation?

The open market value is what you could reasonably expect to sell it for. Home Report valuations will tend to be slanted in favour of the sellers, without the surveyors sticking their necks out too much. Ask them for a mid-market valuation for tax purposes and they may well go a bit lower.

AnotherJoe

In terms of the CGT amount and the gift element, we won’t have used out 12k allowance. The gift element may be upto 10-15k max based on valuation (ie. 25k given plus 17k to clear mortgage but house is valued at 55k max in current state),
£25K + 17K+ 3K = gift of £45K
Less £12K allowance = £33K taxable gain at 18% or 28%

I guess we will need to get it valued by a solicitor before the current tenants move out in its current state before any improvements are carried out by daughter.Solicitors do not value properties. RICS surveyors do.

Your maths in red seems to be off G_M.
Where do you get there's a gift of £45k (unless you mean from daughter to parent?)
The daughter has given/loaned £25k to parent. She is planning to gift/loan another £17k (to clear the mortgage)
Thats £42k daughter has gifted. If the house is worth £55k, then at most (as OP said) the gift to daughter is £13k.
CGT to pay seems unlikely on a property worth £55k. Especially if owned by both parents since.

getmore4less

Don't forget IHT is not an issue,

Most outright gifts don't create more IHT tax they are just IHT neutral for 7 years till they drop out of the estate.

Value guestimate is £45k-£55k

Even at £55k the gift is £13k with 2 parents and 2 years the £3k exemption uses up £12k

Daughter could just throw another £1k at the parent and no £1k PET to worry about.