CGT or not CGT that is the question. Am I a beneficial owner of my mother's house?

silvercar

mordanteur said:

msb1234 said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Would you think it unfair if your mother does need to go into a care home but the house couldn’t be sold to pay for her care as you own 1/3, which from what you say is the reason your parents made this move in the first place? You will have the benefit of inheriting many thousands of £££’s without having to do a single thing!

You seem fixated on the idea that I am getting away with something. My owning a third of the house is no impediment to a local authority deferred payment scheme quite rightly recovering self-funding costs from my mother's estate. Two thirds of the value could be spent on her care. This year new rules mean that an £86,000 lifetime cap is being put on anybody's contribution to their own care. Her two thirds of the house would cover this liability on its own so there would likely be more than a third of the value of the house left in her estate anyway even if I didn't already own it. I am not achieving anything by owning this 1/3 or 'cheating' the state of anything.

Very true, but the lifetime cap didn't exist when your father made the decision to transfer part ownership to you. You are right that you are not achieving anything by the ownership now. In fact you have lost out by losing your first time buyer status along the way and a potential CGT bill. You won't have gained anything by this decision, though it may have given your father some peace of mind that the property couldn't have been sold without your consent.

It may be worth taking professional advice, I remember years ago a parent proving in court that they only became a part owner of a property to facilitate their offspring getting a mortgage based on their income and that 100% beneficial ownership rested with the offspring. 

Keep_pedalling

silvercar said:

mordanteur said:

msb1234 said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Would you think it unfair if your mother does need to go into a care home but the house couldn’t be sold to pay for her care as you own 1/3, which from what you say is the reason your parents made this move in the first place? You will have the benefit of inheriting many thousands of £££’s without having to do a single thing!

You seem fixated on the idea that I am getting away with something. My owning a third of the house is no impediment to a local authority deferred payment scheme quite rightly recovering self-funding costs from my mother's estate. Two thirds of the value could be spent on her care. This year new rules mean that an £86,000 lifetime cap is being put on anybody's contribution to their own care. Her two thirds of the house would cover this liability on its own so there would likely be more than a third of the value of the house left in her estate anyway even if I didn't already own it. I am not achieving anything by owning this 1/3 or 'cheating' the state of anything.

Very true, but the lifetime cap didn't exist when your father made the decision to transfer part ownership to you. You are right that you are not achieving anything by the ownership now. In fact you have lost out by losing your first time buyer status along the way and a potential CGT bill. You won't have gained anything by this decision, though it may have given your father some peace of mind that the property couldn't have been sold without your consent.

It may be worth taking professional advice, I remember years ago a parent proving in court that they only became a part owner of a property to facilitate their offspring getting a mortgage based on their income and that 100% beneficial ownership rested with the offspring. 

30 years ago there was no second home additional stamp duty or FTB status privileges, so the OP probably did not lose out that way.

Spendless

mordanteur said:

I was hoping for advice LunaLater. Your gloating over the apparent unintended consequences of my father's decision of 30 years ago doesn't qualify. As I said, I think that was the reason he did it. I am not sure. It wasn't discussed and I was a teenager at the time. I know he did take professional advice because my copy of the documents has another handwriting on it directing where it was to be signed.

I don't think organising your affairs in an attempt to minimise your liabilities is cheating. Yes, it may turn out to be an own goal in this case but an entire industry of financial professionals would be redundant if it we didn't attempt to react to the evolving legislation on tax and social care policy and just dutifully took our medicine.  

I'm guessing by teenager you mean you were 18 or 19? If you were under 18 could you even legally go on the deeds in the first place - I mean I don't know for sure, but maybe something else to consider. 

Keep_pedalling

Spendless said:

mordanteur said:

I was hoping for advice LunaLater. Your gloating over the apparent unintended consequences of my father's decision of 30 years ago doesn't qualify. As I said, I think that was the reason he did it. I am not sure. It wasn't discussed and I was a teenager at the time. I know he did take professional advice because my copy of the documents has another handwriting on it directing where it was to be signed.

I don't think organising your affairs in an attempt to minimise your liabilities is cheating. Yes, it may turn out to be an own goal in this case but an entire industry of financial professionals would be redundant if it we didn't attempt to react to the evolving legislation on tax and social care policy and just dutifully took our medicine.  

I'm guessing by teenager you mean you were 18 or 19? If you were under 18 could you even legally go on the deeds in the first place - I mean I don't know for sure, but maybe something else to consider. 

Good point, no one under 18 can legally own property it would have to be held in trust before then.

p00hsticks

mordanteur said:

msb1234 said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Would you think it unfair if your mother does need to go into a care home but the house couldn’t be sold to pay for her care as you own 1/3, which from what you say is the reason your parents made this move in the first place? You will have the benefit of inheriting many thousands of £££’s without having to do a single thing!

This year new rules mean that an £86,000 lifetime cap is being put on anybody's contribution to their own care. Her two thirds of the house would cover this liability on its own so there would likely be more than a third of the value of the house left in her estate anyway even if I didn't already own it.

FYI, That cap will only apply to the cost related to someone' s personal care.
If your mother had to go into a residential home then it wouldn't include the daily living costs associated with that care such as accomodation and food, which I think are to be set at a notional amount of around £200 a week. 

mordanteur

Keep_pedalling said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

My understanding is that CG liability falls against the person who is entitled to the proceeds of a sale which in this case is the legal owner. 

I don’t think there is a watt of undoing what was done 30 years ago but if this involves a substantial amount of CGT it may be worth seeking professional advice.

Marcon said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Why not get some professional advice based on a complete understanding of all the facts/sight of all relevant documentation?

Thanks, I will get some professional advice. Researching other threads it seems maybe a declaration of trust that my mother holds 100% of the beneficial ownership and form TR1 sent to Land Registry to register that declaration, then it is the hands of HMRC when the time comes and this is tested.

Keep_pedalling

mordanteur said:

Keep_pedalling said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

My understanding is that CG liability falls against the person who is entitled to the proceeds of a sale which in this case is the legal owner. 

I don’t think there is a watt of undoing what was done 30 years ago but if this involves a substantial amount of CGT it may be worth seeking professional advice.

Marcon said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Why not get some professional advice based on a complete understanding of all the facts/sight of all relevant documentation?

Thanks, I will get some professional advice. Researching other threads it seems maybe a declaration of trust that my mother holds 100% of the beneficial ownership and form TR1 sent to Land Registry to register that declaration, then it is the hands of HMRC when the time comes and this is tested.

Worth checking, but that is mainly done between spouses where there is no CGT implication with transfers.

TonyMMM

mordanteur said:

 Researching other threads it seems maybe a declaration of trust that my mother holds 100% of the beneficial ownership and form TR1 sent to Land Registry to register that declaration, then it is the hands of HMRC when the time comes and this is tested.

Which may then open up the possibility of the local authority regarding the full value of the house as being "in play" when it comes to care costs ?

The two issues ( CGT and care costs)  are in conflict with each other to some extent.

Not your father's fault though - this type of arrangement wasn't uncommon many years ago, but the changes to IHT rules, transferable allowances etc.  and things like first time buyer status rendered them unnecessary in most cases and a potential problem for many others, as you're now finding out. 

Keep_pedalling

TonyMMM said:

mordanteur said:

 Researching other threads it seems maybe a declaration of trust that my mother holds 100% of the beneficial ownership and form TR1 sent to Land Registry to register that declaration, then it is the hands of HMRC when the time comes and this is tested.

Which may then open up the possibility of the local authority regarding the full value of the house as being "in play" when it comes to care costs ?

The two issues ( CGT and care costs)  are in conflict with each other to some extent.

Not your father's fault though - this type of arrangement wasn't uncommon many years ago, but the changes to IHT rules, transferable allowances etc.  and things like first time buyer status rendered them unnecessary in most cases and a potential problem for many others, as you're now finding out. 

It’s highly unlikely the LA would treat this as deliberate deprivation of assets after 30 years, and her husband left her his share on his death. Beneficial ownership would shift back to the OP if his mother had to sell to move into alternative accommodation as it would on her death.