parent transferring their property to 1 child out of 3 - 7 year rule

auroras_answers

i am the eldest sibling of 3, my mum is widowed and she is looking to transfer her current property and main home into my name. this is for a few reasons, e.g. 7 year inheritance tax rule and to try and make things easier for us if she were to pass. i am hoping for some opinions on this as the situation is a little complex. the property's value is approx £700k and it is owned outright. i currently own a property (by mortgage) with my long-term partner, we are not married or civil partnered and have no intentions in formalising our relationship in that way. i also have no intentions of indefinitely staying in my current property and am therefore conscious of any repercussions in the future e.g. extra stamp duty to pay as i will own two properties (but surely the stamp duty would be nominal in comparison to the inheritance tax legally avoided in the future?). i currently do not have a will, so i know i will need to arrange one so that my mum's property is protected, from say, those thinking they have rights to it if i were to suddenly pass. it is important to say that, biologically, i have a different dad to my above-mentioned siblings, he is alive and married, with a separate family, which includes another sibling of mine. please can i have your advice and comments on this situation. 

TripleH

If it is given to you, what do you mum's other children get?

What happens if you go bankrupt and have to sell off yours and your mum'shouse to pay debtors?

Not trying to put you off, but these are points you need to consider as part of the structure.

Also there is a chance the deal could be unpicked as a way of evading care home fees.

turnitround

How old is your mum? Why on earth does she want to give up her security.  What  you have said gives the impression that its more about keeping others from inheriting (which could be done with a proper will)  and also more about helping yourself. Apologies if that is not the case.

auroras_answers

@TripleH - sorry i should have been a little clearer. it would be put into my name and when our mum passes i would be responsible for selling it and sharing the purchase funds with my 2 siblings. i am not clued up on the care home fees comment - i will do some research on that, thank you.

@turnitround - my mum is nearly 56. ooh no - i am not trying to help myself. this is all her idea. 

sevenhills

Is the intention to avoid care costs, I don't believe there is a seven year rule with that, but it would depend on your mother's age and health. I know people that have done this with much lower value houses and it might work out ok. But with such a high value, it might be worth seeking legal advice 

turnitround

If your mum is 56 then I don't understand at all why she would do it. It a mad risk to take, anything could happen in the next 30 years. 
At 50 I was divorced and then at 56 met a man and married at 60. We both sold properties and bought together.  3 years later I was a widow and now 5 years on at 69 I'm married again and with this husband have moved house twice in the last 3 years. Your mum has a full life ahead of her, she would be mad to give up her property.

She could downsize in later years and spend her life cruising the world if she wished.

user1977

It won't even work from an Inheritance Tax point of view anyway if mum is still living there, as it would be a gift with reservation. Plus you'd have Capital Gains Tax liability on it, so probably end up with even more tax than if you just leave things as they are.

auroras_answers

@user1977 - are you able to elaborate please or point me in the right direction? i am not aware of 'gift with reservation' and not clued up on capital gains tax either. thank you.

stuhse

Think about the senario if you die before your mum- could she be kicked out of her home by your beneficiaries ?

p00hsticks

auroras_answers said:

@user1977 - are you able to elaborate please or point me in the right direction? i am not aware of 'gift with reservation' and not clued up on capital gains tax either. thank you.

'Gift of reservation' means that for the purpose of avoiding IHT you can't give something away but then continue to benefit from it.  So if your mother gives you her house but continues to live in it, then unless she pays you the market rent for doing so it will still form part of her estate for IHT purposes, however long you have it. 

Capital gains tax for an individual is basically paid when you make a profit on something.
For property, your main residence is exempt, but any other property you own is laible to CGT. If your mother gives you her house but you do not live in it, then when you later come to sell it you would have to pay CGT on the difference between the value at the point she gave it to you and what you actually sold it for. 

Keep_pedalling

The idea is nuts for several reasons. The first is that while she lives in the house the 7 year rule won’t apply unless she also pays you full market rent to live in her own home. Also if you mother inherited all of your father’s estate then her estate would need to exceed £1M before IHT was even an issue. You on the other hand are unmarried so a £700k increase in your net worth would place you deeply into IHT territory. 

It would also be idiotic of her to give away her security which could be seriously threatened by you going bankrupt or dying first.

It would also be crazy to place your siblings inheritance on nothing but her trust in you to do the right thing. You may have every intention of doing it but what happens if you die or loose mental capacity to do this.

This won’t make things easier on her passing it will actually make things more complicated.