Early transfer of property to children. Advice needed.

km1500

one way is for your parents to physically move out of the house into a smaller place and then give you the money that they raise by doing that 

If they survive seven years then that will be iht free

smithereens

Linton said:

Are your parents going to be paying IHT anyway?  AIUI they would need to be worth at least approx £1M for IHT to apply.

What is in it for your parents?  For example what happens if you die before they do, or divorce or become bankrupt?  Will the house have to be sold? What happens if your parents want to move into a smaller house or one more appropriate were they to become infirm ? Will half the value of the house be enough to buy something suitable?

Do your parents have sufficient other assets to pay for care either at home or in a care home?  If one parent needs to go into care whilst the other is living in the house then the house will be disregarded for costs.    However if the other one has died then the house can be taken into consideration. If there are no other assets the best that is likely to happen is that the council will be prepared to simply put a charge on the house to be paid when it is sold.  Will your brother be happy if you have your half house whilst the value of his inheritance is depleted?

Conversely when the house is eventually sold after both parents die you will be liable for CGT whereas your brother wont.

I suggest you and they think carefully through all the what-ifs.

I think they will be. the house is at least 1.2 ... maybe 1.3.  And they have other savings. probably get to total of 1.5.

So i I understand it, 325k is tax free, so 750k as they are married. means 40% on the remaining 750k = 300k tax. I think?

Whats in it for parents? They are old, Mum's infirm. They are very settled where they are. At the moment, it will be too much for them to move.

Sufficient other assets - At the moment, Dad is getting carers allowance. He cares for her full time; however, we might need to get some kind of help soon, hopefully visitor (Lambeth). We haven't really discussed care  / care costs, and will need to. Good question re brother / half house. We are very fortunately good friends, and will settle any differences.

CGT - point taken.

Your suggestion is a good one.

Thanks.

smithereens

Linton said:

smithereens said:

silvercar said:

maisie_cat said:

If your parents continue to live in the house it will be a gift with reservation. Upon your parent's deaths the "gift" will be treated as though they still owned it at death and no IHT will be saved.

This ^^, plus you will have a CGT liability on sale, given it isn’t your main residence. 

Interesting -why would you still have CGT if the property was transferred for zero?

Because one can assume the half house would have increased in value between being acquired and later sold and the OP was not living in the house.

So are you talking about CGT on selling the property later on? Eg, £0 transfer of half the house, then sell at some point in ther future for 650k, so CGT on the 650k?

smithereens

km1500 said:

one way is for your parents to physically move out of the house into a smaller place and then give you the money that they raise by doing that 

If they survive seven years then that will be iht free

Thanks, not sure this is going to happen.

smithereens

I have read this article:

https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/

So it looks like £1m threshold. Not so bad, but still very high. And if we are to sell it, we get charged CGT? That could be bad. I will need to get advice. OK thank you everyone for help.

Keep_pedalling

Your parents will be able to leave £1M IHT free as they both have a NRB of £325k and a £175k residential NRB. If not used on the first death they are transferable to the survivor’s estate. 

At the moment the tax bill will be high but you will still inherit £1.3M which is not to be sniffed at. The great thing for your parents is that they can easily fund a comfortable existence in their latter years. If things get to much for your father they can easily fund help such as regularly carer visits or even a live in career. I like to think if we have to pay for such services then 40% will come from HMRC through reduced IHT😎

smithereens

Keep_pedalling said:

Your parents will be able to leave £1M IHT free as they both have a NRB of £325k and a £175k residential NRB. If not used on the first death they are transferable to the survivor’s estate. 

At the moment the tax bill will be high but you will still inherit £1.3M which is not to be sniffed at. The great thing for your parents is that they can easily fund a comfortable existence in their latter years. If things get to much for your father they can easily fund help such as regularly carer visits or even a live in career. I like to think if we have to pay for such services then 40% will come from HMRC through reduced IHT😎

Very true, thank you!

Keep_pedalling

Do your parents have lasting powers of attorney in place? If not I think that should be a priority.

smithereens

Keep_pedalling said:

Do your parents have lasting powers of attorney in place? If not I think that should be a priority.

We do. yes. heath+finance. Thanks.

Savvy_Sue

I would also be encouraging them to spend whatever is needed to make life easier. If Dad is caring for mum, then would re-modelling the bathroom help? Stair lift? Changes to the garden and entrances? Doorways widened? And so on.

Then there's help around the home. A cleaner, an ironing service, a gardener, a companion to play games or help with things both for Mum and for Dad. 

There may be resistance, but explain that these things are so that Dad can enjoy time with mum without being worn out by the practical stuff which needs doing.