Help with transferring parents share of property ownership to me

feebie1979

Hello and TIA for any help you can give 🙏🏼 
Myself and my parents are co-owners in a 4 bed property with adjoining 2 bed annexe worth approx £8-900k.
we built the property ourselves and have £50k left on a joint mortgage. 

We used to be business partners but my parents are now 75 and 80 and have retired. 

They want to transfer their shares of the property to me but obviously avoid inheritance tax where possible. 

Is the 7 year gifting process the only option? 

Keep_pedalling

If this is their home then this won’t avoid IHT as it will be classed as a gift with reservation of benefit. Unless they have other major assets this would also be a very foolish move as it risks their long term security, and deliberate deprivation of assets is likely to come into play if they ever need to fund care. 

Also consider that at the moment if their total assets do not exceed £1M then they don’t have an IHT liability to avoid.

If this is not their home then, yes this could save IHT if either of them manage to survive 7 years, but if the value has increased since the house was first built they are going to have an CGT liability on the transfer even though no money changes hands. 

RAS

Is the property owned by you as individuals or it is owned by the joint business?

MeteredOut

Is the house jointly-owned personally, or via your joint business? That would change things.

propertyrental

If you purchase their share, there will be no IHT on the property. Of course, the cash you pay them will go into their estates (unless they blow it on round the world cruises) and that will attract IHT.

And as mentioned, unless the property is their main residence there may be CGT to pay.

feebie1979

The property is jointly owned personally. 

My parents still live in the main house, I live in the annexe, that will continue. 

The house has definitely increased in value… approx £350k when first built and then we added the annexe plus inflation which has taken the value to the current £8/900k 

Grumpy_chap

feebie1979 said:

Hello and TIA for any help you can give 🙏🏼 
Myself and my parents are co-owners in a 4 bed property with adjoining 2 bed annexe worth approx £8-900k.
we built the property ourselves and have £50k left on a joint mortgage. 

We used to be business partners but my parents are now 75 and 80 and have retired. 

They want to transfer their shares of the property to me but obviously avoid inheritance tax where possible. 

Is the 7 year gifting process the only option? 

feebie1979 said:

The property is jointly owned personally. 

My parents still live in the main house, I live in the annexe, that will continue. 

The house has definitely increased in value… approx £350k when first built and then we added the annexe plus inflation which has taken the value to the current £8/900k 

If the house has three owners - OP, Mum, Dad - and the house is worth £900k that makes each share £300k so the joint value of the parent's share is £600k.
Do the parents have other assets that take their total estate above £1M?  That means another £400k between them.  Pension assets are generally not included in that assessment as pensions pass outside of IHT.

If the parents' combined estate does not exceed £1M, then gifting part of the house to avoid IHT would be moot.

If the parents' combined estate does exceed £1M, but the parents are to continue living in the house after making the gift, then that would be a GWR (gift with reservation) and still be deemed within the parents' estate when they pass so make no difference to the IHT liability.

_Penny_Dreadful

feebie1979 said:

The property is jointly owned personally. 

My parents still live in the main house, I live in the annexe, that will continue. 

The house has definitely increased in value… approx £350k when first built and then we added the annexe plus inflation which has taken the value to the current £8/900k 

Jointly owned between the 3 of you? As joint tenants or tenants in common?