Inheritance Tax - passing on proceeds of sale of home to children

Keep_pedalling

Tezap said:

Chatting about this with my dad it would seem best that if he is trying to gift £500k of value as early as possible to try and outlive the 7 year inheritance tax it might be best if he gifts us each a % share of the £800k family home that will be eventually sold. I understand that there would be no stamp duty (there is no mortgage, we already own our own homes so for us this would be a second home)?

This seems better than if he waits until he completes the £1m new build and then completes the sale of the home which could all take 1-2 more years. I guess there's the potential we could be liable for capital gains tax if it goes up in value before being sold.

The only complexity is that my mum is still named as a joint owner of the family home and he is in the slow process of applying for probate on her estate. At what point in the probate process would he be allowed to make the gift?

Would the property need to be reregistered in his name (as my mother's beneficiary) first?

On his death would he still get the full £1m from his and my mum's combined inheritance tax allowance even though he has moved into another property they owned and sold the original family home?

Thanks,
Tezap

How long before the new house is finished? Gifting a portion of the house while he still lives in it complicates things and to start the clock ticking he will need to pay the full market rent as well.

Does he have any significant cash assets?

Moving house does not effect the RNRB in fact the downsizing rules allow you to claim it even if you sell to move in with family, into rented accommodation or to a care home.

Tezap

Olinda99 said:

would your father continue to live in the family home after gifting a percentage ? If so, unless he pays you market rent, the 7 yr clock won't start until be moves out.

Thanks I hadn't considered the market rent issue but it wouldn't be a problem - assuming he would need to pay us each rent in proportion to the percentage of the property that he had gifted? Once he moves into the new house and the old house is empty then I guess he could stop paying us rent while it is being sold?

Tezap

Keep_pedalling said:

How long before the new house is finished? Gifting a portion of the house while he still lives in it complicates things and to start the clock ticking he will need to pay the full market rent as well.

Does he have any significant cash assets?

The house is built up to plasterboard level so it's not a huge amount of work to complete maybe £60k but he is very slow at hiring trades (he likes to do some of the work himself and get everything perfect) and we are all short of cash at the moment with limited ability to raise loans which is the problem. The time to complete plus the time to sell would probably be around 2 years I guess.

As my mother owned half the houses I don't think he can give us big enough proportions until he gets some way into probate which I understand is a long slow process. Could he at least gift us his 50% of the house now circa £400k?

He's going to be 80 this year. I would like to hope he will live another 7 years but he's had several heart attacks etc in the past but at the moment he seems healthy no problems climbing ladders etc probably fitter than me with my office job!

Keep_pedalling said:

Moving house does not effect the RNRB in fact the downsizing rules allow you to claim it even if you sell to move in with family, into rented accommodation or to a care home.

Thanks yes I saw something about the RNRB not being affected if my mother had sold./moved while she was alive but I wasn't sure if she left everything to him then if her unused £500k allowance would be affected/lost if he then moved house.

Keep_pedalling

For jointly owned property you don't need probate to make a change of ownership, so he could gift whatever portion of the house he liked now. If the how was held as joint tenants then he automatically became the sole owner regardless of what any will says.

bunnygo

just a thought - your dad needs to consider future care needs before merrily giving away this much money. I know those are two high value properties but care costs a LOT. This could be even more of an issue if he is still relatively young.

Keep_pedalling

bunnygo said:

just a thought - your dad needs to consider future care needs before merrily giving away this much money. I know those are two high value properties but care costs a LOT. This could be even more of an issue if he is still relatively young.

Yes care does cost a lot, but that is not going to be an issue with someone owning  a £1M house. The only downside for me would not having the cash to employ live in carers as an alternative to residential care.