Selling home to parent

1spiral

I am in the fortunate position to be able to buy my next home without needing to sell my existing home first.

My original plan was to move in and then put my original home up for sale but the potential there is that this sale could be drawn out and I would like to access to reclaiming the second property stamp duty asap.

My thought then turned to selling the home to my mother for a sum below market value.

This could then be held in her estate until she passes where I'd inherit it.

The only downsides I can see are

1) If I die within 7 years, IHT rules would kick in leaving a large bill for my mum.

2) If she needs to go into a care home, there is a potential that my original home gets sold to pay for care costs.

I'm comfortable with both of the above but feel there must be other pitfalls that I have not thought of.

Any thoughts?

Keep_pedalling

What is the value of the home? How much are you looking to sell it to her for? Will she move in after the sale?

What is her marital status? What is yours? 

Sorry for all the questions but more info is required to answer yours.

1spiral

Value of my home ~350K

She has her own home worth about 300K which she will remain in.

Sale price will be max cash she has available so probably 20K ish.

She is widowed,father died 11 years ago, mum inherited all so none of fathers IHT allowance used.

I am married.

silvercar

She will have to pay second home sdlt on the value of the property. As you are connected parties it will be based on market value.

if she ever sells it she will have a CGT liability based on the gain in market value.

Albermarle

Are you going to leave the home empty? Not good for a property to be left empty for all sorts of reasons.
Or will she rent it out with all the potential hassle that entails?

Bookworm225

silvercar said:

She will have to pay second home sdlt on the value of the property. As you are connected parties it will be based on market value.

I do not think that is correct in respect of SDLT
there is no deemed market value rule in SDLT except in relation to purchases by companies, not individuals 

if the chargeable consideration is below £40k then it will not be a higher rate transaction, mother and son relationship or not 

SDLT: the problems with carrying out transactions below market value - Gateley

(you are however correct in respect of CGT)

p00hsticks

1spiral said:

Value of my home ~350K

She has her own home worth about 300K which she will remain in.

Sale price will be max cash she has available so probably 20K ish.

She is widowed,father died 11 years ago, mum inherited all so none of fathers IHT allowance used.

I am married.

How is she going to be able to afford the expenses and maintenance that go with a second home ?  
(Are you in an area that is charging 200% premium for a second home, for starters? ).
I really can't see what benefits there are in this for your mother at all ....

  
 

1spiral

Thanks for all the comments so far.

I hadn't really thought too much about letting or leaving empty but would probably embark on the letting front simply because of the costs of leaving a home empty are higher than living there although that takes me down an entirely different path to that originally planned.

I understand the CGT liability hence the reason for leaving it with her until she passes. I don't want to sell it to her for 20K then have to sell it next year at fulll market value and incur a 300K capital gain.

WRT SDLT (as @Bookworm225 says) my understanding is that SDLT is paid on the consideration, not the value. The term used is "connected company" for basing on market value whereas I'd expect it to say "connected party" if it applied to a mother/child transaction.

1spiral

p00hsticks said:

1spiral said:

Value of my home ~350K

She has her own home worth about 300K which she will remain in.

Sale price will be max cash she has available so probably 20K ish.

She is widowed,father died 11 years ago, mum inherited all so none of fathers IHT allowance used.

I am married.

How is she going to be able to afford the expenses and maintenance that go with a second home ?  
(Are you in an area that is charging 200% premium for a second home, for starters? ).
I really can't see what benefits there are in this for your mother at all ....

  
 

It isn't intended as a benefit for my mother, it is to help me get a quick sale to release the second home SDLT. If I did that, I wouldn't be overly desperate for the proceeds on the house sale and could wait a few years. All the risk is with me in that she lives until she's over 100 and/or it needs to be sold to pay for care home fees.

Grumpy_chap

1spiral said:

I hadn't really thought too much about letting or leaving empty but would probably embark on the letting front

If your mother owns the property, all the liabilities if being a LL will fall on your mother.  Is she aware and does she want that responsibility?
The income arising will also be to your mother's account so suffer income tax accordingly.
That will affect any means-tested benefits your mother may receive.

i understand the same as Silvercar with regard to SDLT on the sale to your mother.  Obviously, Bookworm has a different view.  @SDLT_Geek will know definitively.

Albermarle

I hadn't really thought too much about letting or leaving empty but would probably embark on the letting front simply because of the costs of leaving a home empty are higher than living there although that takes me down an entirely different path to that originally planned.

It would also take her down a different path. Even if you deal with day to day matters ( or an agent does) he will still become legally liable for many different items as a landlord, and will have taxable income from the rent