SDLT questions

Helpseeker1

Hi,
My partner and I (early 40s and not married) jointly own a £270k property outright (no mortgage). I think we're classed as 'tenants in common' without looking at the deeds. Meaning, the other person automatically gets the others share of the house if one of us dies.

We would like to purchase another property valued at around £400k. We intend to purchase this with or without a mortgage - undecided at present - it depends on the property value. Neither property will be rented out as they'll be occupied by one or the both of us throughout the year. They won't be local to each other.

As we're not married, we're thinking we could create a Will to grant to the other all possessions (houses, cars, savings, clothing, etc..) should one of us die. We'd then assign our current house over to, say, me, but my Will should grant my partner the property if anything happened to me. They can take all monies from joint account, and the remaining 50% share of house and possessions will be less than £325k. Then my partner will take our savings and purchase a property in their sole name. Again, I will be granted this other/new home if anything happened to them. Once both properties are owned between us, we'd then get married immediately and then have the both of us be named on both properties' deeds. The aim is, regardless of any Wills created, we'd both automatically own both homes, so should one of us die, the other will own both homes automatically and not have to worry about inheritance implications/tax.

I hope the idea makes sense. I believe the aim is allowed. My questions are below.

Is this allowed?

How long would we have to wait between completing on the second house and getting married for us to be able to be named on both deeds without any tax implications/repercussions?

What type of solicitor would we need to help with this aim, all of this aim?

This isn't for profiteering but for carer reasoning. Will the tax authorities care for the reasoning?

Anything else we should be aware of (maybe restrictions in the impending budget)?

Thanks you for you help in advance.

JGB1955

You need to start by actually checking how the current property is held.  If it's tenants in common you (generally) each own 50%.  If it's a joint tenancy, you both own 100%.

Keep_pedalling

Sounds horribly like tax avoidance to me but I don’t know how you would stand on the SDTL front

As an unmarried couple with significant assets you are already in the position of having a potential IHT liability if one of you meet an untimely end and this could make it much worse as any transfer of assets between you would be treated as a potencially exempt transfer (PET) and a future Marrage does not cancel that.

https://uk.practicallaw.thomsonreuters.com/a-121-5695?transitionType=Default&contextData=(sc.Default)&firstPage=true

p00hsticks

Helpseeker1 said:

Hi,
My partner and I (early 40s and not married) jointly own a £270k property outright (no mortgage). I think we're classed as 'tenants in common' without looking at the deeds. Meaning, the other person automatically gets the others share of the house if one of us dies.

On the contrary, as you aren't married, if you do own the property as tenants in common then unless you have made wills each leaving your share of the property to the other, it go to your respective blood relatives according to the intestacy rules. 

If you want it to automatically go to each other on the death of one you need to hold it as joint tenants. 

Helpseeker1

Having checked the deeds, 'they are to hold the property on trust for themselves as joint tenants'.
Were joints tenants (not tenants in common).
Please based your answers on this status.

It does sound like tax avoidance but we're needing to looks after elderly dependants and seeking a way that to achieve this.

SDLT_Geek

Helpseeker1 said:

Hi,
My partner and I (early 40s and not married) jointly own a £270k property outright (no mortgage). I think we're classed as 'tenants in common' without looking at the deeds. Meaning, the other person automatically gets the others share of the house if one of us dies.

We would like to purchase another property valued at around £400k. We intend to purchase this with or without a mortgage - undecided at present - it depends on the property value. Neither property will be rented out as they'll be occupied by one or the both of us throughout the year. They won't be local to each other.

As we're not married, we're thinking we could create a Will to grant to the other all possessions (houses, cars, savings, clothing, etc..) should one of us die. We'd then assign our current house over to, say, me, but my Will should grant my partner the property if anything happened to me. They can take all monies from joint account, and the remaining 50% share of house and possessions will be less than £325k. Then my partner will take our savings and purchase a property in their sole name. Again, I will be granted this other/new home if anything happened to them. Once both properties are owned between us, we'd then get married immediately and then have the both of us be named on both properties' deeds. The aim is, regardless of any Wills created, we'd both automatically own both homes, so should one of us die, the other will own both homes automatically and not have to worry about inheritance implications/tax.

I hope the idea makes sense. I believe the aim is allowed. My questions are below.

Is this allowed?

How long would we have to wait between completing on the second house and getting married for us to be able to be named on both deeds without any tax implications/repercussions?

What type of solicitor would we need to help with this aim, all of this aim?

This isn't for profiteering but for carer reasoning. Will the tax authorities care for the reasoning?

Anything else we should be aware of (maybe restrictions in the impending budget)?

Thanks you for you help in advance.

I assume both properties are in England, as you mention SDLT in your heading.

I would see the sums of money your partner transfers to you as being chargeable consideration for your transfer of the existing home to her, so she will be liable to SDLT on that and on anything else she gives for the property.

If after you marry you change the ownership by "swapping", so that instead of having one property each you swap half shares to own them jointly, then that would likely be a "land exchange" for SDLT, so there would likely be SDLT on a market value basis.

Helpseeker1

@SDLT_Geek thanks for your reply.

Both properties will be in England 

If this makes a difference, there would be no formal transferring of money. The one who looks to purchase this new property will simply take all money from the joint account and place it in their individual account.
I'm, possibly wrongly, assuming that we can simply remove one name from the deeds. The removed person buys a new home in their sole name with the money taken from the joint account. For all concerned, we may have gone out separate ways but later reconciled when we owned a property each, then decided to marry. It's just this reconciliation and marriage happens within six months for example.

Keep_pedalling

If you let someone take the entire contents of a joint account then you have gifted half of it. The same with the jointly owned property. 

Helpseeker1

@Keep_pedalling thanks for your reply and the link in your earlier reply.
In response to that link, I struggle to understand what it's informing. If I gift either money or the house and neither of us die within seven years - then is it exempt from inheritance tax or SDLT liabilities?

I appreciate I haven't exhausted all the information you guys may need to suggest (I won't take it as formal advice) but is there a way to achieve our aim?  Maybe if we don't get married but have Wills to provide each other our full assets if one of us passes.

Ultimately, we are trying to avoid the SDLT but at the same time wish to make sure if one of us passes then other gets everything. Providing the house stays under the inheritance tax threshold (currently £325k), and the cash in the joint account can just be taken on the day of passing then each others assets are covered.
Thanks.

Keep_pedalling

Helpseeker1 said:

@Keep_pedalling thanks for your reply and the link in your earlier reply.
In response to that link, I struggle to understand what it's informing. If I gift either money or the house and neither of us die within seven years - then is it exempt from inheritance tax or SDLT liabilities?

I appreciate I haven't exhausted all the information you guys may need to suggest (I won't take it as formal advice) but is there a way to achieve our aim?  Maybe if we don't get married but have Wills to provide each other our full assets if one of us passes.

Ultimately, we are trying to avoid the SDLT but at the same time wish to make sure if one of us passes then other gets everything. Providing the house stays under the inheritance tax threshold (currently £325k), and the cash in the joint account can just be taken on the day of passing then each others assets are covered.
Thanks.

As an example if you gift a partner say £200k, then for IHT purposes that £200k remains in your estate so if you die within 7 years IHT may be payable. If you gift a spouse that amount then it has left your estate immediately.

If you gift your partner £200k then later marry then the 7 year rule still applies so IHT may be still be payable on your estate. Having said that it would not matter if you left everything to each other as spousal exemption would apply.