Will adding children to property title under the 7 year rule affect childs LISA

Peterpeter69

hi there 

just wondering if I add my kids name to a property we own outright and they become registered owners, will that affect their LISA as technically it wont affect mortgage status as they still wont have one ?  many thanks for the guidance.  

user1977

What "7 year rule" are you talking about here? If you mean Inheritance Tax, are you still living in the property? If so then you're probably making the tax position worse, not better.

tacticalbanjo

If your children are added to your deeds then they own a stake in your property. At that point they will no longer be first time buyers because they already own or have owned a property. So not eligible to use a LISA towards a house, not eligible for any first time buyers stamp duty discounts. Whether it affects a mortgage will be down to the bank's terms and conditions - Natwest, for instance, only class you as a first time buyer if you have never owned property before. 

theartfullodger

How would child "own" (own name, trust, why.... ??) property & what age are they?? In scotland below 17 is v difficult, 18 in england.  Dunno the other two countries

elsien

What are you hoping to achieve by doing this because as above there are a number of implications for your children when they reach adulthood.

silvercar

Generally a bad idea, you run the risk of them acquiring a CGT problem if they move out, as well as losing FTB status.

penners324

Sounds like a terrible idea for your children. 

Keep_pedalling

Frankly it would be an incredibly foolish thing to do both for you and your children.Your children will lose their first time buyer status and will add an extra 5-8% (depending on which part of the UK they live in) tax when they do buy their own place.

Unless your children are going to live with you for the next 7 years it will also not reduce your IHT liability as it will be classed as a gift with reservation of benefit (GROB) and will add a CGT liability for your children when the house is sold in the future.

If this is a second property rather than your home then it might help with IHT planning, but you would face a CGT liability on the transfer, and they would need to receive their share of any rental otherwise the GROB rules apply again.

This will also not work if it is some crazy plan to have the LA pay for residential care if you need it, as it will be  seen deliberate deprivation of assets. 

NorthYorkie

There are two types of ownership under English land law (Scotland, as always, will be different); 'Legal ownership', and 'Beneficial ownership'. The legal owner is the person in whose name the property is registered etc. ', whilst the beneficial owner is the person for whose benefit the property is held. In most cases these are the same person. However a legal owner might hold the property for the benefit of another, the beneficial owner.
Merely adding your childrens' names to the deeds does not automatically give them a share in the beneficial ownership, only the legal ownership. It is beneficial ownership that is relevant for tax purposes and the question as to whether you have given up any share of the beneficial ownership will depend upon the circumstances, e.g. what the intention of the transfer, who will get the proceeds from any sale of the property.

Even if you did intend them to have a share of the beneficial ownership, then, as stated above, this will be a gift with reservation of benefit and the value of the whole house will be part of your estate for Inheritance Tax purposes and the '7 year rule' will not apply. Conversely, if this was simply to try and avoid inheritance tax and you do not intend for the children to actually have a share of beneficial ownership, then you have not made any gift and the property is still part of your estate.

Albermarle

Time for a rethink of this 'cunning plan'