Implications of my mum giving or lending me money to buy my husband out of our house

AERobson

Hello, my husband and I are separating and have agreed he will keep all our cash and I will keep the house, however, I need an additional £45,000 to do this. My mum has said she will give or lend me this amount, which ever is preferable. 
Can anyone in this forum advise if there will be any tax implications and how best to secure the agreement so my mum's money is protected. Thank you 

Exodi

Well two ways to do this:

1 - the house is transferred into your sole name, you are the only person on the deeds and the mortgage. Your mum will be required to sign a gifted declaration form gifting you the £45k with no claim to the money. Legally the money is yours and your mum will have no legal recourse.

2 - the house is transferred into yours and your mothers name, likely as Tenants in Common, with a Deed of Trust stipulating that the first £45k (or whatever you agree) is returned to your mother, and the remainder to you. Many lenders require any one on the deeds to also be on the mortgage, however I believe there are exceptions. The lender will charge a small change of parties fee to enact this during the transfer of equity.

In terms of tax, the first option is definitely the cleanest - there is no SDLT on a gift. The second, your mother will be liable for SDLT on a second home (assuming she already owns another property) - I believe £2,250 (5%, up to £125k).

Another option is whether you could borrow the difference (known as a 'further advance' with the lender)?

EDIT: but before doing anything, ensure you are formalising the divorce.

Last thing you want is your mum to 'gift' £45k and for him then to state claim to half of it.

poseidon1

Exodi said:

Well two ways to do this:

1 - the house is transferred into your sole name, you are the only person on the deeds and the mortgage. Your mum will be required to sign a gifted declaration form gifting you the £45k with no claim to the money. Legally the money is yours and your mum will have no legal recourse.

2 - the house is transferred into yours and your mothers name, likely as Tenants in Common, with a Deed of Trust stipulating that the first £45k (or whatever you agree) is returned to your mother, and the remainder to you. Many lenders require any one on the deeds to also be on the mortgage, however I believe there are exceptions. The lender will charge a small change of parties fee to enact this during the transfer of equity.

In terms of tax, the first option is definitely the cleanest - there is no SDLT on a gift. The second, your mother will be liable for SDLT on a second home (assuming she already owns another property) - I believe £2,250 (5%, up to £125k).

Another option is whether you could borrow the difference (known as a 'further advance' with the lender)?

EDIT: but before doing anything, ensure you are formalising the divorce.

Last thing you want is your mum to 'gift' £45k and for him then to state claim to half of it.

Further option, mum lends ( interest free) with 2nd charge on property to protect her loan.

No 2nd property SDLT issues and mum has prospect of getting her loan back if property sold in future. In theory should be no problem for a pre exsisting mortgage lender, their 1st charge takes priority.

Keep_pedalling

There are no negative tax implications for you or your mother. If her net worth takes her into IHT territory then gifting could reduce that liability.

What is more important is would this gift / loan leave her short of savings with no emergency fund?

GrumpyDil

Has OP actually said they will have a mortgage? 

sheramber

AERobson said:

Hello, my husband and I are separating and have agreed he will keep all our cash and I will keep the house, however, I need an additional £45,000 to do this. My mum has said she will give or lend me this amount, which ever is preferable. 
Can anyone in this forum advise if there will be any tax implications and how best to secure the agreement so my mum's money is protected. Thank you 

Protected against what?

Is there a mortgage involved?

AERobson

sheramber said:

AERobson said:

Hello, my husband and I are separating and have agreed he will keep all our cash and I will keep the house, however, I need an additional £45,000 to do this. My mum has said she will give or lend me this amount, which ever is preferable. 
Can anyone in this forum advise if there will be any tax implications and how best to secure the agreement so my mum's money is protected. Thank you 

Protected against what?

Is there a mortgage involved?

There isn't a mortgage and I wanted to make sure mum's money couldn't be classed as joint assets of me and my husband so he couldn't claim it in the future or if he died. 

AERobson

Exodi said:

Well two ways to do this:

1 - the house is transferred into your sole name, you are the only person on the deeds and the mortgage. Your mum will be required to sign a gifted declaration form gifting you the £45k with no claim to the money. Legally the money is yours and your mum will have no legal recourse.

2 - the house is transferred into yours and your mothers name, likely as Tenants in Common, with a Deed of Trust stipulating that the first £45k (or whatever you agree) is returned to your mother, and the remainder to you. Many lenders require any one on the deeds to also be on the mortgage, however I believe there are exceptions. The lender will charge a small change of parties fee to enact this during the transfer of equity.

In terms of tax, the first option is definitely the cleanest - there is no SDLT on a gift. The second, your mother will be liable for SDLT on a second home (assuming she already owns another property) - I believe £2,250 (5%, up to £125k).

Another option is whether you could borrow the difference (known as a 'further advance' with the lender)?

EDIT: but before doing anything, ensure you are formalising the divorce.

Last thing you want is your mum to 'gift' £45k and for him then to state claim to half of it.

Thank you so much for a detailed explanation. Your statement "EDIT: but before doing anything, ensure you are formalising the divorce.
Last thing you want is your mum to 'gift' £45k and for him then to state claim to half of it." is what I was thinking about when I said about protecting mum's money...? 

There's no mortgage on the house and although I will be left without any reserves (as per someone else's comment) I will just have to be careful and start saving where I can. 

RAS

Please get yourself a free appointment with a solicitor so you understand the process of divorce and financial settlement. If you do things in the wrong order you lay your self open to exploitation.

The starting point is that assets are shared 50:50. Generally the largest assets are equity in property and pensions.

It's not the annual value of the pension that counts, its the value of the pension pot. You both need statements from your pension providers.

You can DIY divorce and if the agreement is reasonable, you only need a solicitor to write it up in legal terms.

If you give your ex money before the financial settlement is signed off he could spend all the money and come back for half the house. You also need to avoid the remarriage trap.

This sounds extreme but we've seen a couple of cases where similar happened, although in one case it was the fact that the wife had been since claimed benefits that caused the demand.

In another, the wife decided to save money by DIYing the financial settlement. She paid some equity to the husband, in exchange for he his agreement come off the deeds of the jointly owned house. She ignore his sole ownership of property abroad bought quite recently.

She'd never been able to re-mortgage but left the house to the children in her will. Which was irrelevant because she and ex were joint tenants. And she'd been fleeced because the valuable overseas property had been ignored.