Transfer of property from parents

Clowns_are_scary

Hello.

I have lived with my parents in their house in England for over 5 years, but they are planning on moving overseas permanently to live with my considerably richer sister and her husband. As I do not own my own house, they are transferring their mortgage-free house to me. However, they may not be able to move abroad for a couple of months after the transfer. In order to avoid any potential issues with CGT or gift with reservation of benefit, what steps should we take?

For example, would it be a good idea to transfer the household utility/insurance bills and council tax into my name as soon as the TR1 “Transfer of whole of registered title(s)” document is signed and witnessed?

And if they need to pay me rent for the period they remain in the UK, as I am also living there would they be classed as lodgers? And if they are classed as lodgers, would the Rent a Room scheme allowance of £7,500 a year apply? Finally, what would be the easiest way to determine a fair rent?

Thank you all for your help.

peteuk

The issue comes with what happens if your parents become ill, or die.

Ill and abroad - long term illness will not be seen as emergency care and so they will need health care insurance or the rich sister to cover medical bills. Returning to the UK for long term care, MAY mean they are means tested and giving away a property may go against them.

If they die then in giving away the property, it may still apply to Inheritance tax.

Why would you charge them rent, they have just given you their house mortgage free. Equally if you own the house why would they be liable for the bills?

What are you not telling us?

Keep_pedalling

CGT is not an issue as the house is currently both your snd your parents primary residence. Gift with RoB really only applies for the period they remain living with you, so all it does is delay the start of the clock of the 7 year rule. It would be an issue if this did not work out and they moved back to the UK to live with you within 7 years of moving out.

Exodi

peteuk

The issue comes with what happens if your parents become ill, or die.

Ill and abroad - long term illness will not be seen as emergency care and so they will need health care insurance or the rich sister to cover medical bills. Returning to the UK for long term care, MAY mean they are means tested and giving away a property may go against them.

Aside from the very valid healthcare aspect, it also leaves them in quite a risky position.

If the sister and her husband break up, the OP's parents have potentially deprived themselves of options, they would entirely at the whims of the sister. Likewise if they have a big fall out with the sister…

peteuk

Why would you charge them rent, they have just given you their house mortgage free. Equally if you own the house why would they be liable for the bills?

I'd assume the OP is considering charging them rent while they live there to avoid the house being considered a Gift with Reservation of Benefit, meaning the property remains part of the estate for IHT purposes, regardless of how long the person lives.

This is commonly discussed on here where people 'gift' (in air quotes, wink wink, nudge nudge) their houses to their children but carry on living in their *ahem* their children's houses for the rest of their lives. HMRC often point to the lack of consideration paid by the parent as evidence it was not a true gift and levy IHT. So people try getting around this by charging their parents rent while they live in their house. It's also done as an attempt to dodge paying care home fees (can't say if that applies here, I'm not sure what the long-term plan is for OP's parents).

Clowns_are_scary

Thank you all for the feedback.

My parents have already discussed the question of medical bills with my sibling, and have a reasonable amount of savings also so it should be okay. I am glad to hear that so long as both my parents and I remain the house there is no issue with CGT. And, as it appears that a Gift with Reservation of Benefit only applies for the period they remain living with me, that is also fine.