Legal advice please

cynicalmiss_2

I am currently the guarantor and payer of my mothers mortgage. This was done through Right To Buy. It's been agreed that as I am buying the property I will inherit the property when she dies ( no issues with siblings over this ) and she has stated this in her will. My questions are will I have to pay any inheritance tax...the property was bought for 22k after discount & it was valued by the Building Society at 50k. It's probably now worth 70k +.......would it be a good idea now, whilst my mother is still alive, to get her to sign over the property to me ? Questions questions...

Any help would be greatly appreciated.....

Ian_W

cynicalmiss_2,
Very briefly, cos I'm no expert so this isn't legal advice, the IHT threshold is £275k rising to £300,000 next tax year. Unless she has a lot of other wealth that will be included in her estate you shouldn't have anything to worry about re inheritance tax as the property is well below that level.

If the property is transfered to you she would have to survive 7 years I believe, otherwise it would still be included in her estate for IHT and you would then have to consider the CGT implications if you already own your own property.

There are several threads on CUTTING TAX forum about IHT which may be worth you reading.
BoL.

rozeepozee

Ian W is about right if my rusty recollections of IHT law serve me correctly(although a solicitor, this is not my field, so please see my disclaimer!). So, unless your mother has a lot more assets you should be OK. All her worldly goods will be included in the assessment of this, so ensure she's got no money stashed under the bed or offshore which may take her over the threshold!

If her assets do go over, I can't quite remember how it works, but regarding the 7 years referred to by Ian W, there is some tax relief available (called 'taper relief') if the person dies between 3 and 7 years after the transfer, so you wouldn't pay the full IHT (usually 40%) in such circumstances.(I've done a quick Google and found this link which may help http://www.friendsprovident.co.uk/doclib/ctst26.pdf)

In any case, what arrangements do you have in place for the property to go to you? A will can usually be changed at any time by the person making it. I would say it is in your interests for the property to be signed over (or maybe transferred into your joint names as joint tenants then the property would automatically go to you upon your mother's death) since, at the moment, you probably only have an 'equitable' or 'beneficial' interest in the property as it's not in your name, so, for example, your mum could quite feasibly leave the house to someone else entirely, or the cat's home, and you would then have to fight for your claim through the courts (although you may have a strong case). You really need some legal advice (the proper paid type, not what you're getting here from me ;-)) and it shouldn't be too expensive (and well worth the cash!) as the issue sounds quite straightforward and not unusual (phone and get a quote from a few firms) I'm afraid that's the extent of my knowledge on this subject and, as I say, not my field, so I may be wrong, so get on the phone to a nice lawyer and good luck!

Poppy9

Get it in writing that you are paying for the house via the mortgage or you could end up in same boat as me.

In early 90's In laws wanted to buy their council house. The cost was just £20k (now worth £120k). They didn't have the money though so my OH and his sibling chipped in £5k each on the understanding that after 3 years (there was some clause on RTB about selling within 3 years and paying back discount) they would become joint owners (1/4 each with in-laws retaining 1/2). No rent was wanted and they could have it legally set up so they had a right to live their as long as they wanted etc - it was merely to protect their investment should either require long term care as they have no other assets. Well it's never happened. They have point blank refused to action for all these years. FIL has now passed and there is no way MIL will transfer.

cynicalmiss_2

My mums assets are no where near the figures you are talking ( well I think ) !! No she's a littl old pensioner who has lived in her flat 4 the last 20 years. As for her changing her mind over the will I cannot seriously see that happening ( fingers crossed & a mental note to invite her for xmas lunch ) Unfortunately I couldn't be included in the joint tenant / mortgagee scenario as I don't live with my mum. The sale was to her via the LA and I am the guarantor. We originally did everything via a solicitor...the sale....the mortgage....the wills. So it would seem everything is in my favour when she goes....however I have this nagging feeling that when my mum pops of this mortal coil I will have a nasty surprise.....

rozeepozee

I tend to do worst case scenario - it's all those years of legal training! So, I think: what if she gets swept off her feet by some lothario and remarries, joins a cult, ahs more children (snigger, sorry, I've been doing this for too long tonight and I'm going a bit daft, but she could adopt :rotfl: ) etc. etc. I'm glad to hear you did things through the solicitors - you may then have an option to sue them if anything goes wrong - good luck

Bossyboots

I'm with rozeee on this one. There are things that can happen which could affect the property. What if she needs full time care you are unable to give and has to go into a home?

You should have had a deed of trust drawn up when the house was bought which would have safeguarded your position. It is not too late to get that done now. If sufficient time has passed then you could be made a joint owner but you would need to make sure it was as "joint tenants", not "tenants in common".

As for the sibling comment, is this because there are none or because you think there will be no problems later? If the latter, then this is unwise because again, anything can happen in the future to change their attitudes.