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  • FIRST POST
    • simon2018
    • By simon2018 7th Apr 18, 12:59 PM
    • 66Posts
    • 29Thanks
    simon2018
    Gifting proportions of proerty to chilren
    • #1
    • 7th Apr 18, 12:59 PM
    Gifting proportions of proerty to chilren 7th Apr 18 at 12:59 PM
    Hello

    Question on behalf of family.

    They want to give 50% share to their adult/child that lives at home.

    They want to give 50% of share of a rental property to their adult child that lives away from home.

    My family, the husband and wife are booth rtired, one has state pension other is 58 and retired early.


    Reason to give shares of property is to leave kids something in case they end up in a care
    home about both properties are worth close to 900k. (Yes they have worked hard, paid taxes, still paying taxes, nothing was given or left to them by their parents so its their own hard work and reason they cought the second property was to genrate income and ensure their children were helped fincially. Sadly, no one knows who will end up in a care home and I have an uncle that has suffered from severe demntia and been in a home for a good 8 years, his wife could not look after him or their children as he turned on them, he was nothing like that before the illness progress, and it costs them about 6k a month, average costs since is home about 5k as used to be a lot less 8 yrs ago.


    So what is the best way forward.
    What are the implications.
    AS I understand no stamp duty would be payable.

    Any other helpful hines/advice

    Thank you

    PS - IF YOU DONT HAVE A PENNY TO YOUR NAME AND ARE ENVIOUS, DONT BOTHER RESPONDING
    Last edited by simon2018; 07-04-2018 at 1:45 PM.
Page 1
    • le loup
    • By le loup 7th Apr 18, 1:04 PM
    • 3,852 Posts
    • 3,836 Thanks
    le loup
    • #2
    • 7th Apr 18, 1:04 PM
    • #2
    • 7th Apr 18, 1:04 PM
    So, do they want me to pay for their care home fees?
    I don't believe that they paid for the care home fees of my mother.

    However, if they want to proceed without considering morals, look up:
    deprivation of assets
    sales to connected paties
    income tax on rentals
    capital gains tax
    inheritance tax
    nursing care
    Last edited by le loup; 07-04-2018 at 1:12 PM.
    • Cook_County
    • By Cook_County 7th Apr 18, 1:20 PM
    • 2,937 Posts
    • 2,078 Thanks
    Cook_County
    • #3
    • 7th Apr 18, 1:20 PM
    • #3
    • 7th Apr 18, 1:20 PM
    Hello

    Question on behalf of family.

    They want to give 50% share to their adult/child that lives at home.

    They want to give 50% of share of a rental property to their adult child that lives away from home.

    My family, the husband and wife are booth rtired, one has state pension other is 58 and retired early.


    Reason to give shares of property is to leave kids something in case they end up in a care
    home about both properties are worth close to 900k. (Yes they have worked hard, paid taxes, still paying taxes, nothing was given or left to them by their parents so its their own hard work and reason they cought the second property was to genrate income and ensure their children were helped fincially. Sadly, no one knows who will end up in a care home and I have an uncle that has suffered from severe demntia and been in a home for a good 8 years, his wife could not look after him or their children as he turned on them, he was nothing like that before the illness progress, and it costs them about 6k a month, average costs since is home about 5k as used to be a lot less 8 yrs ago.


    So what is the best way forward.
    What are the implications.
    AS I understand no stamp duty would be payable.

    Any other helpful hines/advice

    Thank you
    Originally posted by simon2018
    A very bizarre idea indeed. It will not be effective for any purpose in the UK aside from increasing the amount of CGT the government will get...
    • Mojisola
    • By Mojisola 7th Apr 18, 1:59 PM
    • 29,807 Posts
    • 76,394 Thanks
    Mojisola
    • #4
    • 7th Apr 18, 1:59 PM
    • #4
    • 7th Apr 18, 1:59 PM
    They want to give 50% share to their adult/child that lives at home.

    They want to give 50% of share of a rental property to their adult child that lives away from home.

    both properties are worth close to 900k.
    Originally posted by simon2018
    Go ahead - the scheme will likely result in your parents being assessed as if they still have the capital they have given away and so paying for their care, you two paying CGT on the gifts and IHT being charged on the whole value of their home unless they pay rent on the share owned by their offspring.

    With an estate worth 900k, they should be paying for financial advice and not coming up with random schemes.
    • Linton
    • By Linton 7th Apr 18, 2:00 PM
    • 9,745 Posts
    • 9,992 Thanks
    Linton
    • #5
    • 7th Apr 18, 2:00 PM
    • #5
    • 7th Apr 18, 2:00 PM
    Giving away your home, or part of it, is in my view a serious mistake. There are the "what ifs". What if they want to downsize? What if the adult child goes bankrupt or divorces?

    Giving away half a rented out house has fewer downsides apart from losing half the rental income. Perhaps the parents have sufficient assets for this not to matter, but if they do why the concern about care costs affecting the houses?

    There are the moral considerations - how is giving away your assets to avoid care home costs any different from refusing to work so as to maximise benefits? Would children be happy to see the parents shunted off to somewhere as cheap as posssible so that they could enjoy the maximum inheritance when the parents have gone?

    However there is the practical matter than most people dont end up in care homes, and most of the minority that do dont last long. So actually complex schemes to avoid care home charges may well not be necessary even if they were successful. Councils try hard to make to make benefiting from deprivation of assets difficult.

    Retaining the equity in your home as insurance against care costs is in my view the easiest and most efficient way of ensuring your very old age is as comfortable as possible. It also gives you the opportunity to raise money for care at home which is far more likely to be needed and the amount available from the council is pretty limited in time and scope.
    Last edited by Linton; 07-04-2018 at 2:03 PM.
    • Browntoa
    • By Browntoa 7th Apr 18, 2:08 PM
    • 33,557 Posts
    • 39,657 Thanks
    Browntoa
    • #6
    • 7th Apr 18, 2:08 PM
    • #6
    • 7th Apr 18, 2:08 PM
    It's not a viable plan , it's not a risk free plan , there is the risk of multiple tax liabilities , there is a big risk of councils successfully challenging the deprivation of assets.

    Cash gifts are allowed under the 7 year rule , after 7 years there is no tax but again could be called deprivation if it's to dodge care home fees
    I'm the Board Guide of the Referrers ,Telephones, Pensions , Shop Don't drop ,over 50's and Discount Code boards which means I volunteer to help get your forum questions answered and keep the forum runnning smoothly .However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to forumteam@moneysavingexpert.com Any views are mine and not the official line of MoneySavingExpert.
    • getmore4less
    • By getmore4less 7th Apr 18, 2:18 PM
    • 33,072 Posts
    • 19,943 Thanks
    getmore4less
    • #7
    • 7th Apr 18, 2:18 PM
    • #7
    • 7th Apr 18, 2:18 PM
    Lets break it down

    Hello

    Question on behalf of family.

    They want to give 50% share to their adult/child that lives at home.

    This one can work, but 50% may be too much, will they continue to live at home, do thye have family of their own...?

    if say there are 3 people the parents and the child, then gifting 1/3 would become a PET(not gift with reservation) and drop off the IHT in 7 years. Any mortgage as that would complicate and could end up with SDLT, none on just a gift. there should be limited(potentialy none) exposure to IHT or CGT.



    They want to give 50% of share of a rental property to their adult child that lives away from home.

    Various complications with this, there will be a CGT assessment on disposal, again any mortgage will complicate and potentially result in SDLT, depending on how the future income is shared there could be Gift with reservation implications.


    My family, the husband and wife are booth rtired, one has state pension other is 58 and retired early.


    Reason to give shares of property is to leave kids something in case they end up in a care home.

    NOT a good idea to talk about care as a primary intention as that can be considered deliberate deprivation, far better to talk about the tax savings and other beneficial reasons for distributing and being clear there are enough assets left over to cover the care considerations.


    about both properties are worth close to 900k. (Yes they have worked hard, paid taxes, still paying taxes, nothing was given or left to them by their parents so its their own hard work and reason they cought the second property was to genrate income and ensure their children were helped fincially. Sadly, no one knows who will end up in a care home and I have an uncle that has suffered from severe demntia and been in a home for a good 8 years, his wife could not look after him or their children as he turned on them, he was nothing like that before the illness progress, and it costs them about 6k a month, average costs since is home about 5k as used to be a lot less 8 yrs ago.


    So what is the best way forward.
    What are the implications.
    AS I understand no stamp duty would be payable.

    Any other helpful hines/advice

    Thank you

    PS - IF YOU DONT HAVE A PENNY TO YOUR NAME AND ARE ENVIOUS, DONT BOTHER RESPONDING
    Originally posted by simon2018

    Their estate although OK for now is likely to become liable to IHT with some HPI given 2 houses, some planning is a good idea.

    Gifting parts/all of own home is usually not a good idea, often a bad one, but as the recipient will be living there that mitigates the worst tax problems, and would take at least a 1/3rd of that value out of the estate and give the child some security.

    The let property comes with other complication and if it has increased in value a lot any disposal has a CGT impact.

    need more details to consider other options.
    • 00ec25
    • By 00ec25 7th Apr 18, 3:40 PM
    • 6,992 Posts
    • 6,661 Thanks
    00ec25
    • #8
    • 7th Apr 18, 3:40 PM
    • #8
    • 7th Apr 18, 3:40 PM
    IF YOU DONT HAVE A PENNY TO YOUR NAME AND ARE ENVIOUS, DONT BOTHER RESPONDING
    Originally posted by simon2018
    if you do have a penny to your name don't bother asking for free advice when you can afford to pay for professional advice that comes with a professional indemnity backing it up
    when you find the relevant accountant or member of STEP, ask them to explain:
    - CGT
    - GWR
    - PET
    &
    - deprivation of capital
    to you
    Last edited by 00ec25; 07-04-2018 at 9:49 PM.
    • Mojisola
    • By Mojisola 7th Apr 18, 6:15 PM
    • 29,807 Posts
    • 76,394 Thanks
    Mojisola
    • #9
    • 7th Apr 18, 6:15 PM
    • #9
    • 7th Apr 18, 6:15 PM
    Cash gifts are allowed under the 7 year rule , after 7 years there is no tax
    Originally posted by Browntoa
    The seven year rule wouldn't apply if the parents continued to live in the family home.
    • le loup
    • By le loup 8th Apr 18, 9:38 AM
    • 3,852 Posts
    • 3,836 Thanks
    le loup
    PS - IF YOU DONT HAVE A PENNY TO YOUR NAME AND ARE ENVIOUS, DONT BOTHER RESPONDING
    Originally posted by simon2018
    Nice.
    ...........................................
    • simon2018
    • By simon2018 8th Apr 18, 11:10 AM
    • 66 Posts
    • 29 Thanks
    simon2018
    Good morning.

    Many thanks to the posters that responded in a genuine and helpful manner, ie pros and cons expalined
    in a genuine way.

    Thanks.
    • simon2018
    • By simon2018 8th Apr 18, 7:51 PM
    • 66 Posts
    • 29 Thanks
    simon2018
    The seven year rule wouldn't apply if the parents continued to live in the family home.
    Originally posted by Mojisola
    Thanks. But where does it say that? I've looked adt dor Gov sites. CGT/etc but nothing like that is mentioned. The friends main home where their daughter lives will get 50% of the home - so imo, 0nly 50% of the home will attract the CGT
    • Linton
    • By Linton 8th Apr 18, 8:08 PM
    • 9,745 Posts
    • 9,992 Thanks
    Linton
    Thanks. But where does it say that? I've looked adt dor Gov sites. CGT/etc but nothing like that is mentioned. The friends main home where their daughter lives will get 50% of the home - so imo, 0nly 50% of the home will attract the CGT
    Originally posted by simon2018
    Look under "gifts with reservation". This is where someone makes a gift of assets but continues to enjoy some of the benefits of owning them. HMRC can regard it as not being a genuine gift for IHT purposes. This can be avoided by the person concerned paying rent.
    • 00ec25
    • By 00ec25 8th Apr 18, 8:09 PM
    • 6,992 Posts
    • 6,661 Thanks
    00ec25
    Thanks. But where does it say that? I've looked adt dor Gov sites. CGT/etc but nothing like that is mentioned.
    Originally posted by simon2018
    because it is nothing to do with CGT, go read the relevant tax page and then you'll find it, as we have already mentioned in this thread CGT is not the only tax you need to consider
    • Skibunny40
    • By Skibunny40 9th Apr 18, 8:35 AM
    • 109 Posts
    • 76 Thanks
    Skibunny40
    As I read the OP, the first proposal is to give 50% of the residential home to an adult child who lives there - in that case, there is no "gift with reservation" because the gifter isn't benefiting from the 50% they gave away, only the 50% they already own.
    • getmore4less
    • By getmore4less 9th Apr 18, 9:10 AM
    • 33,072 Posts
    • 19,943 Thanks
    getmore4less
    As I read the OP, the first proposal is to give 50% of the residential home to an adult child who lives there - in that case, there is no "gift with reservation" because the gifter isn't benefiting from the 50% they gave away, only the 50% they already own.
    Originally posted by Skibunny40
    the issue is there are two parents and potentially only one person getting the gift, that might make a 50% gift a partial GWR.

    (there may be an example in the HMRC manual as this must be a common combination)
    • xylophone
    • By xylophone 9th Apr 18, 10:55 AM
    • 26,497 Posts
    • 15,736 Thanks
    xylophone
    https://www.gov.uk/inheritance-tax/passing-on-home

    You don't have to pay rent to the new owners if both the following apply:

    you only give away part of your property
    the new owners also live at the property


    The expectation would be that donor and donee would pay their shares of bills etc.


    https://freemanharris.co.uk/tax-implications-inheriting-gifting-property/

    Many clients wish to gift their home in order to protect the local authority from forcibly selling their property in order to pay for care home fees. If you are going or plan to go into residential care, then the local authority will check whether there has been a deliberate deprivation of assets. The local authority can carry out a financial assessment to determine the amount of funding you are entitled to and it takes into consideration not only your currently owned property but also previously owned assets as well. This means that any gifted property can also be included in their calculations.
    • xylophone
    • By xylophone 9th Apr 18, 10:58 AM
    • 26,497 Posts
    • 15,736 Thanks
    xylophone
    The seven year rule wouldn't apply if the parents continued to live in the family home.
    Not so - see links above.

    If you die within 7 years
    If you die within 7 years of giving away all or part of your property, your home will be treated as a gift and the 7 year rule applies.
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