Property ownership question

[swindonseagull]

My mum is having to sell up in Brighton and move house to be closer to family,

She is going to make plenty of money on her house she has owned for 50 years, but when she buys a new bungalow, what are the legalities of putting it in mine and my brothers name?

The reason I ask is, ( no one knows the future) is she needs to go in a care home in later years, the council can try and get the property sold to cover fees, obviously if it was in my name and mum lived rent free, then the council (or Govt) cant make a demand for its sale for fees, is this legal?

 

[Deleted member 18477]

My mum is having to sell up in Brighton and move house to be closer to family,

She is going to make plenty of money on her house she has owned for 50 years, but when she buys a new bungalow, what are the legalities of putting it in mine and my brothers name?

The reason I ask is, ( no one knows the future) is she needs to go in a care home in later years, the council can try and get the property sold to cover fees, obviously if it was in my name and mum lived rent free, then the council (or Govt) cant make a demand for its sale for fees, is this legal?

its a great idea if she's at that age and i think it's legal yes. i know someone else who did it somehow.

 

[Tricky Dicky]

My mum is having to sell up in Brighton and move house to be closer to family,

She is going to make plenty of money on her house she has owned for 50 years, but when she buys a new bungalow, what are the legalities of putting it in mine and my brothers name?

The reason I ask is, ( no one knows the future) is she needs to go in a care home in later years, the council can try and get the property sold to cover fees, obviously if it was in my name and mum lived rent free, then the council (or Govt) cant make a demand for its sale for fees, is this legal?

I don't think they can claim against a primary residence, just on other assets. You would have a second home and be subject to capital gains. I would get proper advice, not NSC.

 

[sir danny cullip]

Haven't done it for a few years but there's inheritance tax issues because she is enjoying it rent free (basically, she would still be seen as having an interest in the property I think). Either that or the gift of the money to you to buy the flat would be seen as a Potentially exempt transfer and if she dies within 7 years inheritance tax would be payable (think it's tapered though depending how long within that 7 years she dies).

 

[Uncle Spielberg]

I think you require the services of a professional solicitor/conveyancer.

 

[Westdene Seagull]

It is possible but you'll have massive tax issues. Firstly CGT will be due from you when you sell her home at some point in the future. There are also rules around effectively gifting money / property to someone - it isn't tax free ! Also, if she dies within 7 years of gifting you the money / property then inheritance tax will be due. You really MUST speak to both a specialist lawyer and tax accountant before going down this road. There's also what the council might consider around your "avoidance" of paying the fees for a home.

 

[Badger]

My mum and her 3 siblings have done this with my granny's flat. I think my granny pays a token amount of rent to cover the legalities (although she doesn't actually pay it) but as she's been there for over 7 years there is no longer an inheritance issue. I'm not sure what the tax implications were upfront but they were advised it was the best option.

 

[sir danny cullip]

Seek professional legal advice but the CGT would be payable by your mum when she sells her house. If she then gifted you the money and you purchased the house and let it to her at a market rate and she survived for 7 years I don't think there would be an issue. Problem comes with the gift if she dies in the 7 years from the gift. Also worth asking if there's any way you could get around her having to pay you a market rate every month for the rental.

 

[Daffy Duck]

You could be subject to Capital Gains Tax, which is payable on the profits made when sold.
She would need to outlive the move by 7 years. Taper relief is a reducing amount of the tax liability over those 7 years.

Definitely get some financial advice from an IFA. A lot of them will not charge you for a consultation but ask them before you arrange the appointment.

 

[Telscombe Seagull]

as above, the 7 year taper may come into it. but also look at whether it in your name and charging her whats known as a peppercorn rent would help. i.e. £1 a month she has to pay you, you keep a record etc. as mentioned get proper advise though mate, and good luck

 

[Telscombe Seagull]

oh, and its not really my first post, just the first in a few years, hey all

 

[Aadam]

Seek professional legal advice but the CGT would be payable by your mum when she sells her house. If she then gifted you the money and you purchased the house and let it to her at a market rate and she survived for 7 years I don't think there would be an issue. Problem comes with the gift if she dies in the 7 years from the gift. Also worth asking if there's any way you could get around her having to pay you a market rate every month for the rental.

This isn't correct. She wouldn't be liable to CGT. It's only payable when the property is gifted and then sold, if a CG is made. There are exemptions, like gifting to a husband you live with etc. Plus if you correctly put things into trust you can work around tax. Also, inheritance tax is only payable over £325,000 so if the value of the property is less and was gifted before other monies (subject to the 7 years prior), then it would be exempt.

Anyway, speak to an expert. Get help from a solicitor, they'll work it out in the best possible way for you.

 

[ditchy]

Haven't done it for a few years but there's inheritance tax issues because she is enjoying it rent free (basically, she would still be seen as having an interest in the property I think). Either that or the gift of the money to you to buy the flat would be seen as a Potentially exempt transfer and if she dies within 7 years inheritance tax would be payable (think it's tapered though depending how long within that 7 years she dies).

This ... so you will be liable for inheritance tax taper down each year from year 7 to 0 . if she survives 7 yrs its yours tax free .

 

[Westdene Seagull]

Seek professional legal advice but the CGT would be payable by your mum when she sells her house. If she then gifted you the money and you purchased the house and let it to her at a market rate and she survived for 7 years I don't think there would be an issue. Problem comes with the gift if she dies in the 7 years from the gift. Also worth asking if there's any way you could get around her having to pay you a market rate every month for the rental.

No it wouldn't - assuming it's her primary residence. It WOULD be payable by her children if she gifts it to them.

 

[Gazwag]

This ... so you will be liable for inheritance tax taper down each year from year 7 to 0 . if she survives 7 yrs its yours tax free .

Unless the house is sold before she dies then the OP and his brother would be liable to CGT.

However, this should not really be a concern as currently (assuming no other gains in that tax year) they would each get £10,000 CGT allowance (current rate) so as long as CGT is not changed by the government the house's value would have to increase by £25,000 or so (you can deduct the selling expenses) before any tax is payable.

What should also be remembered though is because the house will not be hers when she dies it will not be in her estate, therefore you should consider who she intends to leave her assets to, for example if there are two sisters as well they coul din theory lose out because the two brothers have already had the house and they would not necessarilary have to give the sisters anything. Also if the house is sold after she dies it will not be part of her estate so now get the IHT allowance so if the value did increase by a lot CGT would be payable when IHT may not have been payable anyway.

As other have said get proper legal and tax advice, it may cost you a few hundred now but save you loads in the future

 

[Driver8]

Careful whose advice you take as some of the above is wrong.

First of all the authorities can and will take account of all assets when judging ability to pay. The residence wont be included if a spouse lives there but otherwise it is expected to be sold.

You cannot get around it by gifting as this is seen as "deliberate deprivation" and will be ignored and the asset taken anyway.

If the gift is made some years before care is needed then there is more chance of it being accepted but no guarantee, particularly if she is living there rent free.

With regard to inheritance tax if the house is gifted but your mother remains a tenant she would have to pay a commercial rent (not £1) or it will be treated as a "gift with reservation" and still be part of her estate for IHT purposes.

 

[reigate]

Slightly changing subject, but is CGT based on the gain from original purchase price, or from when I vacated property?

I bought and lived in a house 9 years ago but have now rented it out. If I decided to sell it in say 4 years, would the CGT be based on my profit from 2003 or 2012. The value has gone up a lot in the 9 years I have lived there but if prices stay flat now would I still be liable.

Also, how easy is it to avoid. As I understand it, you are not liable if it has been your main residence for 6 months in the previous 3 years. Would I have to pay council tax in that time if i was to pretend to live there

 

[Westdene Seagull]

Slightly changing subject, but is CGT based on the gain from original purchase price, or from when I vacated property?

I bought and lived in a house 9 years ago but have now rented it out. If I decided to sell it in say 4 years, would the CGT be based on my profit from 2003 or 2012. The value has gone up a lot in the 9 years I have lived there but if prices stay flat now would I still be liable.

Also, how easy is it to avoid. As I understand it, you are not liable if it has been your main residence for 6 months in the previous 3 years. Would I have to pay council tax in that time if i was to pretend to live there

I believe from when you made another property you're primary residence. I'm not sure "avoid" is a wise word to use ! You can lower you're liability to CGT by carrying out works on the property - new kitchen etc. You can also deduct the costs of managing it. How would you explain away your new residence if you "pretended" to live at your rented one ? I take it you have informed you mortgage company that you rent out your original property ? If not I'd suggest doing this soon ! You get a CGT allowance so unless the property value has rocketed in a short period your CGT will be very low and as a fellow tax payer I'd prefer you paid it rather than "avoiding" it.

 

[reigate]

I believe from when you made another property you're primary residence. I'm not sure "avoid" is a wise word to use ! You can lower you're liability to CGT by carrying out works on the property - new kitchen etc. You can also deduct the costs of managing it. How would you explain away your new residence if you "pretended" to live at your rented one ? I take it you have informed you mortgage company that you rent out your original property ? If not I'd suggest doing this soon ! You get a CGT allowance so unless the property value has rocketed in a short period your CGT will be very low and as a fellow tax payer I'd prefer you paid it rather than "avoiding" it.

Yeah everything is legit to far, ie BTL mortgage and i'm sure the managing agents will inform HMRC so I will have to complete a tax return each year now. I thought I could only offset my "costs" against rental income to reduce income tax each year, not any CGT.

I could "seperate" from the wife so we need 2 houses for 6 months!

Any ideas on what the CGT allowance is? I just though it was 100% for 3 years and then nothing?

Cheers

 

[Gblocksouthstand]

Yeah everything is legit to far, ie BTL mortgage and i'm sure the managing agents will inform HMRC so I will have to complete a tax return each year now. I thought I could only offset my "costs" against rental income to reduce income tax each year, not any CGT.

I could "seperate" from the wife so we need 2 houses for 6 months!

Any ideas on what the CGT allowance is? I just though it was 100% for 3 years and then nothing?

Cheers

Tha managing agents won't inform HMRC - you had better register for self assessment otherwise you won't get a tax return and could build up large problems ahead - it is your responsibility to do this. You can deduct running costs and mortgage interest from the rent.

The capital gain will be calculated from when you bought the property and only the amount apportioned (on a time basis) to the let period (plus the last three years of ownership, whether let or not) will be taxable and you can deduct up to another £40k for special lettings relief and your annual exemption (currently £10,600). Probably no tax to pay if you sell after four years.

Best to get advice if you wnat to be certain.