Transferring house to children

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    Transferring house to children

    Hi,

    Hope you can help. My mother is looking to transfer her house into her children's name to limit the tax implications. The house is worth in the region of £600,000. It would be split amongst 4 children,One of which lives with her. She would continue to live in the house.

    How would she go about this and what is the best way to avoid tax?

    Thanks in advance.

    #2
    Your mum should consult a (1) solicitor (specialising in wills & estate ) for advice on the property transfer and (2) a tax accountant for possible tax liability.

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      #3
      Originally posted by Gordon999 View Post
      Your mum should consult a (1) solicitor (specialising in wills & estate ) for advice on the property transfer and (2) a tax accountant for possible tax liability.
      Agreed, especially with a house worth £600,000. Generally, if you retain a benefit or some degree of control there is no tax benefit. However, a professional can advise fully according to your mother's over all financial position and what she wants to achieve.

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        #4
        Normally when an individual gifts an asset and continues to enjoy a benefit from the asset, then this is a gift with reservation of benefit and ineffective for IHT.
        However, if an individual gifts land and continues to occupy the land with the donee, the gift is not a gift with reservation if the donor pays at least their share of outgoings. This is only effective if the donor and donee continue to occupy the land together.
        So if mum gifts the house to the resident child, provided mum pays at least her share of the outgoings, then there is no gift with reservation whilst the child continues to live there.
        Obviously, this would bring with it all kinds of problems if just one child was gifted the house.
        Also worth bearing in mind, if the child then gifts 1/4 of the house to the other 3 siblings during the life of mum, the gift would fall under the pre owned assets tax regime.
        This is in the HMRC IHT manual somewhere I think, but the legislation is FA 1086 s102B.

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          #5
          Someone with 600K to give away , probably has more assets to defend so best to consult a specialist solicitor.

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            #6
            Dealing with the legal title (in England & Wales), namely that recorded by Land Registry, can be relatively straightforward - see our online FAQ re transferring your property http://www.landregistry.gov.uk/publi...d-landproperty

            However before completing such a change it is important to also consider the beneficial title as you imply for IHT tax reasons as well as what happens to each 'share' as and when the children (or their beneficiaries) wish to deal with the property themselves.

            As other posters have stated confirming the 'right' course of action with a legal adviser would be strongly recommended before undertaking any application to change the land register.

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              #7
              Nice idea, but where is the £400,000 supposedly borrowed gone. Would that not form part of the estate.

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                #8
                Originally posted by mo999 View Post
                Nice idea, but where is the £400,000 supposedly borrowed gone. Would that not form part of the estate.
                I think I read somewhere that giving away lump sums of money comes under a 7 year rule and would be subject to inheritance tax - or something along those lines. But I also read, you can give away any multiples of £250 without having to pay any tax.

                £400k has a lot of £250's (1600 of them to be precise!).

                Comment


                  #9
                  This could have worked many years ago, but in the light of recent legislation, it is no longer possible for two reasons.
                  1. There is anti avoidance legislation which prevents any debt which was derived from the property of the deceased being deducted from their estate.
                  and
                  2. If a person benefits from any property which has previously owned, and the gift with reservation rules do not apply, then there is a pre owned assets tax charge.
                  There was a very famous case a few years ago called Lady Ingram which used loan notes and trusts to get around the gifts with reservation rules. Unfortunately for HMRC it worked and so many such schemes were set up. The pre owned assets tax legislation was put in place to counter that scheme and many others similar to that.

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