Gifting Rental Properties to Children

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    Gifting Rental Properties to Children

    Hello
    My wife and I are joint owners of two rental properties. We are considering gifting them to our 20 yr old daughter who will soon be embarking on a second degree course,duration 5yr.
    Gifting now would seem a good idea since property prices are low thereby reducing our CGT liability and her currently unused personal allowance would also contribute to her uni expenses.
    We assume we would need to inform the IRS, provide CGT calculations and pay what’s owed and have our solicitor carry out the necessary transfer.
    Are there any additional cost we may have to bear or any tips you can provide to limit our costs. Would you recommend we engage the services of an expert or should we be able to arrange this ourselves as lay people.
    Regards

    #2
    IRS? Are you in the USA? We can only answer UK questions - let us know!
    Unshackled by the chains of idle vanity, A modest manatee, that's me

    Comment


      #3
      My apologies, been reading other posts from USA and got caught up in the vernacular! I’m UK born and bred

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        #4
        Are there mortgages involved. ? Regards Peter

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          #5
          No mortgage on either property Peter.

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            #6
            Gift it in chunks over several years so as to give away only your annual exemption annually.

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              #7
              Thanks for that Telometer!
              I assume as a professional person you’ve been down this road a couple of times before, so do you consider the average Joe capable of doing this (the CGT part, not the solicitors work)without expert help? or are there many pitfalls
              Regards Legion

              Comment


                #8
                No I do not. Largely because calculating the appropriately sized chunk is complex. I would not even try to do it myself.

                This is how it does NOT work: Flat worth 200k, cost 100k. Gain 100k, annual exemption 10k, therefore gift 10% of flat for each of ten years.

                You have to get the valuations correct (10% of a flat is worth less than 10% of the flat's value, say 6-9%) and there are rules for linked transactions which deem different values for tax purposes. (Otherwise ten transfers of 10% would get rid, but the total value disposed of would be say 10x6%.)

                If you aim to use, say, half of your annual exemption annually then you would probably be able to DIY within tolerances such that no tax is at risk.


                I suspect you are trying to give her the income, more importantly than the capital. In which case, once she owns a little bit (even 1% or less) of the property you can jointly agree that she is entitled to (and thus taxed upon) the majority - or entirety - of the income.


                Final tip, don't actually conveyance the property to her bit by bit. Instead use a trust deed whereby you continue to own the property but you do so on her behalf.

                Comment


                  #9
                  Apologies as we hadn’t fully understood the implications of your last post “Gift it in chunks” We had a more simplistic understanding and thought you meant to gift one property a year thereby using our individual allowances each time.Gifting in chunks does appear complex and as you suggest would require the assistance of a professional.
                  Our main aim is for our daughter to receive the rental income from two properties and to take advantage of her personal tax allowance. We believed the only method of achieving this would be to gift the properties to her.
                  Your post suggests this is not necessary and we only need to gift a small portion of the property.
                  Regards Legion

                  Comment


                    #10
                    It always helps if people say what they want to achieve, rather than having made up their mind how they should do it and then ask how to do it that way.


                    Yes. Again, do not bother registering with the land registry. Arrange a deed of trust such that you dispose of a small portion of the property to your daughter. Then a simple agreement "Legion, Mrs Legion and Miss Legion as joint owners of Arcadia Towers agree that Miss Legion shall be entitled to [50%/whatever you fancy] of the profits. Signed and dated."

                    Comment


                      #11
                      Telometer,
                      You seem a little ticked off with me.
                      I apologise if my question was unclear but I’m the novice here and find it difficult to be precise. Your right I did have preconceived ideas of how to proceed but only because I believe it right to at least attempt some research before asking anyone for help. Unfortunately this resulted in my beginning to formulate ideas.
                      While I appreciate you must grow weary of dealing with people like me you have to understand were all novices and in the same way would not expect you to formulate sensible questions in our area of expertise.
                      Anyway apologies for any annoyance caused and thanks once again for your time and advice.
                      Legion, Mr, Mrs and Miss

                      Comment


                        #12
                        Not at all "ticked off" (sic), I'm sorry if you think I gave that impression. (A little frustrated, perhaps, but the joy of answering questions here is getting to the bottom of a knotty problem, and often coming up with a much better solution than might have appeared likely when the thread first started. It was only a chance remark in my sith paragraph to you that did it.)

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