Gifting a property??

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    Gifting a property??

    One of my friends lives at home with her elderly parents and has recently discovered a problem. Basically about 10 years ago her parents took out an equity release mortgage without anyone's knowledge. There is a possibility the product was mis-sold but I don't want to visit that problem. As a way of getting out of this mortgage, the parents want their daughter to buy the house from them. She will need a mortgage of about £165k but the house is currently worth about £500k (£335k equity).

    What is the best possible way for her to buy the property to keep the taxes at a minimum? Should her parents make a gift of the property? I already think it might be illegal to buy below market value (although I'm not sure?).

    Grateful for any advice.

    #2
    I assume the current interest rate is much higher than a BTL mortgage?

    Nothing illegal about buying BMV - HMRC will merely ignore the agreed price and substitute MV.

    IHT could be an issue now and CGT when the daughter comes to sell the property.

    Plus SDLT if over the threshold.

    Comment


      #3
      I don't see why the parents can't gift the property or part of it, or sell at an undervalue.
      If it's an undervalue, it will only (as far as I know) be an issue for IHT if both parents die within 7 years.
      The parent's estate will be valued as though the house was sold at market value at the date of sale for IHT purposes.

      I don't think the parents will be able to make a gift of a property with the mortgage on it (there'll be a charge on the property record).

      So I think the daughter would have to get a mortgage and buy the property at the undervalue (£165k) and take the chance on the IHT.
      Need a real solicitor for that one...
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        Pretty certain agreement of equity release lender will be required....
        https://www.moneyadviceservice.org.u...equity-release
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

        Comment


          #5
          Originally posted by theartfullodger View Post
          Pretty certain agreement of equity release lender will be required....
          https://www.moneyadviceservice.org.u...equity-release
          Equity Release mortgage 6.5% the debt is increasing by about £12k per year.

          So if she buys at £165k, so long as parents live at least 7 years there is no tax as it would be a gift? One parent is 83, other is 77 :-(

          Comment


            #6
            HMRC I think value it at market value, not contract price.

            Equity release presumably needs paying off before new purchase by daughter.

            Are parents tenants-in-common or the other sort. Think they/she needs to talk to solicitor & IHT accountant.
            I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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