Hi - second Q
My wife and I are purchasing a leasehold flat as a second property. It will be in our names. The plan is for our son to live there rent-free and pay the bills himself.
There is a monthly maintenance charge for the property. Can this be in our son's name (he will be paying it one way or another)? Would we be responsblie for the ground rent?
Thanks for reading, advice gratefully accepted.
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Flat - second question
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- Lemon Quarter
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Re: Flat - second question
planteric wrote:Hi - second Q
My wife and I are purchasing a leasehold flat as a second property. It will be in our names. The plan is for our son to live there rent-free and pay the bills himself.
There is a monthly maintenance charge for the property. Can this be in our son's name (he will be paying it one way or another)? Would we be responsblie for the ground rent?
Thanks for reading, advice gratefully accepted.
You can pay the maintenance/service charge for your son, however if the flat/lease is in your name (or you and your wife's name), then the responsibility/obligation to pay the maintenance/service charge and any ground rent would also be yours (you and your wife's). In practice the lessor/management company won't worry who the funds are coming from, but the legal obligation would remain with you as owner and lessee.
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- Lemon Half
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Re: Flat - second question
I'd also flag up possible future Capital Gains Tax issues.
You don't live in the flat even though you own it. If you intend on eventually leaving it to your son, then "timing" might be an issue. If you decide to leave it to him whilst you are still alive and the flat has appreciated in value, you might be subject to a capital gains tax.
Remember to keep all bills, including stamp duty tax and solicitors fees.
It might be worth mentioning this to your solicitor for advice.
You don't live in the flat even though you own it. If you intend on eventually leaving it to your son, then "timing" might be an issue. If you decide to leave it to him whilst you are still alive and the flat has appreciated in value, you might be subject to a capital gains tax.
Remember to keep all bills, including stamp duty tax and solicitors fees.
It might be worth mentioning this to your solicitor for advice.
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Re: Flat - second question
Thanks, it's a good point. We have other children and would like the flat to be "in the pot" for their inheritance. It is possible that our son could buy us out before then. In any case we will be taking advice on our future options. Our primary goal is to have son able to live on his own without throwing most of his smallish income away on rent.
Planteric
Planteric
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- Lemon Half
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Re: Flat - second question
planteric wrote:Thanks, it's a good point. We have other children and would like the flat to be "in the pot" for their inheritance.
I'm well out of my expertise here, but is this the sort of thing a trust can be useful for?
Have the trust buy the flat for the combined benefit of all of the kids? Be "the pot" you mention?
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- Lemon Quarter
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Re: Flat - second question
planteric wrote:We have other children and would like the flat to be "in the pot" for their inheritance. It is possible that our son could buy us out before then. In any case we will be taking advice on our future options. Our primary goal is to have son able to live on his own without throwing most of his smallish income away on rent.
Planteric
Hopefully this flat is a minor element of your 'pot', otherwise things will get tricky when you die and the flat needs to be sold to divide your estate between all your children.
I would also give some thought now to how this flat which is to form part of the 'pot' will be valued when the estate needs to be divided. Aside from the difference of opinion about how things should be valued (one valuation, two, three, more?) there is also the issue that if your son has some sort of long term right to live there then that would have an impact on the value.
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- Lemon Quarter
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Re: Flat - second question
Have you considered lending the money to your son to buy the flat? It could be on a zero interest basis, so no taxable income will be paid to you. The loan would form part of your estate. Your son will own the flat and so pay lower SDLT and on disposal the flat would be free of CGT. Best get the solicitor to draw up details of the loan if you are interested in going down that route.
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- Lemon Quarter
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Re: Flat - second question
AF62 wrote:planteric wrote:We have other children and would like the flat to be "in the pot" for their inheritance. It is possible that our son could buy us out before then. In any case we will be taking advice on our future options. Our primary goal is to have son able to live on his own without throwing most of his smallish income away on rent.
Planteric
Hopefully this flat is a minor element of your 'pot', otherwise things will get tricky when you die and the flat needs to be sold to divide your estate between all your children.
I would also give some thought now to how this flat which is to form part of the 'pot' will be valued when the estate needs to be divided. Aside from the difference of opinion about how things should be valued (one valuation, two, three, more?) there is also the issue that if your son has some sort of long term right to live there then that would have an impact on the value.
I don't think there's a huge problem provided that it's clear in the will and you've gone over it with your solicitor. I suppose it also depends on how many siblings there are and having a 'normal' family.
Our paternal grandmother had a small house not far away and when she died, my sister went to live there. She's a nurse and had a job at the hospital close by. Our parents were fine with it. When my dad died, it passed to our mum. Since us other two siblings had our own places, I suggested to mum to just gift her the house and have done with it...but must survive another seven years etc. The solicitor went through it with her and they came up with a will that's fair to everyone. When my mum dies, the house where my sister lives will be counted as part of the estate, and all will be divided into three. So in theory, she'll have the house and maybe a bit of money as well, depending on the value of mum's house and investments.
Unlikely, but if by any chance, my sister's house is worth a bit more than a third of the estate, I don't think we'll lose much sleep over it.
Steve
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