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Gifting a house to a parent

Practical Issues
JamesW11
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Joined: November 16th, 2023, 8:07 am

Gifting a house to a parent

#664049

Postby JamesW11 » May 12th, 2024, 10:07 pm

Hi all,

My siblings and I are trying to ascertain the best way forward with our mum's living arrangements.
She is living in a house we own (me and siblings), but wants to move to a smaller, more manageable flat.
She has taken advice and wants to have the property in her name, rather than ours.

(It's in our names as it was made over to us via a deed of trust she had drawn up around her beneficiary interest in her brother's estate and will after his death in 2002.) We already know it would mean CGT for us siblings, after selling the house, and only £500k of the value of her flat would be exempt from IHT on her passing.

But if we (4 siblings) gift her a £600k flat in her name with some of the proceeds of our sale of the house where she currently lives, what are the Gift Tax implications for all of us, please? (Both Mum and us 4 siblings). Anyone know?

Any thoughts or comments very welcome!
Thanks, James.

DrFfybes
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Re: Gifting a house to a parent

#664078

Postby DrFfybes » May 13th, 2024, 8:52 am

Your mum lives in a house you (collectively) own. OK, that is one issue you've considered. If that flat really legally is owned by you then it appears your mum has insufficient assets with which to buy her flat.

So basically it looks like you want to give your elderly mum £600k for a flat, and then want to work out how to avoid IHT on it when she dies?

Why not just lend her the money she needs to buy the flat as an unsecured, no strings attached loan. She dies, the loan is repaid from the estate before IHT is calculated.

She gets her £350k allowance, and might even get her RNRB.

OK, there is a risk she might do something daft and you lose your loan money, so perhaps a Promisory Note contingent on loan due on death or transfer or property.

[Edit - a general rule of thumb for reducing IHT is for the older person to reduce their asset base, not increase it :) ]

Paul

robbelg
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Re: Gifting a house to a parent

#664099

Postby robbelg » May 13th, 2024, 12:04 pm

If you go the loan route you could charge a sensible interest rate with the interest rolled up into the loan. That might be enough to cancel out any gain in property value

Rob

DrFfybes
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Re: Gifting a house to a parent

#664110

Postby DrFfybes » May 13th, 2024, 1:19 pm

robbelg wrote:If you go the loan route you could charge a sensible interest rate with the interest rolled up into the loan. That might be enough to cancel out any gain in property value

Rob


But they'd pay Income tax on the interest, could be high if it all rolled up and paid in one hit.
Also as an unsecured loan the mum would own the house so no CGT.

chas49
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Re: Gifting a house to a parent

#664114

Postby chas49 » May 13th, 2024, 1:33 pm

The OP refers to funding the purchase of the flat with some of the proceeds of the house sale. Absent other funds, they wouldn't have the money to fund a purchase until the sale goes through, and as the flat purchaser and the house vendor are separate people, a seller of the flat would probably be unwilling to accept an offer from someone with no funds.

Obviously I might be missing something here, and/or the OP and siblings might have the funds available elsewhere..


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