Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
May I ask if this is your only residence please?
Does your son have an job and income?
It is my only residence, my son is self employed
Thanks. before I specifically address your question, with your permission, could we take a few moments to examine the reasons behind your proposal? The reason being is that on the face of it, the proposal would appear to have some very significant potential disadvantages from your point of view. if you do not wish to do so, of course please just say so.
thats ok, we are both retired andwe need help with mortgate, my son and his family live with us as they cannot get on the property ladder at the moment, we want to help, we will be living here as long as we want, but it gives my son a start
thank you. If I may make or two observations in this respect. if considering transferring the property into your son's name, you must ensure that you consider adequately protecting yourself and your partner (or spouse). if you transfer the property to your son, legally, your son could immediately proceed to evict you and I live in the property himself or sell the property. You would have no rights to the asset. Whilst you may trust your son completely, consider that if (god forbid) anything happened to your son, his estate (which would include your house under your proposal) may pass to another party under the terms of his will such as a partner or spouse who may take the above steps. In short, the situation leaves you completely, for want of a better phrase, at the mercy of your son and future fortune. There some ways in which you can consider mitigating these issues however first I will answer your question:
the cheapest way to transfer the financial benefit of the property to your son is simply for you and your partner or spouse who co-own the property to sign a bare trust deed. this is a simple document that states that whilst you will continue to own the property legally, money in the property belongs to your son. A bare trust is a very simple document which can be obtained for less than £200 usually and does not require the involvement of your mortgage lender nor any changes to the title. Once signed, your son would owned the financial interest in the property and can require the property to be sold and so on as discussed above.
if you wish to change the legal title, though there is no need to do so in order to transfer the benefit of the financial interest in the property, then this would be considerably more expensive because it would require the consent of your existing mortgage lender to transfer the mortgage into your son's name or alternatively your somebody to make an application to a new lender and also would require the transfer of the legal title. The mortgage element would likely cost at least a couple of hundred pounds in fees unlikely significantly more in the event a new mortgage application is required because things are evaluations need to be paid for. In addition, solicitors fees would likely be in the £350-£500 range and so the transfer of the legal title will be significantly more expensive proposition than a simple bare trust.
in addition, in order to obtain a mortgage, most mortgage lenders will require a self-employed person to be able to show three years of accounts. In addition, your son would likely need to earn at least a 1/4 of the outstanding mortgage in any one year, though the income multiple can vary from lender to lender
returning to my above concerns, you may wish to consider until the mortgage is paid off, a trust which provides for floating shares. In effect what this is is a trust deed that agrees between you and your son that any capital he puts into the property but give him a proportionate financial stake in the property as a percentage share. This means, if he then plays the capital off against the mortgage, in seven years time, he would have a percentage share proportionate to his contributions as against your own equity share in the property. Once the mortgage is paid off, you could consider something known as a life interest trust. this is a trust which provides that you and your spouse have a right to live in the property for your life and sell the property and downsize if you wish and so on but that after your deaths, the property passes to your son or an individual of your choice
the advantage of a life interest trust as it provides you with security in your property but also ensures the property cannot be claimed by the council for things like care fees and finally that you can choose now the person or persons who ultimately obtain the property after your death.
as you'll see, there is a lot to consider and transferring property into another person's name is XXXXX XXXXX that should be undertaXXXXX XXXXXghtly particularly when dealing with your only property as opposed to a second property for example. Notwithstanding this, because there is very little time left on the mortgage, transferring the legal title at the stage is likely to be disproportionately costly than considering a bare trust as discussed above which will achieve your aims without the associated cost of transferring the legal title
Is there anything above I can clarify for you?
The bare trust seems a good idea, and if we all have wills in place as well, thatcould be the best solution and possibly letters in place signed by all parties as to our staying in the property for as long as we wish
It depends upon what you want to achieve. If you are wanting to give some or all of the property to your son now, then there is a question of how to provide for and protect yourselves the remainder of your life as ultimately, you need somewhere to live and to be secure in that property.
if on the other hand, you are wanting your son to have the property after your deaths then provisions in your wills should suffice and would be the best approach with a simple trust in place for any capital he invests in the coming few years.
If you would like me to prepare a bare trust deed you can use for the purpose I would be happy to do so - this would likely take approximate 25 mins and accordingly would suggest a fee of £70.
Alternatively if you would like a trust with floating shares so that your son only receives a financial interest for actual capital he pays into the property through mortgage repayments which would give him a financial stake in the property (in my view this is your better approach for now), again I can do so though this is a slightly more complex trust to draft and therefore a little more costly to prepare.
Do let me know if I can assist further in the above. Otherwise is there anything else I can help you with?
One more question, when the mortgage is finally paid and we have the deeds, is it a simple procedure to change the names on the deeds
Yes it is much more straightforward because you do not have to involve the lender. the same principles apply in terms of you needing to consider protecting you and your partner's future interests but notwithstanding this, it is little more than completing a transfer deed and applying to register this at the land Registry.
Does the above answer all your questions or is there anything I can clarify or help you with any further?
I would like to you prepare a base trust document please for me please
Certainly. May I clarify do you prefer a trust deed that provides for floating shares whereby your son will only acquire a proportionate financial stake in the property commensurate with his contributions to the mortgage and so on or are you saying that you wish to sign over the entire financial interest in the property to your son absolutely. I would caution you against the latter for the above reasons but it is your choice of course.
Don't quite understand the floating shares part
No problem. Say you own a property worth £200K with a £100K mortgage (just example figures). At present you would have £100K equity. Let us say your son over the 3 years pay £50K off the mortgage. A floating shares trust would provide that your son would own 1/3 of the property and you 2/3s of the property in these cirumstances - i.e. so he gets credit for what he puts in.
This is because there would then be £150K equity in the property with £50K left on the mortgage with you owning £100K (2/3) and your son £50K (1/3).
It allows you to give your son a stake in your property for what he contributes but does not require you to give away your financial share in the property hence giving you continuing financial security.
A simple BARE TRUST by contrast would simply sign over all the equity in the property making your son effective the absolute owner and he could do with it as he wished. You would own nothing.
That sound a better position and when to mortgage is paid off we can then look at the situation again
Exactly. In my view a floating share trust is your better solution because it give your son a foot on the housing ladder by virtue of share in your home which he is contributing to but means you are not giving the whole thing away which could potentially leave you financially insecure.
A floating shares trust is a little more complex to prepare. If I were to suggest a fee of £110 for the same would that be fair?
Yes that seems ok, what do I need to do
Thanks. I will create something called and Additional Services Offer which should come up on your screen in a few moments. although I am based in England, the site itself is a US site and therefore I have to input the price in dollars at my end. Therefore the price you see may be a little bit less or more than £110 but it should not be by much either way. Once the offer appears, you can accept the same and it will take you through the payment steps. You will then be asked to leave the chat window (the thread above will be saved) and go to a new page where you can imput your email address so we can communicate by email. Only we can see each others email addresses. Once you let me have your email, I will email you and ask you for the information I need to prepare a draft trust deed for you.
I am very happy to answer any question you have about signing the trust deed and explain its contents - you can email me with any such questions you have. May I proceed?
Certainly. Just give me a few moments...
Should I be seeing something on screen yet?
Yes I sent the offer a couple of minutes ago. Did it not come up?
I am sorry for the inconvenience. I will ask professional support to look at this and contact you. If you have no further questions on the above I should be very grateful if you would kindly take a moment to rate my service to you to date using the simley faces. Your feedback is important to me. This will also complete and save the chat thread and I will be able to get one of the support team to contact you to complete the additional services transaction.
We would like to go ahead with the floating shares trust, but the additional services offer did not appear on screen. you said your professional support team will look into this, so we look forward to hearing from them, and to get the ball rolling
Dear XXXXX, I am still wanting to go ahead with the floating shares trust you told me about yesterday, but I still have not had the additonal services offer. Can you let me know why not, and how can we sort it.
Thanks for your reply. Before I try the above solution, what is the difference between a floating shares trust and a delclaration of trust.
ok, i'd like to proceed with this, so i'll try your suggestion and hope it works
I've just had an email that £120 has been accepted. What do I need to do now?
Payment has been authorised, can you let me what happens next.