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My name is ***** ***** am happy to assist you with your enquiry.
Could you please just confirm that the Deeds to the proeprty are in the child's name?
If so, was any other document drawn up at the time, to confirm or acknowledge that the parent had paid property and it was being held upon trust parent?
I look forward to hearing from you.
originally a charge that was discharged in january 2014
I'm a little confused with this as i have just given further information. Have you received it?
I did already post this information but I will try again.
yes a charge which was released by both parents january 2014
Are you still there?
Apologies- I am here. I will answer you in 2 ticks.
Well, if the Deeds are in the child's name and there is no separate document saying that the property is held upon trust parent, the child is the legal owner of the property full stop and is entitled to deal with it/sell it/retain it as he so wishes.
I am not sure if there is a particular question you have concerning the scenario.
No doubt you will let me know.
what are the legal ramifications should a parent/parents die as i understand there is a certain time span visa vi taxation/inheritance tax
The only legal/tax implications are as follows-
1. Legally, if a party makes a deed of gift or a gift at an undervalue and is then made bankrupt within 5 years from the date of the transaction, the Trustee in Bankruptcy can try and claim back the property if he can prove the transaction was made by the parent to avoid creditors.
2. Tax wise- the only implication is that if the parent dies within 7 years from the date of the transaction, the amount of the "gift" will form part of the parent's Estate when calculating whether any Inheritance Tax is payable (a sliding rate of tax is payable if the parent dies between 3-7 years of the transaction).
I hope this assists, but please let me know if you require any further clarification.
to clarify so is the 7 year period from date of gift ( 5 years ago ) or date of writing off charge ( last year)
Also what is the sliding scale
It is 7 years from the date of the transaction.
Inheritance tax is payable at a rate of 40%.
gifts, the following percentage reliefs are given (ie percentage discount on the full rate of 40%)-
After 3-4 years 20%
4-5 years 40%
5-6 years 60%
6-7 years 80%
I hope this assists.
sorry but is "transaction" original date of purchase even though it was under a charge at the time?
Yes, it is the date of the purchase.
To clarify- if you bought for £300,000, but the child has repaid to his parent the sum of say £100,000 under the Charge, the potential Inheritance tax liabilty is on the £200,000 (the element of the gift) and the 7 year period begins from the date of the purchase of the property by the parent.
thank you al
did u see my other question
both parents have to die before will is activated so that is the same tax on property right?
couples, their joint free tax Estate is £650,000, and is only payable on the second death, provided the surviving spouse has inherited everything from the first spouse.
When calculating the value of the first parent's Estate, it will include any gifts/transactions at an undervalue made by him/her within 7 years of the date of their death.
sorry I'm in america with time difference issue
1. if it's over 7 years there is no inheritance tax on the property and its paid by the estate on death of second parent
2. no inheritance tax until death of both parents if one inherits from the other
3. unsure of language in 2nd par "undervalue" please explain
thank u help
1. Once 7 years has elapsed from the date of the purchase, there is no Inheritance tax liability whatsoever.
2. Provided both spouses have left everything to each other in their Wills, there is no Inheritance tax (IHT) to pay on the first spouse's death, as all gifts to spouses are exempt from IHT.
3. What I meant is that if a party gives a gift or transfers a property/asset to a third party at an undervalue (eg the property is worth is £300,000 and child only repays parent £100,000 property, the amount on which IHT may be payable is that undervalue figure, being £200,000).
I hope this clarifies matters.
right thank you sorry to have so many questions one more!
each parent is leaving everything to the other in trust until their death when it is distributed - with an estate over 1 million not including the "gift" property
Is this still exempt if not is it paid by parents not the child who received it ?
If it's after 7 years it's not part of the estate right?
Inheriance tax that is due on "gifts" you make during the last seven years of your life is payable by the person who received the "gift"
If they cannot or will not pay, the amount due then comes out of your estate.
You are correct in that if you survive years from the date of the "purchase" the whole element of the "gift" is NOT liable to Inheritance tax whatsoever.
sorry last question so
if one parent dies 6 years after transaction but the other lives 10 does that make inheritance tax void as gift was from both parents
Both parents would be deemed to have "gifted" half of the property each.
Therefore, in that scenario, IHT would be payable on the half share of the parent who died 6 years after the transaction, and nothing would be payable by the Estate of the other parent as they would have survived by 7 years.