Hello and thanks for using Just Answer.
My name is ***** ***** am happy to assist you with your enquiry.
Legally, there is nothing stopping you from buying the property at an undervalue.
The only real risk is that if your sister were to be made bankrupt within 5 years of the transaction, the Trustee in Bankruptcy could make a claim against the property, if he could show that your sister has transferred the property to you in avoid to avoid her creditors.
From your point of view, if you were intending on raising a Mortgage to finance the purchase, your Mortgage Lender would insist on you paying for insurance to cover the above scenario (called a "deed of gift/transaction at an undervalue indemnity policy). This Policy would likely cost approx £300 and would only protect your Mortgage Lender and not you, in the event of the Trustee in Bankruptcy making a claim.
From your sister's point of view,
he only other matter to consider is that for Inhertitance tax purposes, she would be deemed to have given the property away at full market value, and under the Inheritance tax laws, any transactions/assets made within 7 years of a person's death are treated as still being within her Estate when calculating if Inheritance tax is payable. If she were to survive for 7 years after the transaction had gone through, this would not be an issue.
I hope this assists you and set sout the legal position.
Thank you for your reply regarding the property in mention. This was a gift to my sister in 2011 by my father valued at 650k. My father passed away in 2014. Probate is currently being finalised and she has will have to pay her taxation on the house as it was gifted to her.
My questions are :
1) Her selling the house so soon after probate to her brother , undervalued, have any implications other than what you aleady have stated?
2) Either now or later I would like to gift part of the house
(25% , it has an annex) to my brother. Would I have to pay CGT on this part? or would it be dis/advantageous for my sister to gift it directly to him and the 75% to me when I buy it.. and if he was on the title deed could this effect my mortgage.
Ultimately we would divide the house and land into two, taking our individual share. His part of the house would not exceed a current valuation of £250k.
1. There ar eno other implications, other than already quoted.
2. For CGT purposes, I am not an accountant, but any gift of part of the property would be subject to the normal CGT rules. If yo uwere to have a Mortggae over the property, you woul dneed to get the Lender's consent to transfer the annex to your brother, which they may well refuse.
It would therefore be best if your sister transferred the annex to him and you get transferred the rest of the property. You can then proceed with your Mortggae on only the part of the house that you will be owning.