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Thomas
Thomas, Solicitor
Category: Property Law
Satisfied Customers: 7617
Experience:  UK solicitor holding an England and Wales practising Certificate.
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We are a 78-year-old retired couple with a large house in a

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We are a 78-year-old retired couple with a large house in a pretty village. The house is owned by us as tenants in common. Both our wills leave our share of the house to our son and daughter. We feel it is time now, before becoming too frail or before some serious illness strikes, to move to a smaller property, with smaller garden, hopefully in the same area, which we could simply rent. However our children are fond of the house, and our son, in particular, does not want it to leave the family. He has come up with the idea of us gifting it to him and our daughter now, rather than on our deaths. We do not need to realise the capital from the house, so we are thinking this might be a good plan. Our children would then rent out the house, and/or use it as a holiday home.
Could you tell us if there are any problems with doing this? Do we have to go through a selling procedure or can the property simply be passed on, witnessed by solicitors? Are there any taxes for which we or they would become liable?
Sincerely, XXXXX XXXXX
Submitted: 3 years ago.
Category: Property Law
Expert:  Thomas replied 3 years ago.
Morning Frankie,

Thanks for your question.

Can you please tell me if there is a mortgage on the property?

Kind regards,


Tom
Customer: replied 3 years ago.

Dear XXXXX, No mortgage.

Expert:  Thomas replied 3 years ago.

Hi

Thank you for your question and patience, I’m Tom and I’ll try to help you.

Basically if there is no mortgage then you can do this. While there is no legal requirement for you to instruct a solicitor to do this for you, you probably should because you want to demonstrate that this is a pure gift in which you shall retain no interest for the purpose of inheritance tax. You would probably do this by executing statutory declarations confirming the gift.

You must not reserve any benefit over the property, which means that you cannot occupy the property after transfer (or probably even use it periodically as a holiday home or temporary accommodation yourself) and must not receive any rent or other benefit.

Additionally it will be a transfer at an undervalue which means that the local authority could in some circumstance seek to set it aside if you went in to a care home and accrued care fees. So, in order to help you in this regard you should both see a doctor and get the to confirm that there are no pre-exisiting conditions of you both which mean that you are likely to need to go in to a carehome. This would also have to be detailed in the statutory declaration.

If the property is your Principal Primary Residence then you can probably use this exemption so that there is no CGT burden.

The gift to your children would be a Potentially Exempt Transfer for inheritance tax purposes, which means that if you live for 7 years after the date of the gift then it will not be included in your respective estates in working out any IHT burdern If you die between 3-7 years then a percentage of the value would be included in your estates for IHT purposes. If you die within 3 years then the whole of the value of the estate would be included for IHT purposes.

Your children will acquire an assets, which if they eventually sell it they will have to account for any capital gain under the CGT regine. The value of the gift will be the market value of the property as at the date of gift so they would need to get the property valued upon transfer and document it.

Obviously they would have to pay income tax on the income from renting.

My goal is to provide you with a good service. If you feel you have received anything less, please reply back as I am happy to address follow-up issues specifically relating to your question.


Kind regards,


Tom

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