Transferring house to children

[Brum]

Hi,

Hope you can help. My mother is looking to transfer her house into her children's name to limit the tax implications. The house is worth in the region of £600,000. It would be split amongst 4 children,One of which lives with her. She would continue to live in the house.

How would she go about this and what is the best way to avoid tax?

Thanks in advance.

[Gordon999]

Your mum should consult a (1) solicitor (specialising in wills & estate ) for advice on the property transfer and (2) a tax accountant for possible tax liability.

[Lawcruncher]

Your mum should consult a (1) solicitor (specialising in wills & estate ) for advice on the property transfer and (2) a tax accountant for possible tax liability.

Agreed, especially with a house worth £600,000. Generally, if you retain a benefit or some degree of control there is no tax benefit. However, a professional can advise fully according to your mother's over all financial position and what she wants to achieve.

[Thompsons]

Normally when an individual gifts an asset and continues to enjoy a benefit from the asset, then this is a gift with reservation of benefit and ineffective for IHT.
However, if an individual gifts land and continues to occupy the land with the donee, the gift is not a gift with reservation if the donor pays at least their share of outgoings. This is only effective if the donor and donee continue to occupy the land together.
So if mum gifts the house to the resident child, provided mum pays at least her share of the outgoings, then there is no gift with reservation whilst the child continues to live there.
Obviously, this would bring with it all kinds of problems if just one child was gifted the house.
Also worth bearing in mind, if the child then gifts 1/4 of the house to the other 3 siblings during the life of mum, the gift would fall under the pre owned assets tax regime.
This is in the HMRC IHT manual somewhere I think, but the legislation is FA 1086 s102B.

[Gordon999]

Someone with 600K to give away , probably has more assets to defend so best to consult a specialist solicitor.

[Land Registry Rep]

Dealing with the legal title (in England & Wales), namely that recorded by Land Registry, can be relatively straightforward - see our online FAQ re transferring your property http://www.landregistry.gov.uk/publi...d-landproperty

However before completing such a change it is important to also consider the beneficial title as you imply for IHT tax reasons as well as what happens to each 'share' as and when the children (or their beneficiaries) wish to deal with the property themselves.

As other posters have stated confirming the 'right' course of action with a legal adviser would be strongly recommended before undertaking any application to change the land register.

[bandontherun]

there might be another way to achieve the same end because your original idea is not a runner. The mother borrows say £400,000 (by IOU, say £100,000 from each child, and then gives the benefit of the amount borrowed to one of her other children) Charges are registered against the property in favour of the four children securing the debt so that upon death of the mother £400,000 plus a bit of interest accruing becomes payable to the chargees, and hence outside the estate for IHT. Provided this is done correctly I dont see why it would not be effective.

Certainly the mother could borrow from any third party secured on her home and then give the capital to her children, reducing the net estate. That could not be attacked as a device

[mo999]

Nice idea, but where is the £400,000 supposedly borrowed gone. Would that not form part of the estate.

[Claymore]

Nice idea, but where is the £400,000 supposedly borrowed gone. Would that not form part of the estate.

I think I read somewhere that giving away lump sums of money comes under a 7 year rule and would be subject to inheritance tax - or something along those lines. But I also read, you can give away any multiples of £250 without having to pay any tax.

£400k has a lot of £250's (1600 of them to be precise!).

[bandontherun]

no, the amount borrowed is gifted to the children leaving the estate with the liability of repaying a £400,000 loan thus reducing the nett value of the estate for IHT purposes. Its probably too neat a solution........

As to the gift of 4 x £100,000; the donor has to survive sever years for the transfer to be fully exempt from IHT, if surviving a shorter period there is a sliding scale of reduced liability