BTL re-mortgage to reduce Inheritance Tax
Discussion
An elderly family friend has a portfolio of properties currently let out. He does not have a wife or children.
We were chatting about his options to release some cash to enjoy his remaining years. He mentioned that he could sell one property (he's not that reliant on the income from all properties) and travel, purchase new car etc. He inherited the portfolio many years ago and CGT would be fairly significant.
It occured to me that he may be able to take out a BTL mortgage (he's 74) and spend that. In theory, he would then avoid the CGT. IHT would be relatively similar in both scenarios if he goes out and spends the money. The estate would obviously clear the mortgage as part of probate.
Assuming he can get a mortgage, is there anything wrong with my thought process?
We were chatting about his options to release some cash to enjoy his remaining years. He mentioned that he could sell one property (he's not that reliant on the income from all properties) and travel, purchase new car etc. He inherited the portfolio many years ago and CGT would be fairly significant.
It occured to me that he may be able to take out a BTL mortgage (he's 74) and spend that. In theory, he would then avoid the CGT. IHT would be relatively similar in both scenarios if he goes out and spends the money. The estate would obviously clear the mortgage as part of probate.
Assuming he can get a mortgage, is there anything wrong with my thought process?
I think that would be an effective way to avoid capital gain. You don't pay CGT when you die.
https://www.taxcafe.co.uk/resources/deathbedtaxpla...
The only problem would be if he is still alive when the mortgage deal ends and he is not able to get a another mortgage in his 80s or 90s!
He will have to sell his BTL Properties to raise the cash to pay the mortgage (s) which will occur CGT!
Equity Release loans will let you pay back when you are dead but the rates are horrendous.
https://www.taxcafe.co.uk/resources/deathbedtaxpla...
The only problem would be if he is still alive when the mortgage deal ends and he is not able to get a another mortgage in his 80s or 90s!
He will have to sell his BTL Properties to raise the cash to pay the mortgage (s) which will occur CGT!
Equity Release loans will let you pay back when you are dead but the rates are horrendous.
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