Can you give someone a house?
Discussion
Hello folks,
Someone has a house bought and paid for worth £250,000. This is to be split between two people on their death.
Situation is now this person can move in with someone else so the house is "spare". Can they either sell it and split the money between the two who would have benefited or could they give the house to one (who would then mortgage the property and give the other the half that is due to them)?
I'm guessing there will be reasons, probably tax, why this can't be done.
Thanks.
Someone has a house bought and paid for worth £250,000. This is to be split between two people on their death.
Situation is now this person can move in with someone else so the house is "spare". Can they either sell it and split the money between the two who would have benefited or could they give the house to one (who would then mortgage the property and give the other the half that is due to them)?
I'm guessing there will be reasons, probably tax, why this can't be done.
Thanks.
I'm sure the right answer is on the HMRC website rather than some randoms on a motoring forum :-)
ETA, https://www.gov.uk/inheritance-tax/gifts
ETA, https://www.gov.uk/inheritance-tax/gifts
There are two main considerations:
1) The gifter is effectively realising the full market value of the house when they give it away, and so they will have to pay any capital gains that is due. If the house is their primary residence, then this will be zero.
2) There is no immediate tax implication on the people receiving the house, however for inheritance tax purposes this will be a 'potentially exempt transfer' meaning that there will be a charge to inheritance tax if the gifter were to die in the next seven years. Again if the estate is under threshold (£650k is the figure that springs to mind) this isn't an issue.
Finally, if the gifter is elderly then care home fees might come into play as the local authority will often see the disposal of a large asset like this as an attempt to avoid paying for care, and can still count the value of the home as part of their net worth when calculating if they are entitled to local authority support.
1) The gifter is effectively realising the full market value of the house when they give it away, and so they will have to pay any capital gains that is due. If the house is their primary residence, then this will be zero.
2) There is no immediate tax implication on the people receiving the house, however for inheritance tax purposes this will be a 'potentially exempt transfer' meaning that there will be a charge to inheritance tax if the gifter were to die in the next seven years. Again if the estate is under threshold (£650k is the figure that springs to mind) this isn't an issue.
Finally, if the gifter is elderly then care home fees might come into play as the local authority will often see the disposal of a large asset like this as an attempt to avoid paying for care, and can still count the value of the home as part of their net worth when calculating if they are entitled to local authority support.
GreatGranny said:
I'm sure the right answer is on the HMRC website rather than some randoms on a motoring forum :-)
ETA, https://www.gov.uk/inheritance-tax/gifts
I did look at that before posting ETA, https://www.gov.uk/inheritance-tax/gifts
but surely that is irreverent as the property is less than £325k?deckster said:
There are two main considerations:
1) The gifter is effectively realising the full market value of the house when they give it away, and so they will have to pay any capital gains that is due. If the house is their primary residence, then this will be zero.
2) There is no immediate tax implication on the people receiving the house, however for inheritance tax purposes this will be a 'potentially exempt transfer' meaning that there will be a charge to inheritance tax if the gifter were to die in the next seven years. Again if the estate is under threshold (£650k is the figure that springs to mind) this isn't an issue.
Finally, if the gifter is elderly then care home fees might come into play as the local authority will often see the disposal of a large asset like this as an attempt to avoid paying for care, and can still count the value of the home as part of their net worth when calculating if they are entitled to local authority support.
At this time, mostly fit and healthy (just given all clear for prostate cancer after treatment) and looking forward to enjoying life for the foreseeable future.1) The gifter is effectively realising the full market value of the house when they give it away, and so they will have to pay any capital gains that is due. If the house is their primary residence, then this will be zero.
2) There is no immediate tax implication on the people receiving the house, however for inheritance tax purposes this will be a 'potentially exempt transfer' meaning that there will be a charge to inheritance tax if the gifter were to die in the next seven years. Again if the estate is under threshold (£650k is the figure that springs to mind) this isn't an issue.
Finally, if the gifter is elderly then care home fees might come into play as the local authority will often see the disposal of a large asset like this as an attempt to avoid paying for care, and can still count the value of the home as part of their net worth when calculating if they are entitled to local authority support.
JumboBeef said:
but surely that is irreverent as the property is less than £325k?
Depends on what the rest of their estate will be worth on their death, with the value of the gift written-down over seven years.If they need residential care, there may also be deprivation of assets issues.
Yes, this is OK as said by others. Also no income tax liability for the cash gift recipients, but maybe tapered IHT liability if death within 7 years, depending on rest of estate value.
It's just down to the generosity (or gullibility) of the current owner. The owner would have to be pretty sure of their future situation to give away their house before death. Most would just rent it out and keep the asset.
Not saying it's you of course, but the missus is a Wills & Probate lawyer and she gets your question every day from over eager nieces and nephews etc. wanting to get their hands on old Grandpa's cash sooner rather than later. Wheeling granny into the solicitors to "change her will"..
It's just down to the generosity (or gullibility) of the current owner. The owner would have to be pretty sure of their future situation to give away their house before death. Most would just rent it out and keep the asset.
Not saying it's you of course, but the missus is a Wills & Probate lawyer and she gets your question every day from over eager nieces and nephews etc. wanting to get their hands on old Grandpa's cash sooner rather than later. Wheeling granny into the solicitors to "change her will"..
Edited by mikeN54 on Monday 7th March 14:41
As has been said above, the owner can gift the house now if they wish. CGT will be payable on the market value of the house by the donor if they can't benefit from the primary residence relief. If it's been their main home until recently, they will probably be ok on that front but the facts would need checking.
The gift would be a PET. Be careful with any expectations of the value of the PET getting tapered over the 7 years OP, as mentioned above. There will only be tapering relief if tax becomes payable at the time of death on THIS gift (e.g. If the donor has previously gifted say £300,000 that becomes taxable at death and this gift takes the total amount over the £325,000 threshold). If that's not the case, the full £250,000 value will be taken off the available nil rate band available at time of death - there would be no tapering. This is a point that is commonly misunderstood.
There are often tax advantages to gifting an asset that is likely to rise in value faster than the nil rate band, because the value is frozen at the time of gift. Imagine the house is worth £500,000 at the time of death and the NRB has risen to £400,000. Keeping it until death would mean tax to pay on £100k (but no CGT), whereas now the whole value is within the NRB. And of course if the donor survives 7 years, it's outside the estate for tax all together. But it might be countered here by the fact that there are changes on the way to give extra IHT relief for family homes.
Might be worth taking some advice if inheritance tax is an issue.
The gift would be a PET. Be careful with any expectations of the value of the PET getting tapered over the 7 years OP, as mentioned above. There will only be tapering relief if tax becomes payable at the time of death on THIS gift (e.g. If the donor has previously gifted say £300,000 that becomes taxable at death and this gift takes the total amount over the £325,000 threshold). If that's not the case, the full £250,000 value will be taken off the available nil rate band available at time of death - there would be no tapering. This is a point that is commonly misunderstood.
There are often tax advantages to gifting an asset that is likely to rise in value faster than the nil rate band, because the value is frozen at the time of gift. Imagine the house is worth £500,000 at the time of death and the NRB has risen to £400,000. Keeping it until death would mean tax to pay on £100k (but no CGT), whereas now the whole value is within the NRB. And of course if the donor survives 7 years, it's outside the estate for tax all together. But it might be countered here by the fact that there are changes on the way to give extra IHT relief for family homes.
Might be worth taking some advice if inheritance tax is an issue.
Interesting thread.
Not wanting to drag it off topic too far, but what about selling under market value? Let's say it's not something entirely unrealistic like selling it for a quid, but what if there was say a 400k house and the owner wanted to sell it to a relative for £300k to help them out.
I presume CGT would still be payable but do things then get murky in terms of inheritance tax, care home fees, etc?
Not wanting to drag it off topic too far, but what about selling under market value? Let's say it's not something entirely unrealistic like selling it for a quid, but what if there was say a 400k house and the owner wanted to sell it to a relative for £300k to help them out.
I presume CGT would still be payable but do things then get murky in terms of inheritance tax, care home fees, etc?
charltjr said:
Interesting thread.
Not wanting to drag it off topic too far, but what about selling under market value? Let's say it's not something entirely unrealistic like selling it for a quid, but what if there was say a 400k house and the owner wanted to sell it to a relative for £300k to help them out.
I presume CGT would still be payable but do things then get murky in terms of inheritance tax, care home fees, etc?
CGT and inheritance tax would both be payable on the market value. The latter is assessed on the reduction in value to the estate (which in an arm's length transaction would usually be the same as the purchase price of course).Not wanting to drag it off topic too far, but what about selling under market value? Let's say it's not something entirely unrealistic like selling it for a quid, but what if there was say a 400k house and the owner wanted to sell it to a relative for £300k to help them out.
I presume CGT would still be payable but do things then get murky in terms of inheritance tax, care home fees, etc?
Don't know about care fees etc but I'd imagine the relevant authorities would be more than a little wise to things like this
CGT is only payable on profit, and only then if the profit is above the personal allowance (per year) of £11,100 this year...
https://www.gov.uk/government/publications/rates-a...
https://www.gov.uk/government/publications/rates-a...
bladebloke said:
Don't know about care fees etc but I'd imagine the relevant authorities would be more than a little wise to things like this
You'd think so but they don't seem to make much attempt to do anything about it - my Mum was adamant that paying for herself was the right thing to do but is increasingly dismayed to find that out of 25 people in the care home she's in, only 3 are paying the fees themselves.The others passed their houses on and emptied their bank accounts. My sister-in-laws are so angry about it they've stopped speaking to her!
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