Inheritance/Capital Gains Tax advise please!!!!
Discussion
I would really appreciate it if somebody could advise me with the following scenario:-
My mother in law is selling her house and buying a new one (no mortgage involved by the way). She would like to take this opportunity to sign the new house over to her only child (my wife) in order to prevent any problems when the inevitable happens one day and she is no longer with us. She has been advised by her solicitor to seek professional advise because apparently if she were to do this now, then my wife would be faced with a capital gains tax bill (is this true?). Therefore, could anybody out there advise me on what we should do to prevent paying this or any other kind of tax (if possible). I have heard stories of placing it in our children’s names etc but is there any truth to this?. I have two children aged 3 and 6 (if this helps).
Any advise on how to pay the least amount of any tax would be very much appreciated.
My mother in law is selling her house and buying a new one (no mortgage involved by the way). She would like to take this opportunity to sign the new house over to her only child (my wife) in order to prevent any problems when the inevitable happens one day and she is no longer with us. She has been advised by her solicitor to seek professional advise because apparently if she were to do this now, then my wife would be faced with a capital gains tax bill (is this true?). Therefore, could anybody out there advise me on what we should do to prevent paying this or any other kind of tax (if possible). I have heard stories of placing it in our children’s names etc but is there any truth to this?. I have two children aged 3 and 6 (if this helps).
Any advise on how to pay the least amount of any tax would be very much appreciated.
A parent signing over a property to his/her son/daughter will not get a person off the Ineritance Tax hook.
This would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
This would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
I am sure this is a very naive suggestion and has already been thought of and is probably not helpful but how does this look to the experts
Have your mother in law sell the house (fees to pay)
Give you the cash as a present (usual 7 year issue)
You buy a new house (pay stamp duty and fees)
Employ your mother in law as a housesitter for the new house (pay tax on the wage, though shouldn't be too high)
Have your mother in law sell the house (fees to pay)
Give you the cash as a present (usual 7 year issue)
You buy a new house (pay stamp duty and fees)
Employ your mother in law as a housesitter for the new house (pay tax on the wage, though shouldn't be too high)
Edited by 2something on Saturday 21st July 10:05
Depends on the value of the house being purchased and any other assets the lady has.
IHT is taxed at 40% on anything above £300,000, if she is "worth" less than that there is no IHT. If she is worth more a visit to a solicitor is best to discuss the options of leaving it in a trust for you and your children
IHT is taxed at 40% on anything above £300,000, if she is "worth" less than that there is no IHT. If she is worth more a visit to a solicitor is best to discuss the options of leaving it in a trust for you and your children
2something said:
I am sure this is a very naive suggestion and has already been thought of and is probably not helpful but how does this look to the experts
Have your mother in law sell the house (fees to pay)
Give you the cash as a present (usual 7 year issue)
You buy a new house (pay stamp duty and fees)
Employ your mother in law as a housesitter for the new house (pay tax on the wage, though shouldn't be too high)
Nice idea, but the HMRC would imo definitely see this as an "associated operation".Have your mother in law sell the house (fees to pay)
Give you the cash as a present (usual 7 year issue)
You buy a new house (pay stamp duty and fees)
Employ your mother in law as a housesitter for the new house (pay tax on the wage, though shouldn't be too high)
Edited by 2something on Saturday 21st July 10:05
The timing of it all would be too much of a coincidence. Had the woman been a professional housesitter for a reasonable period of time beforehand, it might help the situation.
Eric Mc said:
A parent signing over a property to his/her son/daughter will not get a person off the Ineritance Tax hook.
This would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
don't forget there is taper relief of 20% per year up to the 7th year in this scenarioThis would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
dcw@pr" Target="_blank">class="forumQuoter">dcw@pr said:
Eric Mc said:
A parent signing over a property to his/her son/daughter will not get a person off the Ineritance Tax hook.
This would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
don't forget there is taper relief of 20% per year up to the 7th year in this scenarioThis would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
In the 4th year after the gift, 80% of the tax would be payable, 60% in year 5, 40% in year 6, 20% in year 7. Year 8 = 0, years 1-3 = 100%
Best advice would be the usual, talk to an IFA who is well versed in such matters. There are a variety of options available to reduce the tax liability.
emicen said:
dcw@pr" Target="_blank">class="forumQuoter">dcw@pr said:
Eric Mc said:
A parent signing over a property to his/her son/daughter will not get a person off the Ineritance Tax hook.
This would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
don't forget there is taper relief of 20% per year up to the 7th year in this scenarioThis would only work if the property was signed over as a pure gift to the child and all rights pertaining to that property (including the right to live there) are given up. If the parent continues to live there it becomes a "Gift with Reservation of Title" and will not count as a proper gift.
The only way such a gift would work would be for the parent to pay a full market rent for staying in the property. The son/daugfhter would obviously be liable to income tax on the rental income and they would also be liable to Capital Gains Tax if and when the property was eventually sold.
In this scenario, the gift of the property is a genuine gift and COULD escape Inheritance Tax but the parent MUST remain alive for seven years after the date of the gift for the gift to remain outside the estate when the parent dies. If the parent dies within this seven year "window", the property reverts back into the estate and will be included in valuing the estate for IHT purposes.
In the 4th year after the gift, 80% of the tax would be payable, 60% in year 5, 40% in year 6, 20% in year 7. Year 8 = 0, years 1-3 = 100%
Best advice would be the usual, talk to an IFA who is well versed in such matters. There are a variety of options available to reduce the tax liability.
I only know that because I helped my girlfriend revise for her land management MSc and it had inheritance tax in it
dcw_pr said:
don't forget there is taper relief of 20% per year up to the 7th year in this scenario
All this goes over my head, but this caught my eye. 20% per year over 7 years equates to 140%, which doesn't make sense to me. How's that work?PS the '@' in your name screws up the quoting.
Edited by GreenV8S on Monday 23 July 18:05
GreenV8S said:
dcw_pr said:
don't forget there is taper relief of 20% per year up to the 7th year in this scenario
All this goes over my head, but this caught my eye. 20% per year over 7 years equates to 140%, which doesn't make sense to me. How's that work?PS the '@' in your name screws up the quoting.
Edited by GreenV8S on Monday 23 July 18:05
I quite like his way though, would add a bit of gamesmanship to the whole affair. "OK Revenue, they die in the next 5 years, some money's yours. Year 6 we call it evens, year 7, pay me my money bitches!" Be kind of like an each way bet on the horses 
Hahaha, I thought there wasn’t an easy answer. Therefore, I thought I would elaborate on some additional details and our current thought process. The house being sold is £315.000 and the house being bought is £295.000 (therefore, £20.000 will disappear to cover the house move etc). The “estate” not including the house is approx £50.000 plus (but will obviously diminish over the coming years). Therefore, if the mother in law buys the new house and puts joint names down with my wife, does this effectively mean that the estate after the house purchase is £197.500 (mother in laws half plus remaining estate) which is way below the inheritance tax threshold. Although, we guess that my wife will become liable for capital gains tax when her mother dies and the house is sold. An idea at that time is that we could sell the house and put towards two smaller properties as a future investment for my two children.
Please feel free to keep the input coming as I will keep an eye on the topic, although I think they will need to go and seek some face to face legal advise. PS my wife did laugh at the thought of explaining to her mum the idea of my wife employing her to look after her own house.
I will post what they decide to do, just in case anybody faces a similar scenario.
Thanks in advance,
Please feel free to keep the input coming as I will keep an eye on the topic, although I think they will need to go and seek some face to face legal advise. PS my wife did laugh at the thought of explaining to her mum the idea of my wife employing her to look after her own house.
I will post what they decide to do, just in case anybody faces a similar scenario.
Thanks in advance,
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