Mother Gifts her 50% Home Share to Father

clearpath

Registered User
Feb 20, 2018
34
0
Father in care home and self-funding, late stage vascular dementia.
Mother has POA.

Can my mother give my father her 50% share of the property by POA, and then it gets given directly to myself with a will variation later ? No IHT or CGT on this situation...both under the IHT limits combined or separate and no CGT as its the principle residence.
My father has enough money going forward to make up his fees,so by gifting her half over it would not really put that half at risk and if it got to a pre-agreed limit on his savings we would then invest on his behalf after Brexit as things so up in the air right now with Brexit.

Mother in good health, no major conditions.
Could that be seen is dep of assets IF she ended up in a care home for whatever reason 5-10 years down the line...? I think length of time does not really reduce deprivation of assets but how the actions in the past are interpreted.

She would also not be gifting directly to me, but to my father, and I would then inherit the home at a future date. Yes, I would get it sooner but CGT unlikely to accumulate on it, as its value is at an all-time high.

So it's transfer ultimately is indirect and as inheritance,not a gift from her to me either.
She would remain in it going forward....."gift with reservation of benefit", but that is an IHT technicality when assessing total assets, as there is no IHT on his total assets.
 

nitram

Registered User
Apr 6, 2011
30,075
0
Bury
I think length of time does not really reduce deprivation of assets but how the actions in the past are interpreted.

The key is in the full title - 'Deliberate Deprivation of assets'.
Is there any evidence that at the time of the action the person had a condition that was likely to result in them requiring care in the future?

Regarding the scheme to avoid taxes, is it necessary if you factor in MRNRB (main residence nil rate band)?
 

Wifenotcarer

Registered User
Mar 11, 2018
341
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77
Central Scotland
I see that no one has answered you yet and suspect that this question is too complicated for laypersons to comment on. I know that the rules regarding DOA vary in different parts of the Country and their interpretation by each LA varies even more. Also these rules (and CGT & IHT) are subject to change especially if you are looking 5 to 10 years into the future. You need expert legal advice not comments on a forum.
 

Bod

Registered User
Aug 30, 2013
1,958
0
One of the forum rules is no financial advice is to be given here.
But I do see the potential for major problems. Most of which would be overcome by mother retaining her own share of the house.

Bod
 

jugglingmum

Registered User
Jan 5, 2014
7,085
0
Chester
Deprivation of assets only comes into play if you are no longer self funding.

I am in a situation of having an elderly MIL, 92 this year, and I think that most 92 year olds can forsee the need for future care, in the way that most healthy 50 year olds can't so if your mother is elderly or has any indication of infirmity then this needs to be borne in mind, because if she can forsee she needs her assets then you have a problem.

As far as the tax issues you mention, they are fairly complex and you need proper professional advice.

You need a reputable accountant with a good working knowledge of IHT, and it's interaction with all the recent anti avoidance legislation.

Sometimes making things too complex is not worth the hassle as your mother needs to fully understand what she is doing to be able to agree to it and not cause a family rift later on.
 

Kevinl

Registered User
Aug 24, 2013
6,050
0
Salford
As there are no possible tax savings/planning implications in your case then what possible reason is there for your mother to do this other than as a possible way to avoid any possible care costs for her in the future?
Assuming they're tennants in common on the land registry and not joint tennants then she can gift her half to him, if they're tenants in common (as is more usual) then she doesn't have a half to gift as they both own all of the house so she can't gift it to anyone.
If at sometime in the future she needed care and the LA became involved in funding then giving away her half of the house for no apparent reason could (quite reasonably in my opinion) would be a deprivation of assets.
Knowing noting about your mother's health it's impossible to guess whether or not the need for care may ever arise but if it did and the LA assessed her as still having the asset and invite you to take them to court and prove a reason other to be the case, how would you explain this course of action to a judge when there exists no other logical reason for doing it?
K
 

Kevinl

Registered User
Aug 24, 2013
6,050
0
Salford
There are significant potential tax savings in the outlined scenario, although it is a complex area , so needs good personalised professional advice.
other than IHT & C GT both of which the original post says are not relevant in her case what other taxes might apply?
K
 

jugglingmum

Registered User
Jan 5, 2014
7,085
0
Chester
other than IHT & C GT both of which the original post says are not relevant in her case what other taxes might apply?
K

That isn't my interpretation of the post. Certain aspects of these taxes are stated as not applying at certain points in the event chain, which to my reading is the benefit of the proposed series of transactions, which have, as far as I read it, using normal tax terminology, been explained in the post.

I am not an IHT expert but know enough to say this needs a good specialist, as there are to my mind some tax risks contained in this proposal.
 

Susan11

Registered User
Nov 18, 2018
5,064
0
Father in care home and self-funding, late stage vascular dementia.
Mother has POA.

Can my mother give my father her 50% share of the property by POA, and then it gets given directly to myself with a will variation later ? No IHT or CGT on this situation...both under the IHT limits combined or separate and no CGT as its the principle residence.
My father has enough money going forward to make up his fees,so by gifting her half over it would not really put that half at risk and if it got to a pre-agreed limit on his savings we would then invest on his behalf after Brexit as things so up in the air right now with Brexit.

Mother in good health, no major conditions.
Could that be seen is dep of assets IF she ended up in a care home for whatever reason 5-10 years down the line...? I think length of time does not really reduce deprivation of assets but how the actions in the past are interpreted.

She would also not be gifting directly to me, but to my father, and I would then inherit the home at a future date. Yes, I would get it sooner but CGT unlikely to accumulate on it, as its value is at an all-time high.

So it's transfer ultimately is indirect and as inheritance,not a gift from her to me either.
She would remain in it going forward....."gift with reservation of benefit", but that is an IHT technicality when assessing total assets, as there is no IHT on his total assets.
Hi As you can see from the replies members are confused about this plan. Perhaps you could explain the logic behind it . Susan
 

clearpath

Registered User
Feb 20, 2018
34
0
Logic = Asset protection of first property and tax efficiency.

I thought a second property could be bought avoiding purchase taxes if my mother owned no property by giving her half away, but its all looking too complex as you move one way, and another tax issue crops up in another area.....

If we buy any prop. in father's name except commercial to pay his fees, there is an upfront tax now of 3% on top of the price as it would be an "additional dwelling".
My father's personal tax limit is almost already maxxed out wheres my mother has a buffer where she would not pay tax on a rental property as her pension is so low already, the difference to her personal tax-free allowance could be taken up by rent. But the issue is, to legally avoid the 3% ADS (additional dwelling supplement) I think the person has to occupy it who is purchasing it, and not immediately rent it out by law.
 

Susan11

Registered User
Nov 18, 2018
5,064
0
Logic = Asset protection of first property and tax efficiency.

I thought a second property could be bought avoiding purchase taxes if my mother owned no property by giving her half away, but its all looking too complex as you move one way and another tax issues crops up in another area.

If we buy any prop. in father's name except commercial to pay his fees, there is an upfront tax now of 3% on top of the price as it would be an "additional dwelling".
My father's personal tax limit is almost already maxxed out wheres my mother has a buffer where she would not pay tax on a rental property as her pension is so low already, the difference to her personal tax-free allowance could be taken up by rent. But the issue is, to legally avoid the 3% ADS (additional dwelling supplement) I think the person has to occupy it who is purchasing it ,and not immediately rent it out by law.
Yes I think you're right about the 3%. My daughter has a buy to let but lives in a rented flat and she will have to pay the extra 3% if she doesn't sell the buy to let before she buys a home for herself. It's retrospective legislation.....not fair really.
 

jugglingmum

Registered User
Jan 5, 2014
7,085
0
Chester
Hi As you can see from the replies members are confused about this plan. Perhaps you could explain the logic behind it . Susan

I think I understood the plan, it has the elements complex tax planning, there are many intricacies of tax not mentioned in the original post which might arise. It needs professional advice from an experienced tax professional, ie a tax partner in a medium to large firm. There are many complexities in what has been mentioned, and you need someone who understands the full remit of the rules, it is not what you know but what you don't know that will catch you out. The full plan and the full assets and income of your parents need to be considered not one or two transactions in isolation. These sort of things might have worked 30 years ago, now asset protection and tax efficiency don't always go hand in hand but tend to be one or the other, most prefer asset protection over tax efficiencies.

TAAR and GAAR may apply (targeted anti avoidance rules and general anti avoidance rules) as linked transactions are involved and there would appear to be an intention of reducing tax, rather than transactions for non tax reasons, and there are a series of transactions, HMRC would not look kindly on it.

In addition most reputable professionals are wary where parents are following suggestions by children (adult) into transferring assets if they don't fully understand the benefits, so would only assist with the suggestions if the parent was clearly fully on board with it.
 

Katrine

Registered User
Jan 20, 2011
2,837
0
England
The last point made by jugglingmum is what my very non-expert mind has been thinking throughout the progress of this thread. How does giving away her half of the house benefit the OP's mother? OK, she would protect her right to live in the property during her lifetime but if she wanted or needed to live somewhere else then she would no longer have that financial asset. She may want to make OP's future more secure, but actually she requires her own independent financial and legal advice to protect her own future.

Also, the OP suggested that at present her father's share of the house isn't currently willed directly to OP, and that a variation to the will is required. This may not be possible prior to the father's death. It sounds very complicated! We can pitch in with thoughts and questions, but the OP already knows more about it than we do and is, as jugglingmum recommends, in need of some very expert professional advice.
 

clearpath

Registered User
Feb 20, 2018
34
0
Variation of a will happens after a person passes.

I think its a no-go anyway, churns up too many issues.
 

Susan11

Registered User
Nov 18, 2018
5,064
0
Variation of a will happens after a person passes.

I think its a no-go anyway, churns up too many issues.
If you have to have a deed of variation to leave the half your mother has given to your father, to you does that mean it would go back to your Mum without the deed? If your Mum would have to sign the deed that would be Deprivation of Assets. I have a similar problem with an inheritance My Mum has from her brother,
 

clearpath

Registered User
Feb 20, 2018
34
0
Yes, it's all not looking possible from the information shared. Thanks anyway. I'll leave it at that.
 

Susan11

Registered User
Nov 18, 2018
5,064
0
I think I understood the plan, it has the elements complex tax planning, there are many intricacies of tax not mentioned in the original post which might arise. It needs professional advice from an experienced tax professional, ie a tax partner in a medium to large firm. There are many complexities in what has been mentioned, and you need someone who understands the full remit of the rules, it is not what you know but what you don't know that will catch you out. The full plan and the full assets and income of your parents need to be considered not one or two transactions in isolation. These sort of things might have worked 30 years ago, now asset protection and tax efficiency don't always go hand in hand but tend to be one or the other, most prefer asset protection over tax efficiencies.

TAAR and GAAR may apply (targeted anti avoidance rules and general anti avoidance rules) as linked transactions are involved and there would appear to be an intention of reducing tax, rather than transactions for non tax reasons, and there are a series of transactions, HMRC would not look kindly on it.

In addition most reputable professionals are wary where parents are following suggestions by children (adult) into transferring assets if they don't fully understand the benefits, so would only assist with the suggestions if the parent was clearly fully on board with it.
Jugglingmum
Can you help me. My Mum moved into care 7 months ago. I'm going to have to sell her house . Is there's a time limit regarding CGT liability? Thanks Susan
 

clearpath

Registered User
Feb 20, 2018
34
0
Jugglingmum
Can you help me. My Mum moved into care 7 months ago. I'm going to have to sell her house . Is there's a time limit regarding CGT liability? Thanks Susan
Incorrect info removed,
 
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Susan11

Registered User
Nov 18, 2018
5,064
0
3 years before CGT starts for those in care + you will have a 12k CGT allowance for the year its sold.
Don't rent it out if you will have it after 2020 because it will cause hefty retroactive CGT due to Hammond's last budget rule...they will ignore any period of residency if its rented out after 2020 and they will get whacked with 18% CGT on increase in value back to day it was bought
Thank you .I will have it cleared to put on the market soon, it's just so sad sorting out Mum's things and selling her home,
 

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