parent - sell asset and distribute cash or sell asset to child?

[bluebella]

a parent wants to distribute her assets to her children now rather than waiting until after her demise (for want of a better term!).

which is the most tax efficient option:
1. sell the assets and distribute the cash (which should be withing the current threshold for each child)

2. one child buys the asset (the family home) at a reduced rate, another child then buys the first childs house also at a reduced rate. This would be preferable as it means the family home stays with the family (though the parent would move on elsewhere), but this obviously incurs major tax and other complexities (stamp duty, CGT, CAT, mortgage implications, valuation implications and possible future family feuds over who got what!!).

The key complexity iis the fact there is more than one beneficiary child, hence the necessity to be fair about it, but overall the parent wants to minimise the tax implications for the children.

any advice? you guys seem to know your stuff!
thanks

 

[John Conlon]

My first question is why the parent wants to pass the family home before death.
You state that the market value of the estate is just the house which is under the CAT threshold.
In any case there is now no difference in CAT between a gift or an inheritance. That is gone for years.

Of the two options proposed

Sell the house
Assuming the house was always the principal private residence during ownership there would be no CGT

Cash under threshold so no CAT

Where does mother live afterwards?

Inter family sales
All sales to connected persons are deemed to be market value for CGT, CAT and stamp duty.

Sale by parent
principal private residence no CGT
Stamp duty on market value. Duty reduced by 50% for consanguinity relief
valuation and legal costs.

sale of house between children
principal private residence no CGT
Stamp duty on market value. Duty reduced by 50% for consanguinity relief
valuation and legal costs.

In both cases the parent must find somewhere to live. This asset would then form part of the estate in any case.

This is only an outline of the implications