Parents conveying property to kids for equity

T

TheRed

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My parents own a second house free and clear. They are currently considering conveying the property to us, jointly (their 4 kids) to use as equity to help raise a bigger mortgage. Only one of us is on the property market. I'm just wondering about the rest of us, would the conveying of part of a property have any implications on the reduction in stamp duty given to FTB? Also my parents have some idea that it would be a good idea, that is we'd avoid paying some inheritance tax, if they conveyed the property to us now rather than leaving it to us in their will. Are there other reasons why it would be a good idea not to convey it now? We have good inter-family relations and would intend on specifying all details and conditions in a contract. Any info would be much appreciated.
 
Re: Parents Conveying Property 2 Kids 4 Equity

I'm not sure what is intended here. is it that your parents will simply give you 4 the house for free? Or, more likely, they want to sell the house to you 4 for X amount - to release the equity. If you think it through logically, then if all of you are buying the house , then you own a house or part of a house and you are no longer considered f.t.b.'s for stamp duty. If they gift it to you - no money changes hands - I'm not sure if that keeps your f.t.b. status.

If they sell or gift to you now, there may be stamp duty/ Capital Acquisitions Tax payable - depends on the value. If they leave it to you on death, there will be no stamp duty but there may be CAT.

Like most scenarios, without specific information on values, etc.,etc it is almost impossible to give an informed answer to the query.

I think sometimes people forget that a house is an asset with a value like shares that can be traded/ sold/purchased/mortgaged and tend to see it in more emotive terms as, perhaps, a potential home.

mf
 
Sorry, I obviously haven't made myself clear. My parents would gift us their second home. We wouldn't be buying it from them, so I thought we would still get the ftb stamp duty rates when any of us decided to purchase a property at a later stage. Is that correct?

Their intention was that gifting us the property would allow us to use it to raise a bigger mortgage, (at the mo I can only get a mortgage of about 200K) and just give us our inheritance a bit early.There would be a servitude on the property that my parents could use it for the rest of their natural lives. It's a summer house, not their PPR/investment property. They cought the house approx 20 years ago for around 20 grand, its now worth about 750K.

And I was also wondering about the tax implications, capital gains tax, inheritance tax etc. On purely tax grounds would it be more profitable for them to convey the property to us now, or in their will?
 
OK, thats clearer. There is a whole series of issues and complications here.

1. The gifting of the house will put all of you out of the ftb bracket on a subsequent purchase.
2. They will have a CGT liability on the disposal. Think of it as 20% of the actual market value in round terms.
3. Each of you can recieve a total of gifts/inheritances from your parents of up to c.E475K . Anything above that and taking account of any other gifts/inheritances may expose you to a liability of 20% Capital Acquisitions Act.
4. If they are retaining a right of residence in the property, then that will restrict any of your abilities to raise a mortgage using this property as collateral.

On purely tax grounds, I think it would make more sense for them to leave it in the will. On the other hand, if they want to give you all money now, they could sell it, pay their tax and gift you all lots of money. They just don't have a holiday home now.

mf
 
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