Question a friend has asked me to ask:
Currently living in family home in own hometown. Is moving to another part of the country for work reasons. Doesnt want to dispose of current home as its been in the family for years.
Rental market in hometown is dead - will not get enough after tax rental income to cover the mortgage as will be taxed at 50%+ etc. Cannot afford to make a lose when renting out as has to pay rent at new location (and in time will probably purchase a new house at new location). House is not in negative equity.
One option he is considering is to transfer the house into his 2 children (both minors). As children have no other income, and therefore will be paying lower tax, rental income will cover the mortgage. He's more interested in keeping the house in the family than getting an income out of it, so in the event that there was a profit out of the rental, he's quite prepared to leave it in a college fund for the 2 children. Also prepared to leave house in children's name long term and allow them get the benefit as adults.
He's aware that there will be some legal fees etc. and believes bank is happy to allow transfer provided mortgage is paid (though may seek that he be a guarantor).
He's worried that his analysis sounds too good to be true i.e. that tax can be avoided on rental income with the transfer - is there anything he's missing? Can this be done?
Currently living in family home in own hometown. Is moving to another part of the country for work reasons. Doesnt want to dispose of current home as its been in the family for years.
Rental market in hometown is dead - will not get enough after tax rental income to cover the mortgage as will be taxed at 50%+ etc. Cannot afford to make a lose when renting out as has to pay rent at new location (and in time will probably purchase a new house at new location). House is not in negative equity.
One option he is considering is to transfer the house into his 2 children (both minors). As children have no other income, and therefore will be paying lower tax, rental income will cover the mortgage. He's more interested in keeping the house in the family than getting an income out of it, so in the event that there was a profit out of the rental, he's quite prepared to leave it in a college fund for the 2 children. Also prepared to leave house in children's name long term and allow them get the benefit as adults.
He's aware that there will be some legal fees etc. and believes bank is happy to allow transfer provided mortgage is paid (though may seek that he be a guarantor).
He's worried that his analysis sounds too good to be true i.e. that tax can be avoided on rental income with the transfer - is there anything he's missing? Can this be done?