Adding a family member to Title Deeds

by Readers Question

8:45 AM, 12th April 2014
About 7 years ago

Adding a family member to Title Deeds

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Adding a family member to Title Deeds

If I want to add my daughter to the deeds of my BTL properties.

Can I do so without informing the mortgage lender first? Adding a family member to Title Deeds

When I inform them will the lender ask me to pay them an admin fee or require me to do a new mortgage application?

What would happen if I added her and did not inform them?

My reason for doing so is in case anything happened to me, she would be a half owner.

Thanks

TJ



Comments

Mark Alexander

8:54 AM, 12th April 2014
About 7 years ago

Hi TJ

This is a great question and one I'm sure has crossed the minds of several landlords.

There are lots of considerations though and you need to take professional advice.

First off, you will not be able to amend the title deeds without the consent of your mortgage lender. You may well need to refinance and you would certainly have to pay fees to your lender, make a new mortgage application and involve solicitors.

Another complication would be Inheritance Tax and Capital Gains Tax. This is because the element of the property transferred to your daughter would be deemed to be a gift at market value. If the property had increased in value since you purchased it then you would have to pay CGT on the element of the gift which had increased in value since the date of purchase. If you were to die within 7 years some or all of the value of the gift would be deemed to have been part of your estate and might attract IHT.

This isn't where the complications end though. When one borrower dies mortgage lenders usually have the right to call in the loan.

The most effective way to achieve the outcome you are looking for is likely to be life insurance written into trust for the benefit of your daughter. Please see >>> http://www.property118.com/landlords-life-insurance-strategy-and-calculator/

12:13 PM, 13th April 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "12/04/2014 - 08:54":

Great idea about using life cover Mark but can I add one very important caveat? The policy should NOT be for the benefit of the daughter because it will only add to her estate value. Better to have the proceeds directed to an appropriate pilot trust instead, of which she can be a trustee.

Hope that helps?
Garry

Mark Alexander

12:16 PM, 13th April 2014
About 7 years ago

Reply to the comment left by "Garry Streeter" at "13/04/2014 - 12:13":

Hi Garry

Not sure why you would suggest a pilot trust, what's wrong with the Trust forms that insurance companies offer?

I did mention writing the policy into trust by the way. I said "The most effective way to achieve the outcome you are looking for is likely to be life insurance written into trust for the benefit of your daughter."
.

13:30 PM, 13th April 2014
About 7 years ago

HI Mark
in mentioning the trust forms provided by life assurance companies you hit the nub of the problem. Their use is a means of benefitting someone else but keeping the proceeds out of the settlor's (life assured) estate seemingly for IHT purposes.

Although the phrase "written in trust" to benefit X maybe used, what typically occurs is that the policy is written "under trust" but with the proceeds being paid ABSOLUTELY into someone else's estate possibly increasing or creating an IHT liability. Moreover the proceeds are now at risk and can be 'lost' to creditors, divorce, nursing care, and generational IHT etc.

Having the proceeds instead paid INTO a pilot trust or similar they will not form part of anyone's estate and the money is 100% safe from ALL risks. The beneficiary will still get his/her legacy but instead of being GIVEN the money he/she can now BORROW it from the trust and so reduce his/her own estate value.

Exactly the same tactic should be employed with pension funds. The fund may well be set up under a trust but upon death the lump sum is paid into someone else's estate.

Avoiding ABSOLUTE gifting of any sort, including via a Will, would see a great many more legacies going to, and being retained by families and much less IHT being paid!

Hope all that makes sense? I am near to completing a new, practical Introduction to Trusts if any 118 reader wants to make more sense of this subject?

Garry

Mark Alexander

13:57 PM, 13th April 2014
About 7 years ago

So what I think you are saying is that the beneficiary if my life insurance should be a pilot trust. If that's the case, what is the unsuitable interest? I feel I must be missing something here!
.

15:00 PM, 13th April 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "13/04/2014 - 13:57":

Your beneficiary(s) will always be whoever you nominate, all you are doing is making a trust the recipient of the proceeds instead of having it paid directly and absolutely to someone's estate. The beneficiary(s) would usually, but not always, be a trustee and the trust deed (the settlors instructions) tell the trustees who is to benefit and when.

Did you mistype and mean insurable interest? Insurable interest doesn't come into the equation for this example as anyone can insure their own life and benefit who they please. Insurable interest is only a problem when you want to insure someone else's life to benefit you. You then have to prove you will suffer a financial loss by that persons death.

Garry

T J

21:08 PM, 13th April 2014
About 7 years ago

Thank you Mark and Gary, that is really helpful. I am interested in finding out more about the cost of setting up such a Trust and any annual costs involved. Gary, can you please give me your email so I can find out more?

Mark Alexander

21:39 PM, 13th April 2014
About 7 years ago

Reply to the comment left by "T J" at "13/04/2014 - 21:08":

TJ Garry has a contact form on his member profile, his firm can also organise the life insurance for you. They are good people.

Garry, please call me in the morning to discuss setting up a pilot trust for my family.
.

Florance Kennedy

12:04 PM, 14th April 2014
About 7 years ago

I gave this some thought a while back when I realised the mortgage lenders would call in the loans in the event of my death. After some thought I decided against any action - it is very unlikely that either of my children would want to carry on my business and the sale of the properties would therefore probably make sense. They inherit under my will, so it would just liquidate my assets to allow them to invest as they wish, probably in their own properties - I hope!

My daughter does however have Power of Attorney so that if I was unable to carry on the business she could take control while I lived.


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