Can I buy Mother’s house in installments as IHT planning?

by Readers Question

9:23 AM, 31st July 2018
About 5 months ago

Can I buy Mother’s house in installments as IHT planning?

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Can I buy Mother’s house in installments as IHT planning?

Hi everyone, I have tried searching the archives but I cannot find a definitive answer for my question.

I’d like to know if it is possible to add my name to the deeds of a property by way of payment, for example monthly installments instead of a lump sum payment. I’m trying to buy my way into a property owned by my mother. If this is possible, what is the correct way to achieve this, would I need to fill out new TR1 form each time a payment is made?

The reason I’m asking this question is that my mother is 85 years old and one of the properties she owns only has her name on the deeds, although she has written a Will leaving the said property to me. I’m trying to add my name to the deeds hoping to reduce the IHT burden when the time comes.

My mother has another 2 properties, but my siblings names were added to those deeds on the date of purchase many years ago. None of the current properties have a mortgage.

Please advise if there are any further information I need to know, which may complicate things at a later date, for example CGT, Stamp duty etc, etc.

I’m not sure if this will help my status, but I’m domiciled in Hong Kong, and haven’t lived in the UK for over 20 years.

Many thanks

Xia



Comments

Neil Patterson

9:53 AM, 31st July 2018
About 5 months ago

Hi Xia,

Estate planning is not a field of expertise for me other than the basics, but I do have one questions that jumps out to me.

Are you using money you have already paid tax on to buy a share of an asset you may pay IHT tax on later? If that is the case I can't see what you are saving? Also above £40k you would be paying SDLT which you wouldn't on inherited property.

As ever I would recommend you speak with a specialist Estate planning lawyer.

Charles de Lastic

10:14 AM, 31st July 2018
About 5 months ago

Hi Xia
Please do not take this as actual advice but I am an IHT specalist but cannot give advice to a non domicile or anyone else without fully understanding their circumstances.

That being said there are a number of issues you need to be wary of.
The advice will be highly dependent on the values of her estate and the property.
I presume that you have already calculated that your mother actually has an IHT liability. She will be entiteld to a normal Nil rate band and also the new Residential nil rate band.
If she has other properties but in your sibling's names who is receiving the income as that may raise an issue.
If you do buy the property from her you will have to ensure it is an "arms length transaction for correct market value. I addition she will have to pay you market rent which will be liable to UK income tax unless it falls below the annual allowance. Also on the eventual sale the share of the property not owned by her will be liable to CGT.
Make sure you get good advice before proceeding

Kate Mellor

22:19 PM, 31st July 2018
About 5 months ago

IHT planning is NOT something to do on your own without professional advice. I’ve just read a very good book on the topic and there are so many angles in this scenario which could result in you paying MORE IHT rather than less if you make any missteps. For one if your mother is actually living in the property or receiving the income for it the property will remain in the estate for IHT purposes despite you potentially having paid SDLT and your mum having potentially paid CGT on the transfer. Professional advice will pay its cost MANY times over compared to the blunders you’re likely to make without it and the opportunities to make savings missed.

Charles de Lastic

8:41 AM, 1st August 2018
About 5 months ago

Kate is totally correct.

I have had to deal with a number of cases when people end up paying more tax because they had not sought experienced advice

H B

10:31 AM, 5th August 2018
About 4 months ago

Like everyone else, I am not an IHT expert and certainly not in expat tax arrangements. But I wonder how this will help your tax planning. As mentioned above your mother will probably incur CGT on the part sale to you as well as you having to pay stamp duty.
In addition, the amount your mother receives in payment will simply form part of her estate on which she will be taxed - it was previously in the form of bricks and motor and now takes the form of cash, but it is still taxable.


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