Inheritance planning need advice

Inheritance planning need advice

10:52 AM, 16th February 2015, About 9 years ago 5

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Looking for some advice on what’s best to do in our current situation. My mother has a BTL portfolio of seven houses, all have mortgages on except for her property which is worth around £300,000. She does not have any life insurance and has recently been diagnosed with cancer so I am planning for the future with my sister. Inheritance planning need advice

Around half the properties have equity and the other half have none or are slightly negative around £5,000-10,000.

Our current plan is to sell one of the properties which has a lot of equity and is difficult to maintain. Use the profit from this to heavily reduce the mortgages on two or pay them off. Then look to sell the others subsidising the sale price if it does not pay off the mortgages.

The issue I have with reducing the mortgages on all of them to keep them all is that my father borrowed 100% of the value on some of them in the days when you could overvalue property to draw out more money. If I had the option now I wouldn’t pay that amount of money for them and so the thought of putting in 20% to remortgage them seems like a waste of money.

I’m not sure if this is the best idea or do I still sell the property I had in mind and hold onto the money so that in the event of her death we remortgage as many houses as possible where equity is present and sell the ones that have no equity.

Realise I’m just going on and on now so would appreciate any advice possible.

Many thanks


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Mark Alexander - Founder of Property118

11:14 AM, 16th February 2015, About 9 years ago

Hi Alex

I am sorry to hear your news, hopefully the cancer is treatable. Good on you though for just getting on with things.

Please don't think I'm being insensitive but I'm just going to spell out some facts.

For example, did you know that CGT ceases to be chargeable following death?

If the properties are sold now this may well result in a CGT liability and then any money gifted within 7 years of death may also attract IHT. Therefore, timing of sales is important.

Most mortgage lenders will allow up to a year after death for the properties to be sold before they seek possession orders.

I strongly recommend that you seek professional advice - please see >>

Mike W

15:46 PM, 16th February 2015, About 9 years ago

I think you are not necessarily asking the right questions. Moreover I don't think you have provided enough information for anyone to give advice. I would endorse Marks advice.
Having said that, the sort of question I would be asking is:
Do you have a list for each property, it value, the loan and equity, the capital gain and the income per year for the last 2-3 years?
From that can you can make a forecasts of the next few years for each property. Looking at those figures which ones would you sell? Indeed as Mark has pointed out would you want to sell and trigger CGT? Or is there a strategy whereby you may be able to mitigate CGT? There are issues with IHT and you need to know the rules to plan. If all this is gobbledegook get an professional adviser.

Shakeel Ahmad

20:51 PM, 16th February 2015, About 9 years ago

Besides, the capital gains tax & once you have reduced the amount of the mortgage the residue properties will have little or no debt/mortgage to offset against the Asset value of the state of mother and as a result a higher amount of inheritance tax will be due. Dont forget CGT is 18 or 28%. IHT is 40%.

Mike is correct. You need to prepare a spread sheet listing each property value and its corresponding liability/mortgage ( Value can be obtained from Zoopla & the mortgage from the lenders statement.

Armed with the above information you will be in a better position to

a) Sell/not sell.
b) If the portfolio is under the exempt amount or not
c) If not under the exempt amount. What will be the surplus amount that will attract IHT.

Please, don,t forget we all have an IHT exemptions of £362,000 +/-

Finally, I pray that your mother makes a a full recovery and enjoy many years of the fruits of her investments.

Nettie Osborne

11:38 AM, 19th February 2015, About 9 years ago

Yes Alex, very important to get correct advice and agree with the posted comments except that IHT nil rate band for 2014/2015 (set by the Government) is actually £325,000.

Sincerely hope your mother recovers. Best wishes. Nettie

Seething Landlord

19:52 PM, 19th February 2015, About 9 years ago

Also don't forget that if your mother is a surviving spouse there may be an unused nil rate band of up to another £325,000 to the extent that it was not used on the death of her former spouse.

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