Legal Structure for Joint Purchase

by Readers Question

7:28 AM, 17th March 2015
About 4 years ago

Legal Structure for Joint Purchase

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Legal Structure for Joint Purchase

I currently have a small property portfolio with two investment properties in West London as well as a residential home. My overall strategy is to build more aggressively the number of property’s I own to create a steady income and reduce the need to work in my current career.

I have a wife and two young sons (4 & 2). My wife’s Aunt has gone through a cancer scare (she is fine) so has decided to get some affairs in order, including an early inheritance gift to my sons. At the same time my wife’s sister has withdrawn some equity from her flat and would like to jointly invest in a property with me that initially she would live in but subsequently we would rent out. We would like to use the inheritance money to jointly invest in a property with my wifes sister. Legal Structure for Joint Purchase

Apologies if any of this is irrelevant but it feels like there are a number of legal issues that could arise including inheritance tax and also how to structure deals with joint owenrship with unrelated partners.

My question is simply, does anyone have any experience with a similar situation? Obviously I will need some legal advice, but do I need a specialist lawyer? Anything to be aware of from a mortgage perspective?

Thanks for any help

Mike



Comments

Mark Alexander

7:42 AM, 17th March 2015
About 4 years ago

Hi Mike

Welcome to Property118.

I am not a lawyer and I surrendered my regulated permissions to provide financial advice when I retired from financial services in 2009, however, I do have significant experience in such matters. I recommend you seek professional advice.

Having got that out of the way, the simplest and most effective legal structure that I can think of is for the property to be purchased in your name, with your sons and your Aunt's beneficial interests being protected by a declaration of trust.

If you buy in joint names with your Aunt the mortgage lender could call in the mortgage in the event of her demise.

Note that the gift to you/your sons might be liable to IHT if your Aunt dies within 7 years. However, this would be dependent on her wealth at the time. You should recommend to her that she seeks advice on writing any life insurance policies into trust in order to remove their value from her estate.

I recommend you speak with this specialist law firm about the legal ownership structure >>> http://buytoletconveyancing.co.uk/

Also note that if a mortgage is required to purchase the property a BTL mortgage may not be applicable due to the intention being for the property to be occupied by a family member. However, do take advice on this as I'm not sure whether an Aunt falls into this legislative niche, immediate bloodlines certainly do. A residential mortgage for a second home or a regulated BTL mortgage might be more appropriate if so. This chap will be able to advise you on both mortgages and writing life insurance into trust >>> http://www.property118.com/member/?id=314
.

Howard Reuben CeMap CeRER

12:51 PM, 17th March 2015
About 4 years ago

Thanks Mark "This chap" is happy to assist as always 🙂

Hello Mike

My remit is simply mortgage planning and not legal advice, albeit that any mortgage is a debt and we strongly believe that all debts should be repaid in the event of premature demise in order that your loved ones are not inheriting possible issues with delays in probate, repayment to lenders, sale of assets and loss of rental income. And, as Mark alluded to, one of the most efficient ways of protecting your family's financial security is by way of implementing the correct life cover arrangements in to trust from inception.

In fact, I wrote about this some time ago and you can see one of my articles here;

http://www.property118.com/life-insurance-landlords-ifa/30889/

My team of Advisers has arranged hundreds of millions of pounds of life cover over the years and protected them via Trust arrangements too. We're also in London and Essex and would be pleased to assist if required.

Howard
http://www.property118.com/member/?id=314


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