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Where Taxpayers and Advisers Meet

Mortgage coming to an end, too old to get new finance, wants to transfer property to kids

chocaholic
Posts:23
Joined:Wed Aug 06, 2008 3:26 pm
Mortgage coming to an end, too old to get new finance, wants to transfer property to kids

Postby chocaholic » Sat Aug 29, 2020 4:20 pm

Asking for my sister.

Basically, their BTL mortgage term is coming to an end, and my sister's husband is too old to get new finance. They really want to transfer the property to their kids as the kids are now earning well and can take over the mortgage. It appears from other posts on this site that CGT is payable on a gift transfer. My questions:

So what is the benefit of the 'staying alive for 7 years' after gifting rule?
Can they not give the kids their inheritance now, instead of later?
Would they be allowed to transfer the mortgage to the children?

Any advice would be much appreciated.

Thanks in advance
Chocaholic

wamstax
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Re: Mortgage coming to an end, too old to get new finance, wants to transfer property to kids

Postby wamstax » Sat Aug 29, 2020 4:38 pm

Transferring property to children will involve capital gains tax based on the gain comparing the open market value at date of gift with cost of the property.

Transferring mortgage could involve stamp duty being payable if mortgage transfer exceeds SD limit.

Also if property gifted and donor does not survive for 7 years could be that the value of the property could be included in sisters estate
regards and hope this helps
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chocaholic
Posts:23
Joined:Wed Aug 06, 2008 3:26 pm

Re: Mortgage coming to an end, too old to get new finance, wants to transfer property to kids

Postby chocaholic » Sat Aug 29, 2020 4:46 pm


Transferring mortgage could involve stamp duty being payable if mortgage transfer exceeds SD limit.

Also if property gifted and donor does not survive for 7 years could be that the value of the property could be included in sisters estate
Thank you for your prompt response.

Regards the 'surviving 7 years' bit...Is this applicable even if Stamp duty as been paid for the transfer? So, in effect, the transfer could be taxed twice?

Is transferring a mortgage the same as gifting the property? So, if the property is worth 300k and has 100k equity. Can my sister retain ownership of the 100k equity and just transfer the remainder to my niece so that my niece benefits from any future gains and is also responsible for the mortgage? The value of the mortgage portion is under the SD limit, but in any case there is a SD holiday right now... so...

maths
Posts:8527
Joined:Wed Aug 06, 2008 3:25 pm

Re: Mortgage coming to an end, too old to get new finance, wants to transfer property to kids

Postby maths » Sat Aug 29, 2020 7:48 pm

One option is for sister and husband to execute a declaration of trust under which they continue to hold the legal title but hold the beneficial interest on trust for their children and possibly themselves (but see below).

Children would agree to take on the outstanding mortgage. In principle this gives rise to an SDLT charge but should currently be nil.

A cgt charge arises on part of parents.

Under the declaration parents (together) retain 0% interest in the property, albeit with a second charge over the property for 100k. 100% interest being held for the children. Under this option parents do not participate in any future growth in value of the property.


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