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Where Taxpayers and Advisers Meet

gift with(out) reservation

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am
gift with(out) reservation

Postby riccardob » Sat Jul 23, 2011 7:15 pm

If a child is gifted half of a property by a parents and said parent still lives in the house am I correct in saying that rent should be paid?
How does one establish market rent? The other half is owned by the other parent who still lives in the house too. Am I right in saying that 50% of full rent is then due?

Also in terms of the house being transferred to the child, how is this transaction carried out? Is it just a matter of changing the name of one of the owners at land registry? How is "market" value established? Via a surveyor or estate agent?

Many thanks

Lee Young
Posts:2694
Joined:Wed Aug 06, 2008 3:26 pm
Contact:

Re: gift with(out) reservation

Postby Lee Young » Sat Jul 23, 2011 10:05 pm

Best to establish the value of half the property and the full market rent by employing a surveyor. The rent will need to be regularly reviewed because if it falls short of the market a gift with reservation will then arise.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

IanDarkwater
Posts:49
Joined:Fri Oct 31, 2008 10:55 am

Re: gift with(out) reservation

Postby IanDarkwater » Sat Jul 23, 2011 10:59 pm

You havn't mention why parents want to make the gift.

If its about IHT mitigation then the gwr considerations make sense.

If its about residential health care costs mitigation them gwr is irrelevant but other factors may become relevant.

If its neither.........?

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: gift with(out) reservation

Postby riccardob » Sun Jul 24, 2011 10:39 am

its for iht purposes.

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: gift with(out) reservation

Postby riccardob » Sun Jul 24, 2011 10:40 am

Best to establish the value of half the property and the full market rent by employing a surveyor. The rent will need to be regularly reviewed because if it falls short of the market a gift with reservation will then arise.

Thanks Lee.

Does a contract need to be drawn up or is payment of rent and a rent book enough?

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: gift with(out) reservation

Postby riccardob » Sun Jul 24, 2011 10:46 am

Sorry Lee i also forgot to ask you if the gift is made by simply registering change of the owner name at land registry via a solicitor or does other documentation need to be prepared that relates to this sort of transaction?

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Re: gift with(out) reservation

Postby Peter D » Sun Jul 24, 2011 12:06 pm

I assume the 'child' is 18 years plus. The sibling owner, if not living their will be exposred to CGT on disposal. You should take professional advice on this, depending on the value of the estate your proposed ownership may not be the best was forward. Regards Peter

Lee Young
Posts:2694
Joined:Wed Aug 06, 2008 3:26 pm
Contact:

Re: gift with(out) reservation

Postby Lee Young » Sun Jul 24, 2011 7:42 pm

Change of title at land registry is sufficient to evidence the gift.

I would say it is best to have a proper, formal tenancy arrangement.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

riccardob
Posts:105
Joined:Sun May 29, 2011 10:02 am

Re: gift with(out) reservation

Postby riccardob » Mon Jul 25, 2011 5:36 pm

Change of title at land registry is sufficient to evidence the gift.

I would say it is best to have a proper, formal tenancy arrangement.
Thanks Lee.

I believe that we need to fill in a transfer form tr1 and on the form specify that there is no monetary exchange hence no sldt.
Am I right in thinking that we also need to complete a deed of gift?

The parent would only be gifting 50% of said property so is it better to have joint tenancy or tenants in common?

Lee Young
Posts:2694
Joined:Wed Aug 06, 2008 3:26 pm
Contact:

Re: gift with(out) reservation

Postby Lee Young » Mon Jul 25, 2011 6:01 pm

No deed of gift necessary.

Whether you hold as joint tenants or tenants in common depends on how you want your respective halves of the property to be inherited - likley to be as tenants in common to leave things as flexible as possible, then ensuring your respective wills do what they need to do.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701


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