Buying property with family

[Sunnyd]

My parents sold their house to buy a new family house. The deeds were under thier names only on the original house.
On the new house where i will be living also my name was added with theirs as a joint tenant during the purchase. I will be paying the mortgage but i did not contribute anything towards the purchase of the new house.
So did my parents make a gift of a share to me by adding my name to the deeds with them for iht purposes?

[pawncob]

Yes.

[vik2001]

I believe this is a GWR

[Sunnyd]

Is it realy a gift with the reservation. Would this cause us alot of problem later down the line? We wasnt trying to evade tax or anything...

[Sunnyd]

Did some reading up i dont think its a reservation as on the deeds we all on there together and nothing mentions it being a gift

[AGoodman]

It would be a reservation of benefit unless your parents ensure they pay their relevant share* of the outgoings.

*relevant share being their share of the property.

I'm not sure if the mortgage would be included in this but I suspect paying "their" share of the mortgage (and/or mortgage interest) for them could well mean it is a GWR.

s.102B IHTA sets out conditions to avoid a GWR including "the donor does not receive any benefit, other than a negligible one, which is provided by or at the expense of the donee for some reason connected with the gift."

[maths]

On the purchase when your name was added to the legal title was a declaration of trust executed (or included in the TR1 Land Registry form) indicating the respective % beneficial interest in the property?

Assuming you acquired a % beneficial interest then there would appear to be a gift with reservation on the part of your parents. The IHT consequences are removed if (as AG) points out above expenses are appropriately shared.

[Sunnyd]

In the land registry we are all 3 of us, parents and me joint beneficial tenants. There was no seperate declaration of trust apart from the tr1 and ap1 forms. But i remember the solicitor saying as joint beneficial tenants we all own 33.3% each. He also said on first death of someone the other survivors will inherit the shares equally amongst them. We are not tenants in common.

Our arrangements is that i cover the mortgage payments and my parents cover all the household bills such as energy, tv and water bills. Not sure if we avoid GWR this way? We wasnt trying anything funny with avoiding IHT, we believed this would be a good setup going forward and living jointly in a house.

[maths]

It's by no means a disaster in particular if avoiding IHT was not a prime or key motivation.

Assuming a gift with reservation (as it would seem to be) just means that although parents gifted a 33.33% interest in the new property this 33.3% remains in their estates on death for IHT.

Depending upon values there may not be any actual IHT charge on parents' deaths if they leave their interests to each other/you.

If property worth say 925k with joint mortgage of say 100k then net value is 825k.
Parents total nil rate bands 650k and two residence nil rate bands 350k ie 1 million.

No IHT on parents' deaths.

[vik2001]

What maths said is spot on.
I was in a different situation a while back being gifted on my family house with single parent. I had a lot of confusing advice from tax solicitors about whether the joint tenancy made it a gwr, due to wording in legislation. This is instructive:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm15061

It doesnt matter hmrc say if a gift is as joint tenants opposed to tenants in common. Joint beneficial tenants is seen in their example as giving a equal share, so no gwr if you all live together. But if you move out then it becomes a gwr for your parents.
Also share the expenses or your parents can pay more and no gwr will arise.

In my situation at home i just make sure parent pays more of the bills then i do.