Reversing a Gift due to GROB (Gift with Reservation of Benefit)

[chambersiain]

Maths

I really appreciate your reply, I assume this is the if it's joint tenancy or tenants in common in respect of the GROB?

Final question from, me why doesn't my name being on the deeds of my Father's house trigger the 3% STLD for a second property? Surely this is how the HMRC tracks how many houses each person has, but people's names being on the title deeds?

Interested to understand how me having my name on the deeds of his house isn't seen as a second property for me? This has stopped me moving house since that second house 3% ruling came into force.

Once again much appreciated and thank you

Iain

[maths]

If you are on the legal title of father's property, then "yes" that counts as a property.

However, if you sell your own residence and buy another one to live in then the 3% doesn't apply (whether you own another property or not).

[chambersiain]

Maths

In regards my question about "joint tenancy" or "tenancy in common" does that make any difference to the outcome (I asked my father last night which it was and he can't remember, so we need to dig out the deeds). I was only 19 when he did this and I won't be repeating with my daughters that's for sure!

I would just like to thank you for your professional responses and assistance, it has been greatly appreciated. My father who is 89 has been worrying about this ever since he read an aritcle in the papers about GROBs, so hopefully my poor old Dad will get a better night's sleep now.

Thanks again

Iain

[someone]

If you are joint tenants then you own 50% of the property for SDLT purposes (assuming two owners) so the value of your share is 50% of the value of the property.

If you are tenants in common then you own a particular defined (in a deed somewhere) part share of the property (that might be 50% or might not be) and the value of your share will be the value of the property multiplied by the fraction of the property you own)

If your share is worth <40K then it does not count for SDLT 3% purposes. It's sometimes the case that someone might be on the legal title for mortgage purposes but have a small (or zero) TIC share. (Doesn't sound like this would apply in your case)

[chambersiain]

Maths

Thanks again, so to be clear are you saying that whether tenants in common or joint tenancy the fact I've not been living their and have zero beneficial rights and my father has 100% beneficial rights that the GROB pans out the same and your suggestion to "leave well alone" is the right course of action regardless of status (common or joint)?

I couldn't workout if you meant your share is greater than £40K or less than £40K but I'm assuming that is relevant because the second property tax (extra 3%) only comes into effect if you are buying a second property rather than moving prime residence - is that really the case? I can't believe I didn't understand this its held me back a few years. To repeat for others as dumb as me, secondary property tax doesn't come into effect if you are moving from one prime residence to another!!!!

I promise once the above two are cleared up I won't bother you again. My Father did ask if there was a charity (my internet friend - Maths) would like a donation to be made for his/her help?

Thanks

iain

[AGoodman]

GROB is a tax deeming provision. More particularly it is an inheritance tax concept, it does not apply for capital gains tax.

If you are the joint owner, and nothing else was agreed, then you would likely be considered as 50% beneficial owner by default. That's a fact of law.

The GROB rules deem the whole to remain in your father's estate for inheritance tax purposes - i.e. when calculating inheritance tax. That doesn't change your actual interest in the property.

If you transfer your interest back to your father, that is a disposal of your interest for CGT. It is deemed to take place at market value (both because it was made at an undervalue and to a connected person).

You've posted a link to some other advice given to a different person in difference circumstances. We don't have all the facts, but we do know that that individual appears to have lived with their parent whereas you live 250 miles away. The difference is likely to be that he could claim PPR on the transfer back, whereas you can't.

I'd strongly recommend you get some proper - paid - advice on this as the area is not straightforward and you can't decipher the answer to your particular problem from other's views which may have different facts. There may be other important facts that you haven't mentioned here because you don't realise their significance. The price is well worth paying to avoid additional tax or triggering unnecessary tax by taking the wrong action.

[maths]

It's getting a bit confusing as often happens when a long string of Q and As arise.

Maths

In regards my question about "joint tenancy" or "tenancy in common" does that make any difference to the outcome (I asked my father last night which it was and he can't remember, so we need to dig out the deeds). I was only 19 when he did this and I won't be repeating with my daughters that's for sure!

Joint tenancy v tenants in common is irrelevant to the tax issues discussed if father owns 100%. If however he did give you 50% then on his death his 50% will automatically go to you (irrespective of his will) if joint tenants whereas if tenants in common his 50% passes under his will (probably to you in any event).

I would just like to thank you for your professional responses and assistance, it has been greatly appreciated. My father who is 89 has been worrying about this ever since he read an aritcle in the papers about GROBs, so hopefully my poor old Dad will get a better night's sleep now.

Let's hope so.

[chambersiain]

Thanks Maths

Now here's the rub, and I'm not going to tell my father about this but looks like his idea of financial planning was a bad one as I found this ref CGT

However, if the asset is a GROB, the asset is charged at the probate (market) value in the deceased’s estate at the date of the death, but if the donee were to sell the asset, the cost for CGT purposes would be the value of the asset at the date of the original ‘gift’ by the donor. Thus, any increase in value between the gift and the date of the death is charged twice; once to IHT and once to CGT.

To say I'm gutted is an understatement.

Any wise words Maths?

Thanks

Iain

[chambersiain]

This morning my Father emailed electronic copies of the paperwork regarding the purchase of his house, I am on the Deeds but we also signed a Declaration of Trust document at the same time. The document ringfences the property to my Father and excludes me. He was seriously ill at the time and this was a mechanism for me to manage his estate on his behalf should he need long term medical care and was unable to do so. The Declaration states that any proceeds of sale before his death will be for his benefit only, and that probate will deal with his estate once he passes.

+20 years on and he's healthier than me, its good thing that we signed that extra document because it protects him should I die first!

Just wanted to say thanks to all on this forum for their input and support, and as AGoodman says worth investing in good advice from the outset.

[maths]

My father who is 89 has been worrying about this ever since he read an aritcle in the papers about GROBs, so hopefully my poor old Dad will get a better night's sleep now.

Pleased all seems to now be ok. Father can relax and get on with stuff other than all this tax crap.