Twenty Two Years And Counting.
ChatterBank4 mins ago
help for a friend please
3 Answers
Hi, I have a question which I'm researching for my best friend (honest !!)
Her Mother in law proposes to sell the 5 bedroom family home for 200 K (or less) to one of 5 children who currently lives with her. The property is certainly worth more (maybe 300k +), but the daughter can only get a mortgage for 160K. The Mother intends to remain resident in the property with her daughter until her death without paying rent, so effectively there will be no change in their circumstances.
I appreciate this kind of fiddle doesn't fool the inheritance tax people, especially if the mother dies within 7 years, but I would like to understand the capital gains tax the daughter would be liable to pay if she chose to sell the property and know whether it is legal to dispose of an expensive property to a child for significantly less than its market value.
Also my friend's husband is effectively being disinherited by this mother, who has already given another property away to another sibling.
Does he have any rights to contest his mother disposing of her assets without sharing them equally between her 5 children ? he has always done his duty by her and I believe she has no justifyable reason for favouring her poorer children, yet she has systematically given money and property to his sisters and nothing to my friend's husband or their children.
Her Mother in law proposes to sell the 5 bedroom family home for 200 K (or less) to one of 5 children who currently lives with her. The property is certainly worth more (maybe 300k +), but the daughter can only get a mortgage for 160K. The Mother intends to remain resident in the property with her daughter until her death without paying rent, so effectively there will be no change in their circumstances.
I appreciate this kind of fiddle doesn't fool the inheritance tax people, especially if the mother dies within 7 years, but I would like to understand the capital gains tax the daughter would be liable to pay if she chose to sell the property and know whether it is legal to dispose of an expensive property to a child for significantly less than its market value.
Also my friend's husband is effectively being disinherited by this mother, who has already given another property away to another sibling.
Does he have any rights to contest his mother disposing of her assets without sharing them equally between her 5 children ? he has always done his duty by her and I believe she has no justifyable reason for favouring her poorer children, yet she has systematically given money and property to his sisters and nothing to my friend's husband or their children.
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What is proposed is perfectly legal. It has tax implications which I will leave to others more expert than me to explain.
Unless your friend's husband is financially dependent on his mother he has no right to contest the will. Well he has the right but he won't get anywhere and will incur wasted legal costs in doing so.
If there is no will he is entitled to a fifth share on death, but pre-death disposals are irrelevant to this.
Yes, there is a stamp duty implication - the solicitor who will deal with the conveyance should advise on this. They will probably have to pay the duty on the full market value.
If the daughter who becomes the owner lives in the house as her principal residence from the time of purchase, there seem to be no capital gains tax implications.
If the mother moved out of the house on sale, the value would fall out of her estate for inheritance tax purposes if she survived 7 years. BUT you say she will go on living there without paying rent. This is treated as a gift with reservation and never falls out of her estate for IHT - in this case in practice it is probably the difference between the actual sale price and the full market value which will be treated in this way, rather than the full value of the house.
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