Transfer of equity and "Gifting" to your children

[NixnJay]

My parents have a house in Florida that still has a mortgage on it, which they want to "gift" to both myself and my sister. It is both my and my sister's intention to extend our current mortgages here in the UK to pay off their US mortgage, as they can no longer afford to keep up the repayments. We have already taken steps to advertise the property for sale but appreciate that a transfer of deeds needs to take place as well as numerous documents needing to be notarised. My ? is this...do we need to have the deeds transfered b4 the sale, however long that may take, or can my parents just sell the property and then pay the monies into our accounts? Not looking to dodge any tax laws but hoping to not have to pay out anything we dont need to! (And because the very few are quick to make assumptions, we are not after our "inheritance" while they're still alive, but will be using any profits left to clear off debts that they have incurred!) Slight role reversal in the parent/children chain! Advice greatly appreciated, thanx.

Ps. Originally posted this in law but had no response, hope that this section is perhaps the right one!?!

[buildersmate]

I saw your question before but didn't really know the complete answer so didn't post - its one of those situations where one wishes for a US-resident input, in place of the US-based questions we keep getting.

Documentary Stamp Tax is payable on a property purchase in Florida - see below for more info. As far as I can fathom out, it is paid on the transfer value of the deeds AND on the value of the mortgage. This looks like a double whammy to me - and it strikes me that you don't want to be transferring the property into your names, only to transfer it on again by resale.
http://dor.myflorida.com/dor/taxes/doc_stamp.h tml
The property market generally is pretty weak in Florida right now - not a good time to sell if one can avoid it.

[NixnJay]

Thank you buildersmate, a good link, but needs translating for my less than financially astute brain! In essence, I am correct in thinking that if my parents "sell" the house to us for the cost of the outstanding mortgage, ie $60,000, then we could avoid some of the costs? Or have I mis understood completley? :-(

[anniebird]

Firstly your parents may be liable to pay Capital Gains Tax on any increase in value of the property as I assume it is not their home. This will be true even if they give you the property as gifts such as this, between close family members, are deemed to have taken place at Full Market Value. Thus it will make no difference if the gift happens before or after sale but it will save time and legal expenses if they sell in their own names and settle any CGT bill first. Once that has happened and the outstanding mortgage has been paid off they can then do as they wish with the balance. If they give the money to you it will be a 'Potentially Exempt Transfer' and if they survive for seven years no Inheritance Tax will be payable. If not the amount is added back to the estate to calculate any IHT due. I suggest a visit to a solicitor for more definitive advice would be your best way forward.

[NixnJay]

Thanx annie, am advised that any CGT will be negligabe, as going to be selling at a near loss. Just trying to protect mine and my sisters investment(paying off their mortgage) from anyone else who may try to come after the sale proceeds. Would you know if we could issue a charge on the property, or does that have to be done thru a court? Your advice appreciated.

[factor-fiction]

For such a big financial commitment you really ought to use a solicitor. Investing in legal advice could save you a fortune and lots of hassle in the long run