would i get taxed?

[catcuddler2]

i'm hoping this will make sense to someone
if my dad was to pay off the mortgage on his house and then put the house into my name with the clause that he can stay here for the rest of his life would i be charged inheritance tax or death duty?

the reason i ask is because my older sister may contest my dads will when he dies and my dad wants me 2 inherit his house as i have always and continue 2 live here

i hope someone can advise me
TIA

[mark01]

On what reason do you think your sister would contest the will?

[catcuddler2]

my dad has a serious illness which will shorten his life
she hasnt been to see him for 5 years which was before and during his illness
i know she is a grasping sort who will claim i forced him into leaving his estate to me which isnt the case

[mark01]

My advise would be to go to a solicitor (one who specialises in wills and probate) explain the situation and take it from there. I'm sure he'll put your mind at rest.

[sarah_louise]

See a solicitor.
Consider establishing "Tenants in Common" arrangement.
But honestly dont mess around get it done formally with a solicitor.

[sarah_louise]

same answers, 1 minute apart !

[dzug]

Yes the house would form part of his estate for Inheritance tax calculations as it's a gift with reservation.

You (normally) wouldn't be charged the tax - his estate would.

You might be liable for Capital gains Tax on it when it's eventually sold..

Claiming he was forced and proving it are two different things. Trouble is the process is costly either way. She needs witnesses and evidence, not just to assert it must have happened.

[catcuddler2]

i'll give you a bit of background
my dad made a will a year ago leaving everything to me
at the time the solitor adviced us to get a letter saying he is of sound mind as he was going through a period of severe depression due to his long term illlness

we didnt have the funds to do this at the time but we do now so we are going to get the letter from the gp and then go over the will again saying its still what he wants

i dont intend to ever sell the house after my dads death i intend to stay here
he has a sunsbstantial pension so the hope is he can pay off the mortgage with his pension money
if i was charged capital gains tax if he signed the house over to me before his death how much is it likely to be?
will it also come out of his estate after his death or would i be liable for it?
hope this makes sene

[buildersmate]

The second part of this question relates to the ability (or not) of a family member to contest a will. As a principle, a person can leave their estate to whoever they wish - but there are some caveats.
There are primarily two tests that may later enable a challenge by your sister:
a) the testator (will-maker) must have had 'testamentary capacity' - this means the person understands what they own, and recognises any individuals to whom they might have responsibilities after death. Your sister wouldn't appear to be able to challenge on this basis, if she is independent.
b) the testator was improperly influenced (when writing the will). This unlikely, but possible.
For these reasons, given that you believe there might be challenge, it would be better to have the will drawn up by a solicitor - if only because it would then be harder for your sister to argue afterwards that one of these events happened - as a solicitor would have evaluated the validity, and be more likely to be able to rebut any statement made by the sister later.

[buildersmate]

(Answered BEFORE I saw your most recent reply above)

[buildersmate]

Partial answer to your most recent reply.
CGT is ONLY ever paid when the asset is SOLD or transferred. It is assessed on the difference between the price paid and the price (or assessed value) when sold/transferred. It is then paid as a percentage (18%) of that difference (the gain). However one's Principle Private Residence (aka the house one owns and lives in is exempt from CGT).
What dzug is meaning is that, if your dad transfers the house to you, unless you ensure that it your PPR, then you MIGHT have owned an asset that had increased in value but whiuch was not your PPR. It isn't an issue if you live in it and don't own another house (or a share in another house).

[catcuddler2]

i have done it all through a solictor and followed her advice re a doctors statement that he is of sound mind

if he could pay off the mortgage and sign the house over to me
would i be liable for any charges/taxes or would they take it out of his estate after his death?

[buildersmate]

Just to add - any capital gain made on the house will not normally come out the estate of your dad - and certainlly not if the house is transferred to you on death - because it was your dad's PPR so no CGT is payable (see above).

[catcuddler2]

thanks buildersmate thats what i wanted to know
i have lived here for 25 years and dont intend to leave anytime soon if ever
if i was to live it would probably be in 10 years+ but its unlikely
it is my PPR and will continue to be for many years as i said above

so basically you are saying my dad can sign the house over to me if i am living here and neither of us are liable for any taxes/charges?
the charges will only apply if i sell the property?

sorry to keep going over it i just want to be sure and i always get good advice from here

I really appreciate everyones help and advice
xx

[tamborine]

Why dont you pay the mortgage and thereby have a larger claim on the estate and your payment wouldn't be affected by ITax. Should your sister contest the Will and win you would only have to pay sis 50% of your dad's share of the mortgage.

Just because you live with your dad doesn't give you more rights to his estate; you may be asked to prove any rents paid, and charged if you're there rent free.

All Wills can be contested - tho' an expensive route and the loser often pays.

[buildersmate]

Right - step by step summary - forgetting the 'will' part of your question (which was where you started), and concentrating on the situation where your dad transfers the house to you NOW.
1) Your dad transfers the house to you. It is no longer one of his assets - so doesn't appear as one of his assets when he dies. However it is called a Potentially Exempt Transfer (PET - Google it for more info). This means that he has to live for 7 years before the house asset would be completely ignored for IHT (note - I said IHT, NOT CGT). There is a sliding scale of how the value drops off if he unfortunately died before the full 7 years was up.
2) However IHT would only ever be paid on death if the IHT limits had been exceeded - currently around £325k value of the estate.
3) So for IHT purposes, depends on how long he lives after gifting the house to you, and the whole value of the estate.
4) None of this has any bearing on the CGT situation. He would not pay CGT at the date of transfer to you (because the house was his PPR). And you would never have to pay CGT on it (which you would only EVER have to pay when you eventually sold it) if it became your PPR.

[catcuddler2]

i am not working as i am his full time carer as he cant be left alone so therefore i couldnt take on the mortgage
i contribute to bills and have witnesses who could prove this

i am pretty sure my sister wouldnt win as i have put every provision possible in place
i am not assuming i will automatically get his estate as i live with him

is it his wish and his alone to leave it to me as he feels my sister shows no love or care towards him and hasnt done for over 5 years
the solicitor who did the will made sure of that and so will the doctors letter i was not in the room when he made the will a friend of his was so i had no influence
i want his wishes carried out i am not doing this for my benefit he has asked me 2 find out

all i was asking was would there be any fees is he signed the house over to me if and when the mortgage has been paid off

[tamborine]

He would need 'testamentary capacity' proved before the property passes into your name; especially as he is 'so' ill.

[catcuddler2]

what is testemantary capacity?
would that bea doctrod letterstating he is off sound mind?
tambourine why was the word so in so ill in brackets?

[tamborine]

you have pointed how ill your dad is & that he needs you as a full time carer.

Testamentary capacity (sanity) is proved by a psychiatrist & doc. Even that can be contested in Court by an unhappy non-beneficiary (sis). Is the estate large enough to fight over?

To secure your interest I would advise you to take on the mortgage and thereby not lose out.

[catcuddler2]

as i said i am unable to take over the mortgage as i am not working due to being my dads carer

my solicitor seemed fairly sure that the letter from the gp would be sufficient enough to disprove my sisters claims that i coerced him into leaving his estate to me(should she make these claims) and also prove that my dad didnt want her to have any of his estate,due to her not having any contact with him for many years should she contest the will.hope this makes sense