You and the Law – 12th April 2011

Keeping it in  the family

I want to sell my house to my son, at the normal market value.  Is the process just the same as selling to a stranger?  JM

If your son is borrowing money to buy your house the lender will insist on a survey (to ensure the house is worth the amount your son is borrowing) and that a solicitor is involved in the transaction.  So it will be very similar to selling the house to a stranger, although you obviously won’t need to involve an estate agent and you may be able to cut short preliminary inquiries about fixtures and fittings and so on.

If your son isn’t borrowing money you could just transfer the property into his name in return for a cheque, although he will probably have to pay stamp duty.

Tax avoidance

If I transferred my house into my daughter’s name and another property I own into my son’s name, would this enable them to avoid the 40 per cent inheritance tax and pay a lesser ‘lifetime’ tax instead?  Is there a sliding scale of tax applicable depending on the number of years preceding my death that I made the transfer?  EH

Anything you leave above £325,000.00 (£650,000.00 for couples on the second death) is taxed at 40 per cent.  If you have given property away above this sum more than three years before you die the percentage is reduced on a sliding scale until, if you survive longer than seven years, no inheritance tax is payable. 

However, you are likely to be liable to pay capital gains tax on the transfer of your second home if you give it away before you die, and if you continue to live in one of the houses it will be regarded as a gift ‘with reservation’ and still subject to IHT.

The ‘lifetime’ tax you mention is associated with trusts.  See a solicitor specialising in tax and trusts to discuss your plans including the subject of where you are to live if you give your home away!

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