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Daily Mail
a day ago
- Business
- Daily Mail
Can my parents gift their house to me and avoid inheritance tax?
My parents own their three-bed home in south London and they want to give it to my sister and I now, while they are still able to manage their own finances. We understand that they have a collective inheritance tax exemption of £1million - two lots of the normal £325,000 allowance, plus an extra £175,000 each because they are passing their home to direct descendants. The house is freehold, there is no mortgage and neither of our parents have debts. My parents are joint tenants. They have a small amount of assets, at best worth about £30,000. Their home is worth around £1.07million, so a total estate of £1.1million. Can our parents transfer their property to my sister and I by a deed of gift, whilst continuing to live there? C.S Harvey Dorset, of This is Money, replies: Financial adviser tell us they are dealing with a wave of questions like yours, as concerns over inheritance tax intensify. Unfortunately, it isn't a simple matter of people passing on their property now and then living long enough to avoid inheritance tax thanks to the seven-year rule. The key issue, as discussed by our experts below, is the taxman won't allow your parents to simply gift their main residence to you while they continue to live in it, unless they agree to pay market rent on the property. Currently, their estate does not go far beyond the £1million tax-free allowance they will be able to access. As it stands today, you and your sister would need to pay about £40,000. However, it is worth noting that from 2027, pensions will be brought into the inheritance tax net. This means that any pots your parents are drawing from will also have to form part of your calculations, and could well mean the IHT liability will be considerably higher. Despite this, there may be other ways that you parents can reduce the eventual tax bill on their estate that don't involve gifting their property. This is Money spoke to two financial advisers to find out what you need to know before your parents pass their property to you and your sister. The inheritance tax gifting rules Ian Dyall, head of estate planning at Evelyn Partners, replies: Let's start by looking at the key inheritance tax rules regarding gifting, then apply them to your circumstances and finally look at any other relevant considerations. Outright gifts of money or assets from one person to another are unlimited in size and will not trigger a liability to inheritance tax at the time you make them. The gift must meet two criteria: 1. It must be an outright gift with no continued use of the asset that has been given away, and no conditions allowing the donor to take the money back if they choose to do so. 2. The donor must live for seven years after making the gift If the gift is not outright, or can be recalled, there is deemed to be a 'reservation of benefit' and the asset remains in the donor's estate indefinitely for inheritance tax purposes - but not for capital gains tax, which I will cover below. As you correctly stated, each individual has a nil rate band of £325,000 and a residence nil rate band of £175,000, both frozen until April 2030. The residence nil rate band can only be used if they leave their home to their children or grandchildren. However, if their estate is worth over £2million on their death, the value of the residence nil rate allowance is reduced by £1 for every £2 that £2million figure is exceeded by. There are 'downsizing relief' provisions that allow someone to still benefit from the residence nil rate band if they have downsized or sold their home since 8 July 2015. Help with financial advice and planning Financial planning can help you grow your wealth, sort your pension, or make sure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement and inheritance tax planning. If you are looking for help sorting your finances and want to work out whether you need advice, planning, or coaching, the following links can help you understand more: >Do you need financial planning or financial advice - and is it worth it? > Financial advice: What to ask and how much it might cost > Are you retirement ready? Take our quiz and get financial planning help > Inheritance tax planning - what you need to know to protect your wealth Can you parents give you their home? If your parents gift the legal ownership of the property to you and your sister, but continue to live in it rent free, the gift will be seen as a 'reservation of benefit' and will still form part of your parent's estate on death, irrespective of how long they live, for inheritance tax purposes. The gift would only be effective in reducing the liability if they move out and live for seven further years, or if they pay a market rent to you and your sister for the use of the property. You and your sister would then be liable for income tax on the rental income. That may be effective planning if your parents can afford the rent, and your parents live for at least seven years - but the longer they live beyond that, the more income tax you will end up paying. There are also capital gains tax issues to consider (see below). Whether there is a reservation of benefit or not, your parents would be able to benefit from both their nil rate bands and residence nil rate bands. However, there would be no inheritance tax liability if the gift was seen as effective, due to the payment of a market rent, whereas there would still be a liability if the property remained part of their estate due to a reservation of benefit. That liability may only be £40,000 today (based on your estimated figures) but that is likely to increase over time due to the frozen nil rate bands. Capital gains tax Whilst the gift will be ineffective for reducing inheritance tax if your parents continue to live there rent free, the gift will be effective for capital gains tax (CGT) purposes. At the time the gift is made there will be no CGT payable as the property is your parents' main home. But when you and your sister eventually sell the property, any gain in value from the date it was given to you will be liable for capital gains tax, as it is not your main residence. In contrast, if your parents continue to own the property any gains on the property up to their death will be exempt from inheritance tax. There are other factors to consider. What would happen if either you or your sister get divorced or become bankrupt? The property your parents have gifted to you may need to be sold, leaving them homeless. Finally, if your parents ever need long term care, the gift could potentially be seen as 'deprivation of assets'. This is when older people deliberately get rid of money, property or other assets to reduce their liability to pay their own care home fees. If that is the case, then the value of the home may still be included in any care fees assessment. Whilst there are some inheritance tax benefits from gifting a property and paying a market rent to continue living there, the potential risks posed by divorce or bankruptcy of the beneficiary, and the additional income tax and CGT that will be incurred, also need to be considered. Gifting a property and continuing to live there rent-free is generally best avoided as there are very limited benefits, and they are generally outweighed by the risks. Beware the strain gifting could make on relationships Rob Bell, chartered financial planner and founder of Finova Money, replies: From what you've described, your parents' estate is only just over the joint inheritance tax exemption of £1million. Assuming both the standard nil-rate bands (£325,000 each) and the residence nil-rate bands (£175,000 each) are available, there could be a potential tax charge of around £40,000 on the balance above that threshold. It may be sensible to assume the property could increase in value over time, so this could rise further. When it comes to gifting the family home while continuing to live in it, this isn't a straightforward way to reduce inheritance tax. The key issue here is who benefits. If your parents remain in the property without paying full market rent to you and your sister after the transfer, His Majesty's Revenue and Customs would likely view it as a gift with reservation of benefit. That means, in effect, the property would still be treated as part of their estate for inheritance tax purposes, even if the legal title has been changed. So, the hoped-for tax saving may not happen. If they did pay you full market rent, this might be avoided. However, surplus income would be needed to pay the rent in addition to ensuring they could maintain their desired lifestyle. There would also be additional considerations for you and your sister: rent subject to income tax, potential rent reviews, the responsibility for maintaining the property, and the practical reality of charging your own parents rent for their home. This can add strain to your relationship. On top of this, giving away the property removes your parents' financial safety net. It leaves them without control of their main asset, which could impact their ability to respond to changes in their circumstances, particularly if care is ever needed or if further financial support is required later in life. These things can be hard to think about now, but flexibility often becomes more important with age, and what may not seem important to them now may become more important later. How else could they reduce inheritance tax? There are other ways to reduce the potential inheritance tax bill that don't involve giving away the home. These could include: Moving house to release capital, which could then be gifted (subject to the seven-year rule), while bringing the value of the estate below the £1million allowance. This may also be a benefit if the house becomes too much to maintain. Regular gifts from income, which can be immediately exempt if they meet the right criteria. Updating wills and making full use of both sets of allowances, including the residence nil-rate band, which has its own conditions. Life insurance written in trust, to cover any future tax liability. Equity release or a loan secured against the property to release funds that could be gifted gradually, ideally from surplus income. It's worth exploring these alternatives to understand the wider picture, not just the tax impact. Often, a more measured plan provides both peace of mind and more flexibility for everyone involved. Before entering a new arrangement, I recommend seeking professional financial and legal advice. Get your financial planning question answered Financial planning can help you grow your wealth and ensure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement, tax planning and inheritance. If you have a financial planning or advice question, our experts can help answer it. Email: financialplanning@ Please include as many details as possible in your question in order for us to respond in-depth. We will do our best to reply to your message in a forthcoming column, but we won't be able to answer everyone or correspond privately with readers. Nothing in the replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
The Guardian
a day ago
- General
- The Guardian
Why do I still see my siblings as the people they were in childhood?
I am spending a lot of time at my late mother's house, sorting things out, wondering why she had so much asafoetida and thinking about the past. Every time I'm there, my sister asks me to water the garden, and I never do. Then she says: 'Please, just do the window boxes, otherwise the plants will die,' and I still don't. 'I may come and take the potted plants away, or you could take some, if you want to kill them in your own house?', she says, and still I ignore her, because I don't know anything about gardening. So it follows that, being my sibling, she doesn't either. No amount of evidence to the contrary – her own, frankly magnificent garden – can convince me otherwise. This is a two-way street. She is a fashion designer and exquisite draughtsperson – which I, also, after many decades, have yet to wrap my head around – but she can't drive, and if ever she is a passenger when I'm driving, she is on red alert, pointing out things – mainly other cars, pedestrians, trees – as if, without her intervention, I would plough straight into them. Our brother is a skilled decorator and, when he uses words such as 'primer' and 'dust sheet', I can't help looking at him as if a cat is talking. He is a photographer by profession, and, even if we point the same phone at the same object, he creates images that are unfathomably deeper and more pleasing than mine. I look on this not so much as a knowledge base he has that I don't, and more like an act of hocus-pocus. My other brother is a maths teacher, my other sister is a physicist, and I cannot describe how fanciful I find it that they may really be doing these jobs. Obviously, I have to pretend to believe it. I don't even know whether you get wired in childhood to think all knowledge is equally distributed because otherwise it isn't fair, or that every fine difference in skillset is just a question of whoever is younger catching up. But no amount of adulthood can overturn it. Anyway, I couldn't help but notice that, after it rained, the garden looked amazing. It's possible my sister is right on this one thing. Zoe Williams is a Guardian columnist
Yahoo
a day ago
- Entertainment
- Yahoo
Woman Offers Pregnant Sister $500 Not to Use Her Dream Baby Name
The woman is "demanding" that her sister give up the name — even offering her money to pick something else One woman is telling her sister she cannot use her dream baby name — even though she might not ever have children. In a post shared to Reddit, the anonymous 30-year-old writes that she "always wanted kids, but due to fertility issues," isn't sure if she can have them. Her younger sister, meanwhile, is now eight months pregnant with her first child, a girl. "We were talking about names, and she proudly said they chose 'Isla' because it is unique and special to them," she writes in the post. The post continues: "I have always said if I ever have a daughter, her name will be Isla. I have been saying this since I was a teenager. Everyone in our family knows this. So when she told me her name choice, I told her that she cannot use it because it has been my dream name forever. I explained that if she uses it, she will ruin my future experience if I ever get pregnant." Getty Pregnant woman and second woman The woman writes that her sister "laughed at first, then realized I was serious." ADVERTISEMENT "She said, 'You might never have kids. I am literally about to give birth.' I said that was cruel, and if she cared about me, she would pick a different name. She said no, and now my family is split," she writes. "My parents think she should keep her name because she is the one having the baby, but some cousins agree with me that it is messed up for her to take the name she knows I have wanted for years." The woman adds that she also offered her sister $500 "to pick something else," but her sister said she is "being controlling and weird." "I feel like no one understands how important this is to me. I am heartbroken," she adds. Never miss a story — sign up for PEOPLE's free daily newsletter to stay up to date on the best of what PEOPLE has to offer, from juicy celebrity news to compelling human interest stories. Those on Reddit, however, don't think it's okay to claim a baby name. ADVERTISEMENT Writes one commenter: "It's always weird when people 'claim' a name. Isla is super common right now anyway - I know of several preschoolers-1st graders who are named just that. And just because your family may have heard you say Isla, it doesn't mean they retained this info. It likely wasn't important to them!" Read the original article on People
Yahoo
2 days ago
- Business
- Yahoo
Parents' home in Gilbert sold for well under market value. It was 'equity skimming'
Question: In 2019, my parents sold the family home in Gilbert and moved to a continuing care facility 3 miles away. They had purchased the family home in the 1980's for $185,000. Both of my parents passed away last year. My sister and I were going through their paperwork recently. We were shocked to find that our parents had signed a contract with a buyer to sell the home, which was in pristine condition, for only $290,000. This buyer, while in escrow sold the home to another buyer for $425,000, and the sale closed. My sister is a Realtor, and she said that the fair market of the home in 2019 was at least $425,000. In other words, my parents were cheated out of at least $135,000. Is there anything that we can do now, or is it too late? Answer: Probably too late. The original $290,000 buyer in this transaction was a 'wholesale' buyer. In other words, a buyer who never intends to close escrow, but intends to assign the purchase contract in escrow to another buyer for a higher price. This was 'equity skimming.' Some escrows would even have three or four wholesalers raising the price of the home in increments from the $100,000 contract price to a $200,000 closing price. Fortunately, in 2022 the Arizona Legislature passed A.R.S. 44-5101, which requires a wholesale buyer to disclose in writing to the seller of a home that the wholesale buyer will be assigning the purchase contract for a higher price to another buyer who will close the escrow for the purchase of the home. This article originally appeared on Arizona Republic: What to know about 'equity skimming' in real estate Solve the daily Crossword
Yahoo
2 days ago
- Entertainment
- Yahoo
Bride-to-Be Demands Bridesmaid Dye Her Hair for Upcoming Wedding Because She Didn't Want Her 'Punk Rock Look'
A bridesmaid is turning to the internet for some advice after her longtime best friend who is getting married suggested she dye her hair for her upcoming wedding. The woman shared in a post on Reddit's popular 'Bridezillas' subreddit that she recently had an exchange with the bride, which 'rubbed' her 'the wrong way' and wanted to know how to handle the situation. She shared a screenshot of the text the bride supposedly sent her, which read: 'I meant to mention this and forgot… Bridesmaid dresses are going to be a bright, deep red so you may want to go back to black for a short amount of time. Sorry to f--- up your punk rock look.' The bridesmaid said her friend made a comment joking about her bright red hair — which she said she could 'handle' — but then told her sister that she was 'going to dye it back to black.' The bridesmaid noted that this was something she 'never said' she 'would do.' 'It just felt like she was making decisions about me without asking, and that rubbed me the wrong way,' she wrote on Reddit. 'I don't want to be dramatic, but I'm starting to feel like maybe I should still attend her wedding but not be a bridesmaid.' 'I would never ask my friends to change how they look for my big day, especially something as personal as their hair. Am I overthinking this?' she added. She also noted that she felt that the way her friend has spoken to her has 'changed' over 'the past few years' and she can come off 'really harsh or dismissive.' She said it has gotten to the point where she sometimes feels like she's 'walking on eggshells around her.' In response, several people on Reddit suggested that she send a message to her friend asking if she meant what she said about her bridesmaid having to dye her hair. One person said that if the bride said she 'meant it' then the bridesmaid should decline. One person commented: '[It's absurd of people to try to change you for 'their' big day. a) it is not yours, b) it is only one day but you are supposed to bend to their will and do something costly and time consuming and potentially damaging…' Another person suggested that the woman 'stay blunt' to her friend as 'people pleasing gets you nothing but walked on.' Never miss a story — sign up for to stay up-to-date on the best of what PEOPLE has to offer, from celebrity news to compelling human interest stories. They continued, 'if I were you, I would tell her I was stepping down as a bridesmaid. This is nothing short of a personal attack. If it were me, I couldn't enjoy the wedding if I thought the bride was obsessed with my hair.' Another added, 'if someone is asking this of you, they are not a friend who accepts you completely as you are, and that should be your most important consideration.' Read the original article on People
