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I'll like to gift one of my investment properties to my daughter for her 18th birthday and I'll like to know the ideal and hassle-free way of gifting it to her (something similar to the Quitclaim) without the exchange of money
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May I confirm with you this relates to a property in the UK as a quitclaim deed is a US concept?
Yesy, this is a UK property
Hi, I can't find the answer you sent
Hello, where should I look to find your posting?
Have you ever lived in the property or is it purely an investment property?
Has the property made any gain since you acquired it? Can you estimate how much?
we've been paying the yearly tax on the profit from the rental income
Thanks. Are you married and if so is the property owned by both of you or just one of you please?
it's in my husband's name
it's always been an investment property
but we're both agreed in giving it to our daughter
so it'll officially be a gift from him to her
Thanks. Finally is the property mortgaged?
Are you able to either pay the mortgage off or is your daughter able to take on a mortgage herself?
no, we can't pay it off nor can my daughter take it on because she's a student which is the reason why I needed some advice on how best to transfer the deed to her name but not necessarily the mortgage
is the a straightforward process for this?
Thanks. On that basis you will not be able to transfer the legal title. You can if you wish consider drawing up a bare trust deed giving her the benefit of the equitable interest (the value in the property) which means that she would be entitled to receive the rent and would pay thereon. A solicitor can draw such a document up without difficulty for you.
This is all fairly straightforward however there is a sting in the tail potentially in the form of capital gains tax. If the property has increased in value since it as acquired there may be a capital gains tax liability to pay on the transfer of interest to your daughter.
Your husband will have a tax free CGT allowance of £10,900 for the 2013-14 year before tax is payable. If there is a gain of more than this sum you may wish to consider either first transferring the property into your joint names to double your allowance before transferring it to your daughter or "drip-feeding" the transfer to your daughter whereby you obly transfer a percentage of the property each year to your daughter so as not to exceed the annual allowance. You will need to be careful in this approach and would need an accountant ideally to keep a rcord of the figures and have a valuation of the property done at the date of each transfer.
ok, thanks but with the proposed bare trust deed, does that mean that the deed still stays in my husband's name? If so, who has sole legal control of the property?
I am certain the Mortgage company may not want my daughter's name to go on the deed while retain my husband as the mortgagee
... while retaining
In that scenario the property's legal title would remain with your husband but the value of the property (the money) would transfer to your daughter to the extent provided by the Deed of Trust
Your husband would also maintain responsibility for the mortgage vis a vis the lender but it is possible to provide in the trust deed that your daughter indemnifies your husband for the mortgage if you wish which would probably be sensible (e.g. money to be paid out of the rent or generally)
ok, in that case, how does this transfer affect my husband's estate valuation. Will the value of the property be deducted from the total value of the portfolio?
Yes indeed any equity that is transferred under a bare trust no longer forms an asset under your husband's estate providing the gift is genuine and no reservation of benefit is retained - i.e. rent is genuinely paid to your daughter. You will be aware that there is a seven year rule the Revenue apply before they consider the asset gifted out of your husbands estate for inheritance tax purposes - i.e. he must survive seven years before the asset will not be counted
really? We better start praying that God spares his life for longer than 7 yrs. However, on a more serious note, if he were to be deceased before the expiration of the 7 yrs, what becomes of the property?
There is taper relief that applies if he were to pass away within seven years that allows a discount to be applied. If he were to pass away before or after 7 years it does not effect the validilty of the gift to your daughter - that stands as at the day he makes it. It is just that the Revenue notionall treat the asset as still being included in his estate for the purpose of calcualting inheritance tax if he dies within 7 years
By the way, do you have an idea of how much the bare trust deed is usually processed for and is there a particular type of solicitor authorised to issue this?
A solicitor should be prepared to prepare such a document for you for anything between £125-250 + VAt depending on who you talk to.
They are fairly straightforward documents and not difficult to prepare. Any solicitors office in the country pretty much can prepare on particularly those with a private client department.
Some accountants will prepare them for you too.
One other thing please: we're also selling another investment property which will be at a loss because sale valuation is lower than purchase price and that is also in my husband's name. Can we net off the tax free CGT allowance of £10,900 from the equity of the property being gifted to our daughter?
I guess my question is whether that loss and profit from our daughter's property can be netted before applying the tax free CGT allowance of £10,900
You are allowed to offset losses you make against gains for the purposes of calculating your CGT liability.
You will want to consier asking an accountant to prepare a calculation for you before you transfer the interest to your daughter so you can ascertain your or more to the point your daughters liability for CGT before you sign the Deed.
That should greatly reduce our CGT liability for this tax year
ok, thanks so much
You've been of great help and I'm quite happy with the advice received from you.
If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me.
Enjoy your evening and enjoy the long weekend if you get to stop working
I shall do the rating now
Thanks - and you
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