Family property

[Shdkaks]

I have been living in a property now for 12 years owned by my parents. I want to buy it off them for lower than market value with their agreement. Mainly this is to protect me down the line from stress when it comes to my parents aging or eventually dying. Does anyone know if this is complicated and what steps need to be taken? Thanks

[atticus]

The process to transfer ownership is fairly straightforward.

But if the sale is for less than market value, there may in due course be issues relating to ccare home charges or Inheritance Tax.

[Shdkaks]

Thanks for your reply. The care home / tax charges would apply within 7 years is that correct? And to transfer ownership with a mortgage do both parties need different solicitors and then the mortgage company also needs to be happy with the valuation. Is there anything else needing to be considered? Appreciate your help.

[HariSeldon]

Thanks for your reply. The care home / tax charges would apply within 7 years is that correct? And to transfer ownership with a mortgage do both parties need different solicitors and then the mortgage company also needs to be happy with the valuation. Is there anything else needing to be considered? Appreciate your help.

There is no 7 year rule for care home fees, local authorities can go back further; what matters is whether your parents "know they might need care" but give away assets (or parts thereof) so that they can't afford to pay for their own care when the time comes.

Assuming your parents do not live in the same house then yes the gift will fall out of IHT calculations after 7 years. HOWEVER that is based on current legislation, there has been talk that the rules could change so when you finally lose your parents it's not impossible IHT would be payable even if after seven years.

Yes you will need a different solicitor to represent you and you will need to pass the mortgage company's affordability checks.

[Shdkaks]

Ok thanks. Both of them are fit now under 70 years old so giving away assets to avoid needing care shouldn't apply however the longer we wait to sort this it could appear that way which is my concern.

[PallasAthena]

If your parents don't live there I assume they have checked out what their liability to Capital Gains Tax will be?

For CGT calculations the tax liability if they sell to you at below market value is calculated on its open market value at date of transfer to you, not the undermarket price they sell to you.

[Shdkaks]

Thanks, so the property was bought for 75k and was extended and is probably worth close to 200k now. so the CGT would be calculated based on profit of 125k? I would hope to get a mortgage on the property of 140k. It is all quite complicated really which is why I am asking these questions as we dont really have expertise in this field.

[PallasAthena]

Tax when you sell property: Work out your gain - GOV.UK