Family buy to let mortgage

[K.Mc]

Please advise me on the following. If I gift my son a large amount of money from the sale of a property. Can my son use that gift as a deposit to purchase an over 55 apartment with a small buy to let mortgage. Then rent that property to me at market price no discount all above board, are there any family buy to let mortgages many thanks in advance

[HariSeldon]

Please advise me on the following. If I gift my son a large amount of money from the sale of a property. Can my son use that gift as a deposit to purchase an over 55 apartment with a small buy to let mortgage. Then rent that property to me at market price no discount all above board

Theoretically it's possible if the particular apartment complex allows such a purchase and you can find a lender who is happy with the arrangement.

There are some downsides though:

1. typically not a great investment for your son
2. typically high service charges
3. typically very restrictive leases
4. highly probable that when you die your estate will be deemed to still have that "large amount of money from the sale of a property" for Inheritance Tax purposes
5. highly probable that should you need care in the future you'll be deemed to still have that "large amount of money from the sale of a property"

Of course the last two points are irrelevant if your estate won't be in IHT territory or if you don't need future care.

[PallasAthena]

If he leased to you on normal market tenancy terms and at full open market rent HMRC should accept that it is not a "gift with reservations" (GWR) and would not deem it part of your estate forever.

The law on this is complex though and I recommend you get professional advice on how the GWR rules would apply to your proposed gift.

However the usual 7-year rule would apply to the £55k gift which would be treated as part of your estate for IHT (on a sliding scale) if you die within 7 years of making the gift.

Local councils will take every opportunity to try to say that an asset disposal (the £55k) is deliberate deprivation of assets if they have to do a care home fees financial assessment for you in the future. However they would have to show that the disposal was made when you aware that you might need care. Read up about this if you are not familiar with it. There are many sites with good explanations - eg Age UK. So if planning such a gift it's worth getting legal advice so that a solicitor can document your reasons.

[HariSeldon]

HMRC should accept that it is not a "gift with reservations" and would not deem it part of your estate forever.

Local councils will take every opportunity to try to say that an asset disposal (the £55k) is deliberate reduction in assets if they have to do a care home fees financial assessment for you in the future.

I would caveat both those statements that presumably/hopefully neither of those things will be relevant to the OP for many years to come at which point it's highly likely that rules and laws will have changed to further tighten up suspected avoidance schemes.