My 79 year old relative wants to buy a second home as a holiday house what are the disadvantages tax wise?

Question

This would be a second home, can she put it into a relatives name (preferably mine!) and if she lives for 7 years it will become outside the inheritance tax bracket?

Answer 1

Hello

If she buys a second home then gives it to someone else in your family, or she gives someone else in your family the money to buy a home; and she dies within 7 years, then inheritance tax may be payable.

If the total value of her estate, which includes all: property, cars, assets, cash, etc... exceeds £263,000; then 40% tax must be paid on the rest.

If shes gives away a gift (home, cash, etc...) then lives for 7 years then it is safe from inheritace tax.


For example:
Scenario a)
- she gives you a £150,000 house;
- she has another home worth £150,000;
- she has £63,000 in funds in the bank; and
- she dies in 6 years.

Total value of estate: £363,000.
Inheritance tax allowance: £263,000.
Taxable amount after allowance: £100,000.
Total inheritance tax payable: £40,000.

Scenario b)
- she gives you a £150,000 house;
- she has another home worth £150,000;
- she has £63,000 in funds in the bank; and
- she dies in 10 years.

Total value of estate: £213,000.
Inheritance tax allowance: £263,000.
Taxable amount after allowance: £0.
Total inheritance tax payable: £0.


Thanks

Answer 2

Tell her to put it in a Charitable Remainder Trust paying her 7-10% of the homes value while she continues to use the home. She can use the income as a tax deduction and when she passes away or no longer needs the vacation home then any moneys that were not given back to her over the value of the home goes to the charity of her choice. She may need that 7-10% to pay for medical expenses during the last few years of her life. That's a good way to avoid paying an obnoxious tax on the property. Only you don't get the house when she's gone but she can use her income to help you with a down payment on your own home.

Answer 3

properly stable for her. I observed a pair of innovations...kazoo,guitar, being 2. she will additionally make shakers (particularly great for those leftover plastic Easter Eggs) and may well be created from many stuff. Drum(s), playing the spoons, Rainsticks ( use a papertowel tube). there's a e book which you would be able to inspect of the library which will provide guidelines on making domicile made contraptions, that's area of the youngsters Can series (additionally they have technological understanding, Math, analyzing variations of the e book). i'm hoping that helps and that she enjoys her new contraptions.

Answer 4

well, she could give you the ownership of the second home , this would reduce her inheritance tax when she dies

Answer 5

She's not going to live 7 years...or at least the odds aren't that great. Yes its possible. but I wouldn't place my faith in it.