Gift to wife of property asset

Gift to wife of property asset

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I inherited a property from my father (Aug 02). It completed probate May 06. At this point, I gifted 70% of the equity to my wife by way of a written document, which we both signed. This was not witnessed or logged with my solicitor.

I am now in the process of selling the property. The deed will transfer directly from my father to the buyer but the legal owner as per probate is registered in my name.

I have instructed the solicitor to split the sale proceeds and make a payment to my wife of 70% of the sale proceeds.

Both of us will be impacted by CGT. Both our annual allowance will not cover the gain. My wife’s marginal rate is 20% but mine is 40%.

Will the fact that the gift statement has not been formally legally registered and I am currently registered as the legal owner invalidate this 30 % / 70%. In effect, is it possible that I could be liable for the full gain less annual allowance (8,800) at 40%.

Brendan Bradley

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By Paul Soper
09th Jan 2007 11:13

Legal problem
To convey an interest in land everything should be done properly to past muster with HMRC or they will be prone to attack it. For a gift to be binding in law it is normally considered that everything must be done to transfer the interest in the asset - an incompletely constituted gift is not binding.

Your document purporting to gift an interest in the property to your wife was not registered with the Land Registry, although this could have been and as a gift of property on which no mortgage was outstanding would not have attracted Stamp Duty Land Tax. There is a very real danger that HMRC will regard it as gift of an entitlement to a proportion of the proceeds of sale and that will leave the whole gain in the hands of the legal owner who is, at the moment, you. It may, at best, have created an eqwuitable interest in the property but that will subsist in the benefit, not the legal title.

It may be better to complete the legal formalities to have the interest properly registered in your names before sale - all you are saving by not doing so is the legal expense and incidental costs of registering your joint title, and I suspect your potential CGT liability will be a lot bigger. Then a joint disposal is much more likely to be accepted by HMRC.

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By babra2
09th Jan 2007 12:04

Respond to Legal Problem
When you say equable interest do you mean 50 / 50.

The solicitor was not planning to register me as the owner of the property. The sale would be a transfer between my father who is currently registered as the owner with the Land Registry.

I have been advised by a Tax expert that all I need is a DEED of GIFT to be generated by my solicitor and independently evidenced before I accept an offer.

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By Paul Soper
09th Jan 2007 18:44

Sorry Equitable not equable!
Sorry about the spelling error in the original posting. If a "Tax Expert" tells you all you need is a deed of gift why post the question?

But ask yourself are you gifting a share in property which requires legal formalities to be legally binding - ask a solicitor - or are you gifting an interest in the proceeds of sale?

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