David and Sammy
David and Sammy were married 5 years ago and have a 2-year-old child together.
David and Sammy have 1 child each from previous relationships.
Property owned in David’s sole name.
Sammy sold her house when she moved in with David just before their wedding 5 years ago. Out of her sale proceeds she has injected £80,000 into David’s property in order to extend it, build a conservatory and modernise it.
Whilst undergoing their estate planning David confirms that he wishes to gift 50% share of his property to Sammy in order to equalise their estates. This is in recognition of the capital injection Sammy has invested into the property. They also wish to protect their assets against sideways disinheritance in the future and are considering having a Life Interest Trust (Property Protective Trust) written into their Wills.
David and Sammy are married and gifts between married couples are tax free
Making the gift
Where a property has no mortgage, the gift is relatively straightforward.
David and Sammy will sign the Land Registry forms, which are then submitted to the Land Registry for the property title to be updated into both of their names as tenants in common.
They can now proceed to have their Wills drafted to include the Life Interest Trust (Property Protective Trust).
Where a property is subject to a mortgage the gift involves a little more work.
David and Sammy will sign the Land Registry forms but will also need to sign a Declaration of Trust which will confirm that David owns the equity in the property (the value of the property after the outstanding mortgage has been deducted) and it is this equity that is the subject of the gift.
As the legal title to the property cannot be changed (because of the mortgage) a restriction will be placed over the Land Registry title to the property which will state that if the property is sold then the sale proceeds will need to be distributed in accordance with the Declaration of Trust. This Declaration of Trust will confirm that the mortgage will need to be paid first along with any other associated charges and the value left is to be shared as detailed within the Declaration of Trust. As we are aware, David wanted Sammy to have 50% of the equity however, if he gifted her a difference percentage, this would be shown in the document.