whos name to put the property in???

Hi there, parents are buying a property out in spain, retired couple, just wondering if they should put the property in their name or their childrens? Are there advantages to putting it in the childrens name for future situations or not. Appreciate any advice.

Livelife.

Hi, If they are paying cash , then why don`t they form a UK company and buy it in the companies name and have the kids as Directors awell .. That way if something should happen to them . As the house belongs to to company and not them .. (No Death Duty To Pay) 

hard to advise without fuller pciture ie will parents be resident, are children resident, what is financial situation if uk based etc etc

I am interested generally, in that if you are buying a holiday home that you intend to pass on to children, should they be joint buyers, etc. In my case the children are both over 18. Any thoughts to avoid unecessary costs later?

The spanish do put everyone on the title deeds and the property passes down, but inheritance tax is payable by the remaining names.

You can buy the property in your childrens names but with you having life use (cant remember the term for this) and this is perfectly legal.

If your children then wanted to take the money, they would sell the property on, pay capital gains and split it 50 50. Thats probably the best way of tackling this

 My in-laws had a number of shared properties and then there was a divorce in the family and huge claim on the assets of which the person had never had any input. A settlement was difficult. 

However I would agree that there are many good reasons for puting names on property as have been mentioned on this thread.

I think thats the main issue with the kids going on the deeds, if there is a divorce, the property can come into it too! You do really need to take good advice I think.

Hi,

The possibility of purchasing the property on the name of the children is frequently aimed at reducing inheritance tax liability. However the decision should be taken always by taking into account the particularities of the family, the value of the property,  and also if you are going to take over a mortgage or not, therefore more details should be provided before choosing the best option.

In general terms, the options are:

a.- The parents purchase the life long right of use of the property (so-called "usufructo" in legal terms) and the children get just the "nuda propiedad", which is equivalent to the ownership right "stripped out" the right to use the property; in other words, there is an user of the property who is not owner (the parents) and there is an owner who is not entitled to use the property (the children). By doing this the parents have got an effective guarantee of using the property whilst they are alive.

However, the problem arises when they want to sell and they find that no on purchases the "usufructo", so that their children - as owners of the nuda propiedad - have to come along with them. Some recommend that the children gave PoA to the parents to enable them to sell the children's interest on the property on their behalf, but...the PoA in Spain are fully revokable at any time by the grantors under Spanish law... If there were disagreements among the children and the parents, and the former revoked the PoA, the outcome is uncertain. It would be some kind of stalemate. 

Furthermore, once the parents die, their "right of use" reverts to the children, who become then FULL OWNERS. However the transfer back of the right of use is subject to the Spanish inheritance tax.

The point is if the cost of the whole system is lower than the savings you would make in inheritance tax...

Once again, the cost of this option has to be ascertained by taking into account the values of the property. 

b.-  to put the children as joint owners, i,e 50% of the property becomes shared among the children and 50% between the parents. This reduces inheritance tax liability but it gives rise to other side problems: now the parents have to put up with someone who is joint owner and has a say in the use of the property and also when it comes to sell it. I will simply outline some of them:

- the joint ownership situation is considered as non operative and therefore our laws grant any joint owner the possibility of putting the property at auction if they do not reach an agreement as to the use of the property, and the property cannot be divided. For example: If the parents allow child A to hold a 25% of the property, A dies and his will appoints as heir to his wife and she does not get along well with the parents,,,his wife appears as owner of 25% and now every decision has to be agreed with her. And if not, there is no chance to sell.

- What happens to the improvements made in the property? there is always one who has invested more in the property and he/she thinks that the property is worth more and he always want a bigger part of the profit, if there is any; in contrast, there is always one who has not done anything and has not paid anything in his life, but of course it is necessary to deal with him and he/she wants his part...free of costs, naturally.

- What happens if one of the child holds a 25% and he goes bankrupt in the UK? It would seem that the parents would have to RE- purchase the percentage of property which had been seized by the bankrupcy administrators...that or the forced sale of the property at auction, at a very low value! I would personally think twice if my child was self employed or had a company, in the present times. 

All these problems and some more - except probably the bankrupcy - an be sorted out previously with an agreement signed by all joint owners, which covers all these possibilities.

c.- A company, now what do we do: a UK Company, an offshore company, an Spanish company or a combination of these tthree (Spanish company whose shares would be held by a UK company)?

This is a complicated option which gives rise to many many difficulties and considerable costs, as every year it is necessary to do some maintenance of the company -such us company accounts, etc. I would not recommend it unless the costs and the consequences were calculated carefully. 

d.- If the main worry is the inheritance tax liability, another suggestion is contracting a life insurance to cover the approximate amount of inheritance tax liability... it is less complicated, but you might find the problem that after 10 years paying the monthly quotes, once you reach the age of X, the insurance company says that they do not renew it any more, and you have been paying 10 years...for nothing!

e.- if the problem is the divorce, well, an agreement covering this possibiity - such us in point b above- could be fine. However, I would need to check with a UK based lawyer or solicitor if such agreement can be rendered as illegal under British Family Law.

There are more alternatives, but the above - or a combination of those (i.e. a company where the right of use of the shares is granted to the parents where the children keep the naked ownership) - are the most usual ones.

 For further details or examination of your case, please send a private message.

Yours,

 Although this is an old post the content interests me, has anyone bought a property in the names of the their children?

This is something we are considering, we are not doing this to avoid any Spanish taxes, but thought that should either of us need to go into care later on in our lives, then we could not be forced to sell the property to pay for care home fees.

We have 2 children (23 & 25) and they would inherit the property on our deaths anyway.

• What are the positives and negatives?
• Does it affect our children and their financial standing in the UK (can it affect mortgage applications etc.?) 
• Do they have to make a will (Spanish and/or English) to pass ownership to us should they die before us?
• I take the point of Fairways Lawyers around bankcruptcy, can we have a legal agreement that ownership passes back to us or the other child should one of them be made bankcrupt, and again should this be a Spanish or UK agreement?
• What are the additional legal charges compared to buying in our own right.

Lots of questions I know, but hopefully this will prompt some debate / replies and help us to make a decision.

Kelju

 We have just kept it simple. The property was bought in my sons name. We have an agreement that we can use it for our lifetime for no charge. My son has a Spanish will leaving the property to his brother. When we die I expect the boys to decide on what they want to do with the property. Sell it or keep it, it will be their choice. It is not a major part of our estate so don't really think they will fall out over it. Be careful and do not sign up to some complicated scheme that require large costs to keep it going each year. Check them out carefully and you will find that the scheme has never been tested in the courts. Our son was 25 when we bought in Spain, so you must be a similar age to us. Good luck. Kevin

 Thanks for the replies kev2006n & johnzx, some good points to consider.

It hasn't crossed my mind that the property could be considered a gift and liabe to tax, so will seek further advice on this.

The property is a holiday home and therefore living rent free does not come into it, we would use the apartment as and when we wanted to and the kids as well, in between we would look to generate a little bit of income, possibly enough to cover the comunity fees etc. by letting family and friends use it.

Cheers

Kelju