Find Out If It’s Possible to Make Your Girlfriend Rich with Rental Property Income!

My partner and I are not married but have two young children together. We jointly own the house we currently live in, but we each still own the previous properties from before we met, both of which are rented out.

There is no mortgage on the rental property I own, but my partner’s property still has a relatively small mortgage. My partner earns much less than me and she receives £6,000 a year gross from her rented property. She has much lower pension savings than me.

Is there a way to transfer ownership of my rental property to my partner to allow her to invest the rental income in retirement savings? Or is there a better way to achieve the same goal?

Phineas Hirsch, senior associate at the law firm Withers, says that giving away your rental property, if unmortgaged, would not give rise to stamp duty, the property transaction tax in England and Wales. However, as you and your partner are not married, gifting it to your partner will be subject to capital gains tax (CGT) at a rate of 28% on any gains.

In this case, assuming you have actually previously lived in the rental property, the £90,000 earnings would be reduced to reflect the number of years it was your primary home.

You are also correct in assuming that even if you sold the property below the market rate to your partner, it would still be deemed to have been sold at the market rate and would not help reduce the amount of CGT payable.

If you want the rent on your previous property to be added to your partner’s pension without transferring ownership, you can give your partner the income as it is generated (and she could contribute it to her pension), or you could contribute to hers yourself. pension. Your partner is limited in the total amount that can be contributed to his retirement from what he earns from work.

The tax-free annual superannuation allowance was recently increased from £40,000 to £60,000. The threshold at which this benefit starts to be reduced for top earners has also been raised from £240,000 to £260,000. Depending on your new income levels, you may be able to make additional contributions to your pension annually if you wish.

If your non-rental income is sufficient to cover your living expenses without the need to dip into savings, donations of your rental income may be made as part of your normal spending outside the IHT exemption on giving from excess income, so no IHT on these amounts if you die within seven years.

Contributing rental income to your partner’s retirement would mean you would pay rental income tax at your highest marginal tax rate, but she would get the benefit of retirement income tax relief, so you’d want to run those figures to see which. option is more tax efficient.

From a purely fiscal point of view, marriage or civil partnership is worth considering. In addition to any tax-exempt spousal gifts (CGT or IHT), a marriage or civil partnership certificate would also allow for more effective estate planning, such as CGT and IHT benefits for you, your partner and your children, given that the value of your estate is already likely to exceed the current IHT exemption threshold (£325,000).

If we leave the farm to our son, could it be challenged?

My son works on our farm, which has been in my family for generations, and I would like to leave it to him to ensure the continuation of the business. Could my other children, none of whom have ever shown any interest in farming, challenge his legacy?

Emily Robertson, associate at Burgess Mee Family Law, states that wills are not fully binding in England and Wales. Historically, if you wanted to leave everything at the cat house, you could. However, this changed significantly following the Inheritance (Provision for Family and Dependants) Act 1975.

The circumstances you mention are very common in peasant families: one son continues to work on the farm, while the others choose to leave and pursue their own careers. Farming is a tough profession, with long hours of work and sometimes offering little financial reward. It is understandable that you want your child to be rewarded for the work he has undertaken. Also, if your farm has been in the family for generations, you may want it to remain untouched and not sold to developers.

However, your other children can make a claim under the IPFDA if you are domiciled in England and Wales and they feel wronged by your will. The court will consider whether your will makes reasonable financial arrangements for them and will only follow your wishes if it deems it right to do so. Therefore, there is a possibility that the court will consider it reasonable to divide the farm between your children.

Whether your other children can dispute your child’s inheritance will largely depend on the value of your estate. For example, if you have valuable possessions other than your farm, they could be distributed to your other children. However, it is often the case that agricultural land is by far the most valuable asset.

The court will consider several factors when deciding whether your other children should inherit part of the farm. It will pay particular attention to the financial resources and needs of all parties involved. It will also consider any obligations you may have towards your children, any mental or physical disabilities they may have, and any other matters it deems relevant. However, the court said applications for able-bodied adult children should be treated with caution.

The best way to avoid controversy after your death is to plan throughout your life. You should consult professionals as soon as possible. They may be able to put structures in place using insurance policies, lifelong gifts and pensions to ensure your children are fairly cared for.

After talking to your counselors, you may want to talk to your children to avoid surprises. You may then be able to settle any claims in your lifetime rather than having your children face an inevitably costly IPFDA application.

The opinions in this column are intended for general informational purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not liable for any direct or indirect results arising from any reliance placed on the responses, including any loss, and exclude liability to the fullest extent.

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