I have some buy to let properties in my name with mortagegs in my name. On my death would the properties

go to my wife or would the mortgage companies sell them and try and and get any surplus from my estate if they were not worth what the mortgage was for. There is no insurance to cover the loans on death

Asked by ian.wragg

4 Answers

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Answered by Paul Skinner
Hi Ian,

I would recommend you check with a solicitor, but I believe that the properties and the mortgages would become part of your estate. In order for your wife to take on the mortgages, she would have to apply for mortgages in her own name, to repay the debt to the estate (unless there were sufficient funds in the estate to cover the debts).

The best thing to do would be to apply to the lender to have the mortgages put into joint names. This would also require some legal work to transfer the "equity" in to joint names, and this would typically cost around £200+vat per property (although you may get a discount depending on the number of properties). In this way, the properties will automatically pass to the surviving spouse on the first death, and the mortgages should be allowed to continue in the sole name (although worth checking with the lender).

I hope this helps.

Kind regards

Paul Skinner
http://pks.org.uk | 11.28.11 @ 20:22
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$commenter.renderDisplayableName() — {comment} | 08.24.17 @ 01:17
Answered by Darren Smith, IFA in Basingstoke, HAMPSHIRE
Hello Ian

if the properties are in your sole ownership then they would form part of your estate upon death. Future ownership would be determined by your will or the rules of intestacy.

if the value of your estate is <£250000 your wife would inherit all, if above £250000 and you have children, your wife would take first £250000 plus chattels and a life interest (income only) in half
of the remainder of your estate. The remaining half goes
to the children in equal shares on reaching age 18 or on
earlier marriage. Children also inherit other half of remainder on death of the surviving parent.

if no children and estate is £250000-£450000 then your wife would inherit all. if above £450000 and you have no children but do have living parents, siblings, nieces or nephews: Your wife takes the first £450,000 plus personal chattels and half the remainder of your estate. The rest goes to your surviving parents, otherwise your brothers and sisters (if not surviving then to your
respective nephews and nieces).

this all relates to estate assets under English & Welsh law - different rules apply in Scotland or to assets in Scotland.

in terms of the mortgages, your beneficiaries (if they meet the mortgage criteria) could apply for a new mortgage to keep from selling the property but as they wouldnt be a current party to the current mortgage, they wouldnt be able to retain the existing deal or perk that you have in place - the estate would suffer any mortgage redemption penalties and the new owner would incur the cost of the new mortgage - a lender could choose to simply offer the option to take on the mortgage deal in place but they would not be obliged to do so.

if the properties wouldnt cover the outstanding debts, the lenders could enforce a sale (just as they could now if the mortgage were to default) and any shortfall of monies due would be paid by the estate and this is because all debts must be settled from an estate before it can be executed.

the priority debts are: funeral expenses, tax and then other debts, this is why banks will often allow executors to draw down cash on deposit to cover funeral bill and IHT etc as it will enable the estate to be wound up. But once all debts are cleared, the balance is then the definition of your estate and that sum would then be settled according to your will or the laws of intestacy.

if the net result is still a debt, that debt normally dies with you unless there is a jointly held asset with a survivor as a lender could still try and secure repayment from that asset.

as ever, it is far cheaper to write a will now and consider a life policy which could be placed in trust for the benefit of your family.

a standard will can cost in the region of £100+vat and would be far cheaper than paying a solicitor to deal with the mess of intestacy that could occur later and a life plan in trust wouldnt form part of your estate on death and so the funds would be released in a few days to your "family" by way of the trust which would enable debts to be repaid or standard of living to be maintained whilst the estate is wound up - therefore removing a financial burden from your family at a time when they are grieving your loss, and the cost of a trust? most often just a few minutes of filling in a form!

feel free if you'd like to talk about this more, sometimes its not sensible for you to disclose too much in such a public forum and of course the above information is based only on what you have said so far and so without a personal assessment of your position it couldnt be fully relied upon as 100% fool proof!

darrenasmith@2plan.com | 11.29.11 @ 00:00
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$commenter.renderDisplayableName() — {comment} | 08.24.17 @ 01:17
Answered by John Stirling, IFA in Saffron Walden, ESSEX
Hi Ian,

I will also add a little to Paul Skinner's point above, if you transfer the properties into joint names, and the value of the transfer (as dictated by the value of the mortgages) exceeds the stamp duty nil rate band then you will have to pay some stamp duty to transfer the properties into joint names. The amount of this will depend on the total value of the transfer.

It may still be worth doing, and there are mitigation strategies, but stamp duty is something you need to be aware of. | 11.29.11 @ 08:51
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$commenter.renderDisplayableName() — {comment} | 08.24.17 @ 01:17
Answered by Darren Smith, IFA in Basingstoke, HAMPSHIRE
you also need to be aware of income tax on the rental properties if your wife pays tax at a higher rate than you as a married couple can only take a 50:50 split on rental income only jointly owned properties which might mean the exercise costs you more throughout the period of ownership.

it does also mean that you are gifting the asset to her and you wouldnt be able to "take it back" or insist that you did it "only for IHT purposes" as it would be deemed to be equally hers.

this is not to say that a court wouldnt award her part of it in the event of a matrimonial breakdown but bear this in mind with savings accounts and investments that once you add on an extra holder, they become an owner and entitled to do whatever they like with what they can access! | 11.29.11 @ 11:21
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$commenter.renderDisplayableName() — {comment} | 08.24.17 @ 01:17
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