Questions of Cash: A gift property may be a risky proposition

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The Independent Online

I own my flat, with no mortgage or loans outstanding. A friend wants to sign her property over to me for safe keeping until her young children reach maturity.

I own my flat, with no mortgage or loans outstanding. A friend wants to sign her property over to me for safe keeping until her young children reach maturity. She and her children will still live in the property. No money would change hands. If I agree to this, I will be the owner of two properties for several years. Will I incur any financial burdens - other than mortgage payments, if she fails to honour them - as a result of owning two properties? If I sell my flat to buy another while her property is still in my name, what taxes will I be liable to pay?
PR, London.

This unusual arrangement looks unwise. Simon Rees, senior manager in the private client practice at the accountant PricewaterhouseCoopers, says: "The gift won't work for inheritance tax as she will 'reserve a benefit' by still living there. A transfer to avoid potential creditors would be ineffective. Worse still, the Inland Revenue is looking at introducing provisions to produce an annual tax charge where you give away homes and continue living in them. Your home should be exempt from Capital Gains Tax on sale. The problem comes when you give your friend's flat to the kids. This will be treated as if you sold the flat at open market value. Since it's not your home, there will be CGT on the disposal. That tax bill applies even though you will have received no cash. A gift by your friend [to her children] would be CGT-free."

I am considering an off-plan scheme advertised by Spain-Homes. What should be on my check-list?
JD, Kent.

We have written about Spain-Homes and its sale of properties off-plan. While the company makes claims of potentially large profits, this depends on Spanish house price inflation continuing to rise. Property inflation in parts of Spain is moderate and some properties can be difficult to sell. If you buy to re-sell in the hope of a big profit you could be disappointed. You should visit the area, learn about the local property market, consider alternative properties and suppliers, consult a licensed estate agent and obtain good quality local legal advice.

I received an "&more" Mastercard from Marks & Spencer with an invitation to transfer a balance from another credit card at 0 per cent interest for six months. I was assured by M&S that transferred balances and new purchases would be separate and I would not pay interest on the balance transfer, so I transferred £1,000. On the next M&S statement I was charged interest on the entire remaining balance, although I had sent a cheque to cover the retail purchases. M&S has pointed to the small print, which says that payments are cleared first against the transferred balance before being applied to recent purchases. I feel conned.
RM, by email.

M&S argues it is "industry standard" to apply repayments towards transferred balances, before clearing more recent purchases. It says it made the position clear to you, but other customers have been similarly confused. You might consider transferring the balance again, to Egg or Royal Bank of Scotland, which offer 0 per cent deals on both balance transfers and initial purchases.

I took out an endowment 14 years ago and last year covered the projected shortfall by taking on a repayment mortgage. I received £2,700 for mis-selling compensation, from which I bought Premium Bonds. I have maintained my endowment, paying in £50 monthly to treat it as a savings policy to mature in 11 years. Two years ago the policy had lost £500 in 12 months, last year it just about recovered that loss. It is now worth about the same as I have paid in - £7,000. I now wonder whether I should cash it in and if so what I should invest in instead.
JD, Coventry.

Philippa Gee of the adviser Torquil Clark suggests you research your insurer's performance. The better the insurer's performance, the less reason to move. The second step is to obtain a projection of maturity value, including terminal bonus and current surrender value. You should also check how much you could achieve by selling it, remembering that market prices for traded endowments can be volatile. Tom McPhail of Hargreaves Lansdown adds that, given the reduction in equity exposure of most with-profits funds, future returns may be about 4 to 6 per cent, rather than the much higher levels of the past.

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