She explains that the plan is for her daughter to apply for a loan to build a flat on the property, in which the reader will live, and she would like to know whether her daughter could proceed with this before the estate has been finalised.
See the reader’s question here.
There are a few aspects that require discussion in this instance.
Firstly, it is important to understand that the property cannot simply be transferred from the estate to the reader’s daughter.
The transactions need to follow a process and a corresponding timeline.
In terms of the will of the deceased, the property must first be transferred from the estate to the heir, which is his wife, the reader.
If the property is sold to the daughter by the estate, the transfer to the reader must still take place and the property may then pass from mother to daughter.
One must also keep in mind that the bequest to the reader is a justified reason, or causa, to transfer the property to her. Because it is a bequest in the deceased’s will, no transfer duty will be payable.
For the transfer of the property to the daughter, however, a valid causa will also be required.
Depending on the provisions of the will, the estate could be entitled to sell the property to the daughter at a market-related price, but this may require the reader to make the decision to “prefer” the cash proceeds over the property itself.
The reader may sell the property to her daughter once it has been transferred from the estate to her.
Donation would also be a valid transaction, but keep in mind that it would bring about donations tax implications for the reader.
It is important to keep in mind that each type of transaction may have different tax implications.
For example, the transfer of the property from the estate to our reader will qualify for rollover relief from capital gains tax.
Upon resale to her daughter, capital gains tax may be triggered, but could be mitigated if the property serves as a primary residence.
It would be wise to gain formal tax advice on each of these aspects.
The nature of the intended transaction, and possible financial obligations, between either the estate or the reader, as the case may be, and the daughter should be clarified before proceeding.
A bequest from an estate does not amount to a donation even though no purchase price is payable by the heir, whereas a disposal to another person without any counter-performance may lead to unwanted tax implications.
Only once the daughter becomes the registered owner of the property would she be able to obtain a loan or register a bond against the property.
Until then she is not entitled to use the asset as security or encumber it with a bond.
The reader’s daughter could perhaps begin the investigations into whether she would qualify for a loan, and for how much, in anticipation of the possible transfer of the property into her name.
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