Many portfolio landlords have gone through the process of creating a partnership and incorporating their portfolio into an investment company. They will have substantially completed the incorporation by transferring the beneficial interest to their investment company, while the mortgages stay in their own name until such time that the it is appropriate the remortgage from preferential loans in their own name to loans in the name of the company.
One of the downsides of holding mortgaged property in your own name is that when the landlord dies any outstanding loans need to be repaid on the death of the borrower – usually within 6 to 12 months. This will likely mean the property will have to be sold.
When the property portfolio is held in an investment company the loan is with the company and not with the landlord. This means that on death of the director the loan does not have to be repaid although there may be issues to resolve with director loans or guarantees.
The question then arises as to what happens when the director dies before incorporation is fully complete and the legal ownership is transferred to the company?
As the beneficial interest is already in the investment company the process can be completed by seeking new lending in the name of the investment company which is used to pay off the mortgages in the landlord’s personal name.
Most buy to let lenders should allow 6 to 12 months to repay the loan in the director’s name.
The process of completing the incorporation by transferring the legal title to the company can they be completed during this time.
Consideration needs to be given to inheritance tax during this process as IHT may be due on the portfolio if other planning has not been considered.
Planning to pass on your property portfolio to your family after you pass on requires careful planning and needs the expertise of a firm such as JMS Accounting who understand the process of incorporation, property tax and inheritance tax planning.
Get in touch if you have a portfolio and want to ensure that as much of that portfolio as possible passes on to your family.
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