Financial Adviser | Tax burden on property inheritance
I am building a house on family property with my two brothers. We are tenants in common and in our late 60s and 70s. I heard that inheritance tax is burdensome. Should I remove my name from the title now and replace it with my daughter's to avoid this burdensome tax?
FINANCIAL ADVISER: It is good to see you giving attention to estate planning and trying to determine the most cost effective way to transfer property to your heiress. Effective estate planning saves time, money, and relationships.
It is worth highlighting that you are able to transfer your interest in the property to your daughter by virtue of it being held by you and your brothers as tenants in common. If you were holding the property as joint tenants, the interest of a deceased joint tenant would pass to the surviving joint tenant.
I do not know that you can just remove your name from the title and replace it with your daughter's. A formal process has to be followed, and it costs. I do not know either that it is correct to say that there is an inheritance tax in Jamaica, although the transfer of property before and after death comes with costs.
INTER VIVOS GIFT
A gift to take effect while the parties are alive is known as an inter vivos gift, which is one of the courses you are considering. According to the Stamp Duty and Transfer Tax Division of Tax Administration Jamaica, the costs of a 'love and affection gift' such as you are interested in are as follows: transfer tax of five per cent of your share of the market value of the property as determined by the valuators at the Stamp Office and stamp duty of $40.
If, however, you should decide to have ownership of your interest transferred to your daughter after your demise, that is, by a probated will, the stamp duty would be 0% and the transfer tax on death would be 1.5 per cent of your share of the market value of the property.
For information, should the transfer be by sale to your daughter or any other person, the transfer tax would be five per cent and the stamp duty four per cent of the market value.
To have your daughter's name registered on the title, you would need to engage the Titles Office of the National Land Agency. For a gift, using the Transfer of Land form, the fee would be $200.
Should the transfer be by a will, the cost would be $1,200 $1,000 for the transmission application accompanied by the probated will and which endorses the executor on the title; and $200 to register her name on the title.
Should the transfer be by sale, the cost at the Titles Office would be 0.5 per cent of the value of the interest being transferred.
It is usually prudent to get guidance from an attorney-at-law - at a cost to you, of course. The legal minds would be particularly crucial in the event of a transfer by will. It seems to me, though, that the processes at the Titles Office are sufficiently straightforward for a sober individual to complete the transaction at that office without engaging the costly services of an attorney. To save money using this approach would require some time on the part of the person relating to the Titles Office.
In terms of the cost of stamp duty and transfer tax, it would cost less to do a testamentary transfer, that is, transfer by will, than a transfer by inter vivos gift. The former would most likely require the services of an attorney, which could be costly bearing in mind that an attorney would likely charge for such services on the basis of the value of your share of the property.
It is also possible that you would want to engage the services of an attorney in the latter case, though not necessarily in relating to the Titles Office. Bear in mind that it could become necessary to do a valuation of the property, which would cost you.
Although cost is important, there are other issues you may want to consider in coming to a decision. Whatever you decide, it seems it will not be cheap.
Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. email@example.com