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Old 4th April 2018, 18:27   #1 (permalink)
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Turkish property bare ownership inheritance.

I generally find the 'yellali' website interesting and often helpful but this item posted today could cause problems for any UK owners not first taking financial and legal advice in the UK.

Bare ownership - an alternative to the classical inheritance procedure for a property
4th April 2018


https://yellali.com/news/article/528...for-a-property

This interesting article explains that you can pass on your Turkish property to a beneficiary while you are still using it using the 'bare ownership' law. While this may be possible in some jurisdictions a UK citizen/property owner/taxpayer should consider the following points and take advice about their tax situation before making any decisions.

In UK Law;

1. All assets are taken into account in a divorce, so if you pass your Turkish holiday/main home to your child who later gets divorced, 50% of your Turkish home may pass to your divorced son or daughter in law if they cannot be bought out, leaving you vulnerable.

2. In UK inheritance law, if you give away any asset but continue to have use of it, this is called a 'gift with reservation of benefit', which means that it is still treated as part of your estate however long you live after giving it away. To get round this you would have to live at least 7 years after making the gift AND pay the full market rate of rent for the rest of your occupancy.
Your heirs would also have to declare rent as income for UK tax and keep the necessary records for Turkish tax authorities.

3. If you have left UK permanently and live fulltime in Turkey, you are still potentially liable for UK inheritance tax if you have lived in UK in 17 out of the last 20 years before death. All your assets worldwide are included in UK inheritance tax assessments and if necessary there is a 'divvying up' between countries for any tax due on your estate. Only charitable bequests are free of UK tax or offset against other assets.

4. If you pass your Turkish home to your heirs and they decide to pass it back to you for any reason, they could pay capital gains tax on any increase in value over the allowed taxfree gain, if it is not their main residence.

5. If you decide to pass over the property to a grandchild, if under 18 they will not be able to 'give receipt' and the property would have to be put into a UK trust which would involve appointing independent trustees and making trust tax returns.

This is just a bare outline of some potential points to consider.

While the idea of 'bare ownership' could be brilliant for some, particularly if you leave to a charity, or if you know you have a life threatening condition and want to leave the property to a spouse, (no tax between spouses in UK law) can I respectfully suggest that this should not be arranged without careful planning and the relevant professional advice that takes into account your main tax jurisdiction, wherever you live.
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