Mortgage/House Purchase Advice (Parents Involved)

[Hibernian Verse]

Looking for some advice if possible. We are unsure of the best way to proceed.

My parents are getting on and have found a house with a small annexe. Myself and my girlfriend have, coincidentally, got our house on the market so it is good timing. Let's not get into a debate about living next to your parents :greengrin

My Mum & Dad are willing to gift me a decent deposit to add on to the equity I currently have for the new house's mortgage however would like to retain their stake (which works out at 28% with "their deposit") but the mortgage will be in mine and my girlfriends name.

Firstly, is this possible given my mortgage would be on the whole home?

Secondly, I'm my Mum's only child but my Dad has three other kids (who never visit or bother their arse to phone but that's another issue) who will be swarming when the inevitable happens eventually. So is there a way of writing up a "contract" whereby my parents own 28% until such a time when that stake could automatically pass to me?

I hope that makes sense...any further questions let me know.

[Smartie]

Looking for some advice if possible. We are unsure of the best way to proceed.

My parents are getting on and have found a house with a small annexe. Myself and my girlfriend have, coincidentally, got our house on the market so it is good timing. Let's not get into a debate about living next to your parents :greengrin

My Mum & Dad are willing to gift me a decent deposit to add on to the equity I currently have for the new house's mortgage however would like to retain their stake (which works out at 28% with "their deposit") but the mortgage will be in mine and my girlfriends name.

Firstly, is this possible given my mortgage would be on the whole home?

Secondly, I'm my Mum's only child but my Dad has three other kids (who never visit or bother their arse to phone but that's another issue) who will be swarming when the inevitable happens eventually. So is there a way of writing up a "contract" whereby my parents own 28% until such a time when that stake could automatically pass to me?

I hope that makes sense...any further questions let me know.

Interestingly I’ve been dealing with bits and pieces of this sort of stuff myself.

First point I’d make is that it’s important that all parties get proper legal advice.

I’ve got a second child on the way in August, own my own business and home (mortgaged) but I’m not married to my partner. We realised it was time to make wills so seeing that you get a 18.75% discount from Watermans legal through having a Hibs season ticket, we went there.

Re point 2 -

Rather than say “everything I own transfers to my partner” it was suggested that I set up an appropriate trust for my kids so that if I died, my stuff would transfer to my partner but be ringfenced for them and not be diluted should she marry someone else in future and have stepchildren.

So if I’m right - I think this might be down to the terms set out in your mother’s will? Remember, a will is an individual thing and even if you attend as a couple you can’t really have a “joint will”.

So imo - it will be possible but I think you probably need to have robust conversations between the 4 of you and also bespoke legal advice regarding your respective positions.

Re point 1 - sounds like it should be possible but I think you’d need proper legal advice regarding how exactly you do it.

(I am absolutely NOT a lawyer so take this with an appropriate pinch of salt).

[Mon Dieu4]

Mortgage lenders can be funny with what you plan on doing, they wouldn't treat it as a gift(normally with a gift you need confirmation from the person gifting the cash to say it's a gift and they have no interest in the property) they treat it as a loan as it's not a non returnable gifted deposit, I would say speak to an IFA or Solicitor about it, Ive worked for some of the biggest mortgage lenders in the UK over the years and none of them would do what you are looking to do, there may be other lenders that might though

[Hibernian Verse]

Thanks guys, appreciate the responses. I've spoken to my mortgage advisor who basically said take the deposit as a gift and never mention my parents again to the mortgage advisor. Whatever gentleman's agreement is fine but to keep it private. Will get some legal advice from my lawyer and see which way is the best to go.

[Bristolhibby]

Mortgage lenders can be funny with what you plan on doing, they wouldn't treat it as a gift(normally with a gift you need confirmation from the person gifting the cash to say it's a gift and they have no interest in the property) they treat it as a loan as it's not a non returnable gifted deposit, I would say speak to an IFA or Solicitor about it, Ive worked for some of the biggest mortgage lenders in the UK over the years and none of them would do what you are looking to do, there may be other lenders that might though

Yes I had some nonsense when we bought our first house. My in laws were loaning us a deposit. It effectively became a gift, but I said loan when discussing it with the mortgage company. Had to draw up papers saying it was a gift, even though at the time it was a loan. Her folks then decided to gift us the money in the end anyway.

Christ knows when I’ll ever be in a situation to do that for my kids.

J

[JeMeSouviens]

If you can get through all this without ending up on the "Family estrangement" thread, you're a better man than me, HV. :greengrin

[Hibernian Verse]

If you can get through all this without ending up on the "Family estrangement" thread, you're a better man than me, HV. :greengrin

Haha it crossed my mind to hijack it

[lapsedhibee]

My parents are getting on and have found a house with a small annexe. Myself and my girlfriend have, coincidentally, got our house on the market so it is good timing. Let's not get into a debate about living next to your parents :greengrin


Fashionable. In today's Guardian. (https://www.theguardian.com/money/2023/jun/13/my-parents-want-to-split-their-home-into-two-houses-selling-one-to-me-is-it-feasible)

[Chuck Rhoades]

I’m also after some info / views in the mortgage space.

My parents are working class individuals who’ve come from and had very little in terms of wealth in their lives. They’ve contributed tax into the system since they were teenagers. They proudly became mortgage free a couple of months ago. They are 66/62yrs old respectively.

They’ve worked almost every day of their lives with little time off, including my Mum having one day per month off for almost a 10yr stint.

They want to sign the property over to my Sister and I now to avoid inheritance issues where their hard earned assets are impacted by tax. Equally, there was a situation in my wife’s family whereby her Granda had to sell his property to pay for his care home. They stripped him of almost everything he’d worked for to pay for his end of life care. My parents don’t want the same to happen.

They would remain in the property and have no intention of moving house again. The four of us are all aligned on this.

We’ve not sought any professional advice yet, that’s the next step, but would appreciate any insight/info people have on this. I’ve heard if signed over that should something happen within the first 7yrs in terms of care then authorities would still expect those assets to fund the care?

We recognise this will cost several thousand pound to organise the right legal paperwork so any initial views welcomed.

Cheers

[CropleyWasGod]

I’m also after some info / views in the mortgage space.

My parents are working class individuals who’ve come from and had very little in terms of wealth in their lives. They’ve contributed tax into the system since they were teenagers. They proudly became mortgage free a couple of months ago. They are 66/62yrs old respectively.

They’ve worked almost every day of their lives with little time off, including my Mum having one day per month off for almost a 10yr stint.

They want to sign the property over to my Sister and I now to avoid inheritance issues where their hard earned assets are impacted by tax. Equally, there was a situation in my wife’s family whereby her Granda had to sell his property to pay for his care home. They stripped him of almost everything he’d worked for to pay for his end of life care. My parents don’t want the same to happen.

They would remain in the property and have no intention of moving house again. The four of us are all aligned on this.

We’ve not sought any professional advice yet, that’s the next step, but would appreciate any insight/info people have on this. I’ve heard if signed over that should something happen within the first 7yrs in terms of care then authorities would still expect those assets to fund the care?

We recognise this will cost several thousand pound to organise the right legal paperwork so any initial views welcomed.

Cheers

As far as Inheritance Tax goes, signing over the house and then continuing to live in it (presumably rent-free ) creates a situation where it is still counted as part of your parent's estate. Thus IHT isn't avoided.

I appreciate there is a bigger picture here, not least the value of the house. I would urge you to get proper advice, based on all the facts, as soon as possible.

[JeMeSouviens]

I’m also after some info / views in the mortgage space.

My parents are working class individuals who’ve come from and had very little in terms of wealth in their lives. They’ve contributed tax into the system since they were teenagers. They proudly became mortgage free a couple of months ago. They are 66/62yrs old respectively.

They’ve worked almost every day of their lives with little time off, including my Mum having one day per month off for almost a 10yr stint.

They want to sign the property over to my Sister and I now to avoid inheritance issues where their hard earned assets are impacted by tax. Equally, there was a situation in my wife’s family whereby her Granda had to sell his property to pay for his care home. They stripped him of almost everything he’d worked for to pay for his end of life care. My parents don’t want the same to happen.

They would remain in the property and have no intention of moving house again. The four of us are all aligned on this.

We’ve not sought any professional advice yet, that’s the next step, but would appreciate any insight/info people have on this. I’ve heard if signed over that should something happen within the first 7yrs in terms of care then authorities would still expect those assets to fund the care?

We recognise this will cost several thousand pound to organise the right legal paperwork so any initial views welcomed.

Cheers

There are 2 separate issues here: inheritance tax and care costs.

As far as IHT is concerned, the first £325K of any assets each parent passes on is tax free, and they can leave the entirety of their assets to each other tax free and then the surviving spouse inherits the other's allowance. So the net effect is that unless your parents are likely to leave a combined inheritance of over £650K, there will be nothing due. Even if they are over that there is a further £175K allowance for leaving your main residence. Combine these things and for the vast majority of people, it's not an issue. (But YMMV obs.)

Care costs are not quite so clear cut. There are rules against what's called "deliberate deprivation", ie. essentially giving away money and assets to avoid them going on care costs. If your parents give you the home but continue to live in it that would be a pretty obvious case. I don't think there's any time limit on this. The 7 years you refer to is to do with Inheritance Tax, not care costs.

You need to get proper legal advice I think.

[pollution]

I’m also after some info / views in the mortgage space.

My parents are working class individuals who’ve come from and had very little in terms of wealth in their lives. They’ve contributed tax into the system since they were teenagers. They proudly became mortgage free a couple of months ago. They are 66/62yrs old respectively.

They’ve worked almost every day of their lives with little time off, including my Mum having one day per month off for almost a 10yr stint.

They want to sign the property over to my Sister and I now to avoid inheritance issues where their hard earned assets are impacted by tax. Equally, there was a situation in my wife’s family whereby her Granda had to sell his property to pay for his care home. They stripped him of almost everything he’d worked for to pay for his end of life care. My parents don’t want the same to happen.

They would remain in the property and have no intention of moving house again. The four of us are all aligned on this.

We’ve not sought any professional advice yet, that’s the next step, but would appreciate any insight/info people have on this. I’ve heard if signed over that should something happen within the first 7yrs in terms of care then authorities would still expect those assets to fund the care?

We recognise this will cost several thousand pound to organise the right legal paperwork so any initial views welcomed.

Cheers

The only part of this that I can answer with some certainty is that your parents would need to pay you market rent for them to qualify for the seven year rule exemption

ie if they survive seven years after the gift their house is exempt form inheritance tax. What you do with the market rent is your business.

Next part: I may be wrong but if your parents' total estate ie property, savings, shares etc etc is below £325,000 then it is exempt from inheritance tax so your parents may not

have to bother gifting it to you full stop. Having said that, the value of the estate may exceed the £325,000 level in years to come ( assuming the £325,000 level is not increased )

in the future.

I am not qualified in any way, just a serious passing interest.

It may will some money but definitely pay for a solicitor's advice.

[JeMeSouviens]

The only part of this that I can answer with some certainty is that your parents would need to pay you market rent for them to qualify for the seven year rule exemption

ie if they survive seven years after the gift their house is exempt form inheritance tax. What you do with the market rent is your business.

Next part: I may be wrong but if your parents' total estate ie property, savings, shares etc etc is below £325,000 then it is exempt from inheritance tax so your parents may not

have to bother gifting it to you full stop. Having said that, the value of the estate may exceed the £325,000 level in years to come ( assuming the £325,000 level is not increased )

in the future.

I am not qualified in any way, just a serious passing interest.

It may will some money but definitely pay for a solicitor's advice.

£325K for each parent. £650K for their estate in total.

[Onceinawhile]

£325K for each parent. £650K for their estate in total.

But, if they don't gift their house and, presuming their combined estate is below the threshold, they would also have their residence nil rate band.

Which complicates matters further.

Personally, having looked through this with multiple people, for purely IHT purposes, it is almost never worth gifting the family home that your parents still live in to children.

It might be for care home purposes though.

[Hibernian Verse]

But, if they don't gift their house and, presuming their combined estate is below the threshold, they would also have their residence nil rate band.

Which complicates matters further.

Personally, having looked through this with multiple people, for purely IHT purposes, it is almost never worth gifting the family home that your parents still live in to children.

It might be for care home purposes though.

What about gifting a deposit with which a mortgage is then taken out, but the parents then also move into the annexe at "a later date"?

Is that when the 7 year rule kicks in?

[WhileTheChief..]

For a married couple, when you take the residence nil rate band into account, you can have an estate of up to £1m before IHT becomes an issue.

Any gift, whether it be cash or physical property, remains part of the donor’s estate for 7 years.

For anyone considering putting any assets into trust, you have to get good legal advice. Remember, circumstances can change dramatically and there will consequences you haven’t even considered as being a thing.

We should all have Wills in place. A married couple can set up a “mirror will” (leaving everything to each other) for a few quid. Dying intestate leaves a total s*** storm behind you.

[McD]

Is there somewhere that wills can be created in a fairly straightforward manner that isn’t hugely expensive?

I’ve really no idea but have been meaning to get it done for a while

[JeMeSouviens]

But, if they don't gift their house and, presuming their combined estate is below the threshold, they would also have their residence nil rate band.

Which complicates matters further.

Personally, having looked through this with multiple people, for purely IHT purposes, it is almost never worth gifting the family home that your parents still live in to children.

It might be for care home purposes though.

Yeah, I mentioned that above. The nub of it is that for the vast majority, almost certainly including Chuck's folks, inheritance tax is not a problem.

[CropleyWasGod]

For a married couple, when you take the residence nil rate band into account, you can have an estate of up to £1m before IHT becomes an issue.

Any gift, whether it be cash or physical property, remains part of the donor’s estate for 7 years.

For anyone considering putting any assets into trust, you have to get good legal advice. Remember, circumstances can change dramatically and there will consequences you haven’t even considered as being a thing.

We should all have Wills in place. A married couple can set up a “mirror will” (leaving everything to each other) for a few quid. Dying intestate leaves a total s*** storm behind you.

Not strictly true.

It's part of the donee's estate. If the donor survives 7 years from the date of the gift, there is no IHT. If they die within the 7 years, there is a sliding scale of IHT chargeable.

There is also an Annual Exemption of £3,000 for gifts.

Like I said earlier, professional advice is the only way to go with these kind of issues.

[Smartie]

Is there somewhere that wills can be created in a fairly straightforward manner that isn’t hugely expensive?

I’ve really no idea but have been meaning to get it done for a while

It depends on what you consider to be hugely expensive.

My situation is quite complex and there are going to be a few extras thrown in as a result (we're going to do some powers of attorney and I'm also going to renew the lease for my work premises through them too) so I accept I'm going to be running up a fair bill.

Give them a call just to find out what a simple will would cost. A simple will shouldn't cost the Earth, a few hundred quid. Mirror wills (you and a partner doing it together) can save a bit more. If you have a season ticket you get 18.75% off at Watermans.

I think it's going to be worth it for peace of mind. I've grown to realise the absolute chaos I'd leave behind if I didn't get it sorted so I'm hoping to have it all tidied up soon.

[McD]

It depends on what you consider to be hugely expensive.

My situation is quite complex and there are going to be a few extras thrown in as a result (we're going to do some powers of attorney and I'm also going to renew the lease for my work premises through them too) so I accept I'm going to be running up a fair bill.

Give them a call just to find out what a simple will would cost. A simple will shouldn't cost the Earth, a few hundred quid. Mirror wills (you and a partner doing it together) can save a bit more. If you have a season ticket you get 18.75% off at Watermans.

I think it's going to be worth it for peace of mind. I've grown to realise the absolute chaos I'd leave behind if I didn't get it sorted so I'm hoping to have it all tidied up soon.


thanks :aok:

[JeMeSouviens]

Make a will in September with a particpating solicitor in exchange for a donation to charity:

https://willreliefscotland.org

Suggested donations are £100 for a single or £150 for a mirror (2 wills for partners leaving to each other and/or their kids).

[Chuck Rhoades]

Thanks everyone, very helpful.

IHT is a non-issue based on this trail.

What I’m less clear on is the care home situ. If they gift the house and then paying a rent, i.e. money in my sister or I’s account, would that avoid the issue stated above?

[JeMeSouviens]

Thanks everyone, very helpful.

IHT is a non-issue based on this trail.

What I’m less clear on is the care home situ. If they gift the house and then paying a rent, i.e. money in my sister or I’s account, would that avoid the issue stated above?

No, I don't think so but I'm no expert. This might help: https://careinfoscotland.scot/topics/care-homes/paying-care-home-fees/deprivation-of-capital/

[Since90+2]

Thanks everyone, very helpful.

IHT is a non-issue based on this trail.

What I’m less clear on is the care home situ. If they gift the house and then paying a rent, i.e. money in my sister or I’s account, would that avoid the issue stated above?

I'd imagine HMRC would probably be wise to that.

Not saying you'd do it, but you'd probably find a lot of people would "pay" rent to their children, but not really pay if you get what a I mean.

As has been said you'll need to take proper legal advice (which won't be cheap).

[WhileTheChief..]

If you're getting your Will done, you should also consider Power of Attorney at the same time. In Scotland, it would be a Continuing and Welfare POA you want.

Discuss it with a solicitor, it's not going to add much to the cost of getting a Will, and again, can save you all kinds of problems in the future. It's even more pertinent for those older amongst us!

[WhileTheChief..]

Some light Sunday morning reading for those of you concerned about Care Costs / Property.

It's long, and covers a lot of topics, but you want to focus on Section 7, page 61.

You'll probably still want / need to get professional advice.

https://www.sehd.scot.nhs.uk/publications/CC2021_01.pdf

[Billy Whizz]

Thanks everyone, very helpful.

IHT is a non-issue based on this trail.

What I’m less clear on is the care home situ. If they gift the house and then paying a rent, i.e. money in my sister or I’s account, would that avoid the issue stated above?
Your parents could put their house into trust, very expensive though
Means if they had to go into a care home, they can’t take the house away from them

[BSEJVT]

If you go down the route of them paying rent to continue to live in the property you need to be aware that such rent whether it is ever paid or not or refunded straight back to them will still be treated as taxable income in the hands of the "recipient"