Can I give my parents £150K to clear their mortgage?

margaretclare

I'm very aware of potential problems with them splitting up etc. The house is actually my Mum's and the deeds are in her sole name. However her partner has been living with her for 10 years or so and could make a claim on it.

I am not sure how much of a claim an unmarried live-in partner actually has. Certainly he would have if they were married - he'd acquire a right in that case simply by virtue of being married. Is there any particular reason why they don't get married?

I think you and Mum need good legal advice!

Medders2604, the download worked perfectly and I'm pleased to have the factual information rather than all the emotional stuff like 'the government steal your house' etc. However, it's 100 pages and will take some reading!! Thanks anyway.

Primrose

I don't know what your parents' house is valued at but wonder whether you could buy a half share of it from them, or the equivalent percentage of whatever £150 is worth? I imagine this would protect that part of it from any implications if it had to be sold for care home funding at some long term period in the future. Perhaps worth booking an hour with a solicitor, having writen to him with all the details in advance, to get some proper legal advice?

margaretclare

I think the situation is altered because it's not her parents' house - it's Mum's house with Mum's live-in partner! The OP said that the value is £300K with outstanding mortgage of £150K. Whether it really IS worth £300K now, in the present climate, is hard to tell. I agree - legal advice is essential.

molan

margaretclare wrote: »

I am not sure how much of a claim an unmarried live-in partner actually has. Certainly he would have if they were married - he'd acquire a right in that case simply by virtue of being married. Is there any particular reason why they don't get married?

It's an obscure death benefit pension thing. My mum has a strange pension from when my Dad died that pays out as long as she remains unmarried. It's not a huge amount but worth having anyway.

skintchick

My dad did this for me. He paid off my mortgage (52k) although it is different cos I pay him back at a rate he has worked out gives him the same return he would get if he had it in savings. (currently £180 a month down from £215). I don;t imagine he has declared it for tax though!

I know it's not quite the same but we've done it for a few years and it's not been an issue.

Susan_Frost

Regarding the rent situation, medders2604 is right, it would have to be an "normal" rent for that type of property. But you could "gift" £3,000 a year to offset the rent.

But it sounds as though you have already put money into the house and now the other half needs paying.

Why dont you pay off the rest, but all done though a solicitor. Work out how much of the house you would own, say the 50% and the monies given over the years and the solicitor can get it signed that you owe, say ... 80%?... of it. It may be then that they still have to pay you rent, but again, there is the £3,000 gift per year to offset that.

That way you have control of your own money (tied up in the house they are living in) and you can be assured that it is safe.

Also, I dont want to sound mean or anything. But you say you will let mum's partner live in it for life if anything happens to her. Very laudable and caring. But be careful. She could die at any time, like the rest of us, and how long would he be in the house. 5, 10, 15, 20 years. Perhaps with another partner. If you make it legally binding.

How about you own it, and have an understanding that if the worst happened, you would let him live in the house for, say 2 years. After that it can be reconsidered. It would give him time to grieve, but then maybe look for something smaller, depending on how life is for him, for you, etc. etc.

You never know what may happen to your own circumstances.

See a solicitor and talk through all the legal angles.

You can probably already gift £3000 for this year, before 5th April. And I believe you can gift to each of them which makes £6,000. Should cover any rents the taxman will expect you to charge. You will also have to pay tax on the income from the rents.

Good luck in your decisions.

Belt-tightener_2

Just to make you aware there was a bloke in France who bought a elderly ladies appartment and let her live in it for a nominal rent she outlived him by about 20 years so he never got the benifit of buying it to live in which was his plan.

You need to think about this with a view to your mothers partner.

see a solicior and get a trust drawn up in yours and yor mothers name, take into account what you paid in the past and what you will pay off. Have it set up so you can have the house upon her death. note that her partner may remain in the house for 2 years after her death, but if he remarries or co-habbits then the agreement is null and void and it turns to a 6 month rolling lease at full market value, after the 2 years even if he does not remarry it will revert to a rolling lease at market value.

This way if he does meet someone he is not out on his ear but you have a tennet sorted so the house in not empty and best of all if thinks break down then you can have him out in 6 months.

sloughflint

1)Unless I'm mis-remembering, I disagree with some of what has been said about gifts and IHT:

medders2604 wrote: »

so if you give them £150,000 the gift value would be £144,000 which would be added back into your estate if anything were to happen to you.
However if this does happen the amount of IHT payable is reduced on a sliding scale as I said earlier.

I thought taper relief ( if that is what you were referring to in post 11)was for gifts above the threshold so not applicable to the 144 k example you gave.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm
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ailuro2 wrote: »

Buy the house off of them, and then let them live in it for a nominal rent?

medders2604 wrote: »

ailuro2 unfortunately the tax man doesn't let you do that unless you pay full market rent they will still deem you to have a benefot and therefore include it in your estate for tax purposes otherwise everyone wuld buy their grandparents house and rent it back at a £1 a week or something and the taxman really doesn't like that.

Were you thinking of where people gift their houses but carry on living there and unless they pay full market rent then they are deemed to have given a gift with reservation of benefit and therefore the gift is still counted as part of the estate regardless of 7 years? That's not what Ailuro2 was suggesting though.

I thought that the suggestion was just insecure from the mother and partner's points of view and tax inefficient.
Had Op been able to afford 300k, mother would have received 150k from the purchase and could have paid rent on the property out of this but the couple might not necessarily have been safe in the home for the rest of their days ( family fall out, divorce etc). Also stamp duty implications? Income tax from the rent? CGT when he/she eventually sold the house if not living there?
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Susan_Frost wrote: »

And I believe you can gift to each of them which makes £6,000.

Not so I believe. Maximum of 3k IHT exempt per annum from capital( eg 1.5k each). However if no gift the previous year that can be carried forward to the following year making 6k exempt that year.


2)As for the problem :
I gather at the moment mother has a 50% equity in her house that she shares with her partner but they are struggling to pay the mortgage. OP cannot afford to buy the house but could afford enough for the mortgage to be redeemed.
The question is what solution is best that safeguards OP's money, safeguards mother and partner during their lifetime in that house (or move if they wish) and is tax efficient.
Suggestions so far include:

Gift
Purchase share in property
Loan

Is that a fair summary?

Susan_Frost wrote: »

How about you own it, and have an understanding that if the worst happened, you would let him live in the house for, say 2 years. After that it can be reconsidered. It would give him time to grieve, but then maybe look for something smaller, depending on how life is for him, for you, etc. etc.

If OP owns the house after paying a proportion, that would involve a gift from Op's mother ( the equity she already has) and then we are back at the potential deprivation of assets problem and other problems.

A loan seems the most simple to me to safeguard OP's money but then I'm just a random poster so could be wrong.Time for experts.

We from time to time see people on here relaying poor advice received from solicitors in this area so I wonder if this might be any better?
http://www.solicitorsfortheelderly.com/public/index.php

withnell

Why not make them a 150k 0% loan? That way when you inherit the property, you'll only pay IHT on the (estate-150k)

People quoting above about the £3000 exempt transfer each year would only be relevant in the situation if the OP was to die and pass their estate to their parents, which I would assume to be unlikely!

sloughflint

withnell wrote: »

Why not make them a 150k 0% loan?

Certainly a loan safeguards OP's money but doesn't help his/her own IHT dilemma if estate large enough to be an issue.

withnell wrote: »

That way when you inherit the property, you'll only pay IHT on the (estate-150k)

Do you mean upon mother's death? IHT would be paid out of the mother's estate; not by the OP. At the moment the mother's estate sounds well below the IHT threshold if she only has 150k equity in the house and perhaps minimal savings if struggling with mortgage payments so unlikely to have any IHT issues of her own.

withnell wrote: »

People quoting above about the £3000 exempt transfer each year would only be relevant in the situation if the OP was to die and pass their estate to their parents, which I would assume to be unlikely!

It would be relevant to OP's estate regardless of where the estate passed to.Op was questioning IHT implications for him/her if money was gifted.