Giving money to parents to buy a house!!

winglessbird

Need advice,

My husband's parents have the opportuntiy to buy there home "from the council" at a discounted rate. Now to do so we are adding more money onto our mortgage and giving them our savings. This all comes to around £40,000. The house will be willed to us. Their fear is that because they are both pensioners questions will be asked as to where they got the money or will we have to pay tax on the money as it is essentially a gift?

Any help would be appreciated.

00ec25

you can give them as much money as you like - there is no tax on gifts in the UK

BUT
when you inherit the house it may be subject to Inheritnce Tax because it would be part of their estate. Assuming one leaves the house to the other then on the death of the second person IHT rules men the estate would have to be worth over £650,000 before it would pay tax. Estates mens the house and all other possessions, cash, savings etc

RayWolfe

Is the money a "gift" if it is paid conditionally, i.e., if it is willed back?

p00hsticks

Bear in mind that if your parents in law get into debt, or need to go into care, then they may end up having to sell the house. Even if they don't, any debts that they have when they die would have to be settled from the estate before you received any inheritance - so you can't guarantee that you'll get your money back if you gift it to them in this way.

And there is nothing to stop them just changing their will at any point.

Slightly off topic for the tax board, but have you all thought this through thoroughly - are they really sure that they want to own their own house at this stage in their life? If they have lived in rented accomodation all their lives - particularly with the council as landlord - it's a big responsibility to suddenly become an owner-occupier.

Going on my Mother in laws exerience, they'll be used to just phoning the council to get them to deal with maintenence issues such as the heating breaking down or a window getting broken. And they'll be used to the council regularly redecorating and maintaining the property. As owners, your pensioner in laws will have to fund and arrange all this themselves (or call you to do it!).

As owner-occupiers they'll lose any entitlement to items such as Housing benefit, and as I've mentioned, could end up with charges put against the property if they get into debt or to pay for care - even to the point of being forced to sell.

Round our way, it's pretty easy to identify those ex-council properties where the 'right to buy' has been exercised. While some - particularly those lived in by younger working residents - are very smart, there are a larger proportion that are scruffly and badly maintained, as they have missed out on the replacement windows and doors, new central heating, redecorating, fencing etc enjoyed by those houses still owned by the council, and the elderly owners are obviously unable to cope with or afford even the minumum maintenance required.

James,_Oxford

Sounds like it could be a recipe for trouble.

Why don't you buy a share in the house with the £40,000. That way you help your parents in law get to buy the house for a bargain price and you get some security.

bryanb

James,_Oxford wrote: »

Sounds like it could be a recipe for trouble.

Why don't you buy a share in the house with the £40,000.

Not allowed unless you are living there and on the agreement.

James,_Oxford

Is that a stipulation imposed by the Council?

McKneff

I would think its an overall stipulation.
Only tenants are allowed to get the discounts that councils give. And so it should be.

relaxtwotribes

Lend them the £40,000 and at the very least take an equitable charge over the property (preferably take a legal charge).
Or, after the house has been bought, convert the £40,000 loan into a percentage ownership of the house and in the process you get your name on the deeds.

p00hsticks

relaxtwotribes wrote: »

Lend them the £40,000 and at the very least take an equitable charge over the property (preferably take a legal charge).
Or, after the house has been bought, convert the £40,000 loan into a percentage ownership of the house and in the process you get your name on the deeds.

It depends on the particular council, but they may well impose restrictions (such as having to at least partially repay the discount given) if the property is sold on or the ownership changes within a certain time of the sale.

relaxtwotribes

Thanks for that information p00hsticks. My original suggestions were aimed at protecting the OP's "investment". The OP stated that "the house will be willed to us" which has 2 very large loopholes in that assumption. One is that the wills (for there needs to be 2) do get made and executed. Two is that the wills are not subsequently superceded.

Winglessbird, for the house purchase and the wills your in-laws will be best with a solicitor. Find one, put your proposal to him and ask him/her how to best protect your interests (conflict of interest accepted).