Confused and need help!

brian.wainwright_2

Hi,

As a result of suddenly losing my step-father, my mother has found herself inheriting his house (they were not married and she had no legal claim to the house - ie. not on the deeds/mortgage/etc).

However, he also had a reasonable amount of debt and the rest of his estate went in paying that off. That leaves my mother with a mortgage-free house, but with no liquid cash.

She has a reasonable amount of debt herself (she took out loans to help with his failing business after he ran out of credit), and due to the fact that she's disabled and unable to work, she lives on benefits.

Due to her own debt, she's struggling to keep her head above water, and the stress is making her quite ill.

I currently live at home, although I am currently searching for my first home with my girlfriend.

As I am an only child and my mother intends to eventually leave everything to me, we've briefly looked into the idea of 'gifting' the house to me at some point. I understand that if she gifts it to me, then as long as she survives 7 years, I won't be eligable for inheritence tax on the property.

However, a friend has also made the suggestion that I could get a Buy To Let mortgage and buy my mothers house for a reduced (yet reasonable) price. The idea being that she would get enough money to pay her debts and live comfortably in the future, and she could stay in the house (with an appropriate tenancy agreement) paying a reasonable (yet affordable) rent.

My friend also suggested that I might be able to get a mortgage for my own home secured against the property.

To be honest, I'm totally confused about all of this and I really need to sit down and talk to an advisor! However, you guys are usually pretty sharp about this kind of stuff!

So, does this sound like a possibility? If so, it'd help my mother out of a tight situation and really help get on to the property ladder.

Or, does this sound like something that would be full of pitfalls, tax implications and legal wranglings!?!

Thanks in advance!

poppy10_2

Why can't she just sell up, get a windfall lump sum, and live comfortably renting for the rest of her life?

brian.wainwright_2

Because it's her home of 20 years and has all the memories of my step-father here.

We're looking into the possibility of her gifting the house to me, then I can release some of the equity in the house in order to help her pay of her debts and help me buy my own house. At least that way, she gets to stay in her home.

Emmzi

could you and gf move in and pay her rent to help with the bills?

brian.wainwright_2

It's a nice idea Emmzi, but it's not going to happen! Let's just say that there are some 'personal differences' between the two of them!

Emmzi

ok. so the main question is, can she afford to run the house?

if not, options
1) sell
2) lodger
3) if old enough sell part of house to annuity company and get an income (lowers your inheritance)
4) you buy house, grant her liferent occupancy, se has cash to live on (you need mortgage)

If she *can* afford to run the house then it's just about the most tax efficeint way to transfer it to you while guaranteeing her occupancy ie so you can't legally force her out. I'd say you need a soliticotr for this, and so does she - it may be all friendly now but if she needs to eg go into a care hme later, if she feels railroaded into it "so you can have the house" it's got so much potential to get bitter and tiwsted.

brian.wainwright_2

Hi Emmzi,

Simply put, if she could clear her debt, based on her income she could comfortably run the house.

Option 1. is a total last resort for her, as she desperately wants to keep the house - as I said, it's her home of 20 years and she's been through enough with the loss of my step-father that I fear that being forced to sell the house would push her over the edge.

Option 2. is not an option. She's incredibly private and would feel highly uncomfortable sharing her house with anyone. She's rather sell up than take on a lodger.

Option 3. is something that I'd prefer her not to do. Yes, partially because it would affect my inheritance, but also that I'd prefer to help her first before we had to go to an annuity company.

Option 4. is looking like the most favoured option all round. We'd have to look into the figures and details, but it seems that we could both win if we worked things out correctly between us. She'd get her debts paid and get to live in her home as long as she wanted and I get a property which I could use to secure a mortgage against for my own home.

I totally agree about sitting down with solicitors to guarantee occupancy - I'd only agree to do this if she was totally assurred that she'd always have a roof over her head and she felt totally comfortable with the arrangement.

Thanks for your comments!

Emmzi

by the way - you've checked there was no extra life insurance policy hiding somewhere? just to be obvious...

an, I would recommend one solicitor each, so there can be no conflict of interest.

brian.wainwright_2

Lol, afraid not Emmzi!

It's been a long (and quite painful) process going through the whole probate/inheritence process, and we're positive that there's no extra policies or pensions anywhere.

To be fair, the whole problem could have been avoided if my step-father had known what we know now about 'avoiding' inheritence tax (ie. having my mum put onto the deeds of the house, gifting his assets, etc. - all legal stuff of course! ). It's just a pity that between the government and the solicitors handling the probate taking a HUGE amount of money in taxes and fee, my mum could have paid off her own debts and lived quite comfortably for the rest of her life in her own home.

Still, lessons learnt!

Thanks for the advice on individual solicitors. I think that I'd agree with that!

Trollfever

Just the facts
about equity
release schemes

Raising money from your home

http://www.moneymadeclear.fsa.gov.uk/pdfs/equity_release_ink.pdf