Should I buy my parents house?

FairyElephant_2

I posted a similar message on 'silver savers' for my mum, but from my point of view, perhaps it's better here, so apols if anyopne already read the gist of it!

I know that there is something about a 7-year-rule when people are 'given' houses or money, to avoid stuff like inheritance tax (we're not in that league believe me - we are talking a little 2-bed semi, not a great fortune!), but not really sure how it all works.
If I were buy my parents house and pay the market value for it, and then rent it back to them, would that still count? After all, they could re-mortgage it to get money for their retirement as many older people do? What is the difference if they sell it to a relative?

This came about becuase of a conversation I had with my mum at the weekend. She & dad live in the same house, but have had separate lives for many years, although still married in name - but since he has had dementia for the past couple of years, she has looked after him. He is not totally inacapable at the moment, but needs watching as otherwise he doesn't take medication, often won't eat, sometimes forgets to change his clothes, that sort of thing. Mum is worried that if something happens to her, he won't be able to cope and will need to go into some sort of care, for which she thinks the house will have to be sold to pay for.

Mum worked all her life, and has made a will leaving her 'half' of the house to me. She is worried that I would not get this if the above happened. She is happy for my dad's 'half' to pay for his care, but wants hers to go to me. Is she correct? Or would her will be taken into account, and only my dad's 'half' be used for his care? I know this is a morbid subject and hopefully we'll not have to find out, but she gets concerned about these things!

Can anyone offer any advice?

Thanks in advance.

FE

Bossyboots

First thing, is their property held as tenants in common or joint tenants. This piece of information is vital to their situation as if the latter, her half goes automatically to your father should your mother die first, regardless of what is in her will.

At the moment I can see nothing wrong with you buying their property in the manner you suggest. It is when property is given or sold at below market value that subserquent problems can kick in. I am giving you the benefit of the doubt and assuming you will be charging them rent to cover a mortgage you will need to raise to buy the property.

I am not sure, but I don't recall anyone suggesting that if it is done the way you suggest that the local authority can act against the property should one of them need care. They will after all have the lump sum from the house to pay for that in any event.

The only thing that does spring to my mind as I am typing, is whether your father is actually capable of handling his own affairs and therefore by extension, can he be considered mentally able to execute the necessary documentation to effect the sale. You would be wise to get his doctor to certify him capable if you wish to avoid questions being raised later although, as I said, with the capital sum, no-one is likely to look at the background to the house sale other than to check it was sold at market value.

clutton_2

there is also the question of if your family may need to claim housing benefit in the future to pay their rent for them. if the property is owned by a family member, i know there can be quite severe problems. you could get round this by buying in a limited company name i think. I got my mums house put into our joint names, so that if she had gone into a home, she knew that half of the value of her house would have come to me. However, if a local authoirity suspects that a house has been "disposed of " to avoid Care Costs, some have assumed powers to recoup some of that disposal sum - but, i dont think these powers have yet been tested in the courts. If the house is sold a fair few months/years in advance of residential care being needed, they will have difficulty proving that the disposal was to avoid costs, so, the sooner you sort this out the better.

i would also suggest that your mum consults a solicitor who can advise her independently on this transaction. good luck.