How to help my parents

Ssss

Hi this is my first post - not sure if this is the right forum, so here goes!!

My parents are in financial difficulties and my brother and I would like to help, but not sure about how.

Parents are in 60's - Dad (68) retired on small pension, Mum aged 64 made redundant - almost zero pension, only paid the reduced stamp so not looking good. We have just found out that they still have a £33000 mortgage on their £130000 home - paying £600 a month!! They have no savings and currently have an insurance covering just the interest. Mum is coming to realisation that a new job is unlikely. Dad has ill health. If we don't help, they will be repossessed within the year. One reason for their difficulties is funding us through university!!

My brother and I both have good salaries but also young families. Our initial thoughts are to somehow take over the mortgage as we could afford £33000 interest only. Could we buy the house for this price? Are there tax implications? We would like them to remain living in the property rent free as they have such little cash.

My parents would like to move into a bungalow due to their mobility - bungalows in our area cost more than their house. If we bought their house for £33000, could we then sell and buy a bungalow - acting as their landlords, with them again living rent free.

Are we barking up the wrong tree? Is it best that they lose everything in order to get a council property? We have absolutely no idea of what to do or who we should speak to. My parents are old fashioned and hate admitting their difficulties. They have finally asked for our help but none of us know anything about tax etc. Any advice would be very greatfully recieved - it's heartbreaking to think they could lose everything.

Emmzi

I'm guessing the house is worth more than £33k, so if there is significant equity, they won't lose everything, and they won't be a council housing priority.

If they sold their house they would have enough to rent somewhere? And as/when their capital ran out could apply for housing benefit.

Do they need a bungalow or would a ground floor flat (maybe with a warden nearby?) be more appropriate?

ailuro2

Ctizen's Advice Bureau would be able to point you in the right direction, your parents might qualify for some kind of benefit to help with your Dad's ill health.

You can't buy the house for £33k, that would have longer term implications for tax, iirc.

Oldernotwiser

Can't your parents sell their house and either buy a flat (likely to be cheaper) or a bungalow jointly with you or your brother? Any other way seems to involve your parents handing over the equity in their property to you.

onlyroz

Presumably they could sell the house, pay off the mortgage and move somewhere smaller?

Kay_Peel

A couple of idea:

Could they sell their home and pay off their mortgage with the balance? Could they move in with one of you until such time as they found a suitable property to down size into?

Could you and your brother afford to boost their income by contributing a set sum into their bank acount each month? (I forget what the amount you can 'gift' to a relative without their being a tax implication).

daska

I'm by no means an expert when it comes to tax but even I can see you're getting into the realms of stamp-duty avoidance and gifts with reservation and all that malarky. I strongly advise getting professional advice before opting for any of the plans above.

The simplest solution is for you to help them sell the house and downsize.

donquine

Since you and your brother can afford to help out, I would suggest you set up a regular payment into your parents' account to cover their mortgage. This would get the job done and is the simplest option from a tax point of view. There are some IHT implications, but your potential exposure is relatively small and it's unlikely to ever become a real issue. To be blunt, the chances of your parents outliving you are relatively low.

Alternatively, if your parents want to live in a bungalow, they could sell their current home. They could use the proceeds to pay rent, or use the cash to buy most of the bungalow outright, obtaining a small mortgage for the remainder. You and your brother would have to act as guarantors and you might be into specialist lending territory due to your parents' age and lack of income.

Broadly speaking, if your parents were to sell their house now, they probably wouldn't have any CGT to pay. If you and your brother bought the house and your parents lived in it, there would be CGT to pay when you and your brother eventually sold the property. It is possible, based on the limited information you've provided and a couple of assumptions on my part, that this CGT bill would not be insignificant.

There would also be several IHT implications.

It's difficult to give you more specific advice without more information, but I trust the above shows that your idea to buy your parents' house at a low price isn't a great one.

From a non tax perspective, if your parents end up needing care and they've essentially given most of their biggest asset to you and your brother, deprivation of assets becomes an issue. You say you and your brother have families of your own now - do either of you have a partner? What if you die, your share of the house goes to that person and they decide they want to realise the cash by forcing a sale of the house, even though your parents are still alive and don't want to leave?

It really is simpler if your parents retain ownership of their own home. The expression "can of worms" comes to mind...

kingfisherblue

Are there any pensioner's 'villages' in your area? near me, these are springing up following the success of one that opened about five years ago. They are designed for people over 60 and are one and two bedroom flats, with no building higher than two floors. Everywhere is accessible by a lift and there are communal areas such as a lounge, hairdresser, social club, small health centre, bowling green, etc.

The flats are a mixture of privately owned and rented. There is a waiting list, but prices are cheaper than a house.

It might be an option if there is a village (more like an estate really) near you, as it would help your parents financially, as well as providing suitable housing for your father.

RedBern

also, what about looking into some sort of 'sheltered' accommodation - these used to be council owned/run but more and more are housing association. There's sometimes a waiting list, but, if you get a nice one, they can be very good. Your parents would have their own space, a garden to sit in but not have to look after (unless they wanted to potter), and company of others - which, longer term, may also be a good reason to move somewhere with more support. Also, check with the council about a benefits advisor to check all their entitlements, especially as they are on limited income.

Penelope_Penguin

Ssss wrote: »

My parents would like to move into a bungalow due to their mobility - bungalows in our area cost more than their house. If we bought their house for £33000, could we then sell and buy a bungalow - acting as their landlords, with them again living rent free.

This is important for inheritance tax. Unless you charge your parents a reasonable market rent for living in the property, it may be classed as having been transferred to you and your brother to avoid IHT.

I'd advise that a chat with a solicitor or IFA, even if you have to pay, will be money well spent.