Buying a House with a parent - potential problems?

clearingout

Hello,
Not sure if this is the right place to post but will see if anyone can help! My solicitor doesn't seem to know the answer so maybe someone here does!

I am about to buy a house outright, no mortgage, using my divorce settlement and money from my mum. We have been advised that to avoid me having to pay any tax on the money my mum is giving me, she should become part-owner of the house. She will then gift me her share of the house in her will. We have been advised there are two ways of doing this: either she becomes a part-owner in full with the Land Registry or we simply register her share of the property as a charge against the house.

My mum isn't young and although in overall good health, I obviously have concerns that at some point, she may need to go into sheltered accommodation or a nursing home. She owns her own home. I am an only child. She intends to gift half her estate to me (including her share of my house) and half to my children. No other beneficaries. The estate isn't huge - but at the current time consists of her house worth around £150k and a cash sum of around £75K and her share of my house which will be about £60K.

I guess there are two questions:
a) is putting a charge on my house the best way to go about this? will I be forced to sell my house at any point to pay for her care if she were to need car? My ex has messed around so much that I doubt I will ever get serious credit again so I am concerned that I would struggle to raise a mortgage if I needed to. Certainly, it's going to be a problem for the next few years whilst I get back on my feet.
b) is there anything we can do now which would protect her from having to sell her house if she needed to pay for care?

and a further question:
in making her will, is she better off consulting a specialist will-maker or a high street solicitor?

thanks!

G51shopaholic

Why would you have to pay tax on the money your mum is giving you?
If it is going towards the cost of a house then it isn't income, it's a gift.

Problem I see is if she ever decided to change her will (for any reason) then your house could be at risk.
Also if you ever decided to sell and move, if you every got remarried or anything.

I guess you live in England and your mum would have to pay for her care if she every need it in the future. Alternative is that she moves in with you
and you care for her in her final years as a "thank you" for all that she's done for you.

But I would get a solicitor to do a will so that it is done correctly. I did read somewhere that on 1 day a year they do wills for free but not sure when this is.

Again it is also important that YOU do a will so that if anything happens to YOU your mum's money is safe!

SmlSave

Clearingout - To put a personal charge on the property you need to fill out a form (can't remember which one) and send it to the Land Registry. I'd suggest giving the Land Registry a call to find out.

I would suggest getting a solicitor for this and for making a Will too - then at least you know its all been sorted correctly.

You could also think about owning the proeprty as tenants in common where you both own in different percentages to protect your investment.

clearingout

thanks for that. Yes, there is the concern that at some point my mum and I fall out for some reason and she changes her will. I don't think that will happen - we are not that type of family, really. I doubt very much she'd move in with me - we have discussed it at length and I offered for us to look for a place with a granny flat at this point but she declined but I guess she may change her mind if she gets ill. Bit of a wait and see that one!

Jinx

Hi Clearingout

You could have a solicitor draw up a financial agreement between you and your mum. My partner and I did this when we bought our house but werent married.

And I did have a conversation with someone who does wills the other day re it being sold if my partner needed care (we're not old but was just mulling over wills and that kinda thing !!) and she said it would be unlikely if one 'well' person was living in the house but that it could be valued and that money taken from that persons estate at a later date. So your mum would get care and any monies owed would be collected later...

I suggest a trip to an experienced solicitor. Btw im in Scotland so your rules may be different re care?

Georgie4

To be honest the first thing I would do is change to a solicitor who can answer your questions. This area is fraught with difficulties and tax implications so you need to be aware of everything that could happen. Both you and your mum need to be protected in case of all eventualities and you would be amazed at what can happen in families - though it does help you being an only child

Fire_Fox

If your solicitor does not know the answers, find one who does! There are many implications of your mum gifting you the money or purchasing together, not least what happens if your mum needs residential care in later life (Google 'deprivation of capital').

roger196

Your mums estate is under the nil band for IHT, so IHT is not a problem. If mum becomes a part owner of your house, there is a potential cgt liability if you have to sell. When your mum dies, there is no cgt liability on her share of the house. The major problem is care home fees. However there are sufficient assets in your mum's estate to pay these for about six years at about £30k per year.
The problem with wills is that they can be changed at any time up to death. What would happen if your mum should re-marry?
The route I would favour is for your mum to set up a trust now with you as the life tenant. Your mum would put £60k into the trust and the trust would then buy the part share in your house. Your mum would need to decide who the remaindermen were ie what happens when you die and the life tenancy comes to an end.
You need a solicitor who specialises in trusts and carehome tax planning.
It is some years since I was seriously involved with trusts etc, so some of the above may need updating but should be food for thought.