Advance on inheritance, whats it worth

XAN

My Father died recently and my Mother is selling my Fathers house to my sister for half market value this equates to half a million purchase price on a 1 million pound house. I have been told my half of my fathers estate is to be invested in my mothers new smaller home that is costing 600k and I can have my 500k when my mother passes away.

What I want to know is, if my sister is basically getting a loan from the estate in the form of the property that is being gifted to her, does the fact that she is getting the benefit of that half a million, for 20-30 years longer than I will get the benefit of my share not have a value. If she put the half a million in the bank it would earn interest

I have been advised that the hidden value of the money my sister is getting is the interest she would of had to pay on a morgage, had she had to take out a mortgage for the full asking price of the property , this equates to just under 10k in interest a year.

The executors are saying that my sisters saving of 10k interest a year is irrelevant and as long as we get the same eventually it dosent matter if my sister has the money 20-30 years longer than I.

Is this fair or right?

NAR

Who was the house willed to? If it automatically came to your mother it will be her choice who she wills what to.

If she has chosen to sell it to your sister at less than market price then that could have IHT implications.

If your mother becomes very ill and has to go into a nursing home the new home may have to be sold to fund her nursing home costs.

DVardysShadow

I understand your argument and I tend to agree. The mortgage she does not pay is rent on the money she does not borrow - another way of looking at this is that she is not paying rent on the half of the house she is being given.

At the end of the day, the executors must do what the will says, so your argument may fall down there. What does the will say?

I really have no expertise here, but I think that the estate will be held by your mother with a lifetime interest. This may constrain what she can do with the house in terms of any deal with your sister.

XAN

The house has been left in trust for my mothers life time to then come to me and my sister who under my fathers will are to be treated equally.
My mother thinks the house is to big so wants a smaller house its a huge 5 bed 2 bath edwardian home and a difficult walk to the shops, so I support her mooving. My mothers new home will be split between me and my sister and my Mother with me getting the higher percentage so that my sister's advance and my larger percentage of my mothers house evens up when my mother dies, I am also trying to sort the fact that I will have to pay more capital gains than my sister then but that is being looked into
.
However My father promised me just before he died150k for a large extension as my 17 and 19 year old sons at 6 foot four share a single bedroom he thought we needed more space, bedrooms , living bathrooms etc. I now cannot have this as my mother is using the funds to put into her new home. I really could of done with an advance myself.
If I want an extension I will now have to take out a very large loan. It some how does not seem fair that my siter is getting a large family home with 50% free and I will have to pay interest on a large bank loan and my sister gets interest free if we are supposed to be equal.

What I need is to know if there is an equasion to charge my sister interest on this big advance, has this been done before and interest charged, half a million 25 years early must be worth something its not a small amount of time or money !!"""

XAN

Is there a set equasion for the value or interest of an advance on inheritance if only one party is getting the advance to equal things up.

RAS

Legally neither you or your sister are entitled to anything until your mother dies.

There is nothing to stop all the beneficiaries of thwe will agreeing to a variation in the will, but you ALL have to agree to it.


So lets separate out the issues

Mother wants to sell the family home and buy a smaller property. No problem with either of you.

Sister wants to buy the family home. No problem with either of you.

Sister wants to subsidise her purchase of the house with a loan equal to half the value of the release equity, from you. Not OK with you. Also not sure on the legality of you effectively lending her a mortgage for 25% of the value of the house or what her mortgage provider would say.

This can only happen if you agree to forego immediate access to your part of the equity released and the benefits that would accrue over the rest of your mother's life.

You need a solicitor of your own.

RAS

If this were legally acceptable to all parties including the mortgage company, I would suggest that you sister pays you 3% above the base rate, monthly payment until you mother dies, with a 25% charge on the property. Then you get the equity and remove the charge when your mother dies.

Actually you might simply want to advise the trustee that you want £180K of the equity immediately and then discuss a smaller loan to your sister?

meritaten

isnt it unlawful for your mother to sell a house which has been left in trust to her? if your fathers will left the house to his daughters with the proviso that your mother lives in it during her lifetime then she cannot sell it. if he left it to your mother with the proviso it goes to his daughters in equal shares when she dies - I still cannot see how she can sell it to one daughter. there is also a risk of falling foul of the taxman in this as he may think he is losing out on inheritance tax/capital gains tax.
of course a sharp lawyer may well know of loopholes in this - but this is my understanding of a property left in trust.

mountainofdebt

XAN wrote: »

However My father promised me just before he died150k for a large extension as my 17 and 19 year old sons at 6 foot four share a single bedroom he thought we needed more space, bedrooms , living bathrooms etc. I now cannot have this as my mother is using the funds to put into her new home. I really could of done with an advance myself.

Regardless of the legality of the situaiton, this quote really doesn't put you in a good light.

I must admit that I too agree that the legality of the move is highly suspect but given that you support her move what are you to do? run the risk of causing a family split?

Seems to me the sensible solution would be to sell the house for the market rate - a reduction may be negotiated if your sister buys it to take into account no estate agents fees etc - your mum buys a house from part of the proceeds making her new property in trust for you and your sister, and then you and your sister split the remainder.

NAR

meritaten wrote: »

isnt it unlawful for your mother to sell a house which has been left in trust to her? if your fathers will left the house to his daughters with the proviso that your mother lives in it during her lifetime then she cannot sell it.

This is my immediate thought also. Unless both daughters agree to rhe sale, which puts you in a much stronger bargaining position.

XAN

mountainofdebt wrote: »

I must admit that I too agree that the legality of the move is highly suspect but given that you support her move what are you to do? run the risk of causing a family split?

Seems to me the sensible solution would be to sell the house for the market rate - a reduction may be negotiated if your sister buys it to take into account no estate agents fees etc - your mum buys a house from part of the proceeds making her new property in trust for you and your sister, and then you and your sister split the remainder.

I agree the sensible solution would be to sell the house, however my sister has snowballed the situation and is now living inthe house with my mother. We were given no figures until my sister had sold her house and only this week have we been given slightly more accurate figures, which show how little my sister is getting the house for in other words we have been told as its a couple of weeks now until my mother moves to her house its to late to sell. We did say selling was best initially but the executors said they agreed but it was to late. Forcing a sale now would mean my mother looses her new house.

All we can do is make sure that what ever equity my sister gets is not interest free. But I will need examples or case law etc to prove that my sister needs to pay some kind of rent/interest on the amount she is getting that we are not. Where can I find out about this.