selling my house to daughter

barbs88

I own my house outright valued at approx £140,000 and would dearly love to retire. I am 64 years old and my daughter of 30 lives with me. I would be selling at well below market value i.e anything from £50,000 to £70,000 although she has a 3 year fixed rate mortgage offer of up to £88,000. I have 3 other children all with good jobs and their own homes and they are agreeable that she buy from me. I would like to leave them something when I die though and was thinking of at least £10,000 each. I don't think it would be a good idea for my daughter to have to sell the house to give them that money so would it be better for her to have a mortgage of £70,000 and for me to put aside £30,000 for them or for her to have a smaller one to enable her to save and to then be able to remortgage when I am gone. I claim my pension and have always just been that few pounds over being able to claim anything in benefits so have had to work hard all my life. I just want to help my daughter as she has been good to me. Any help most gratefully received as not sleeping thinking about this. We have an appointment with the building society next Tuesday to get the ball rolling. thanks in advance.

Annisele

Where would you be living after you sold the house to your daughter? If with her, are you absolutely certain that she won't do anything that will mean the house is sold out from under you? (E.g. fall out with you, go bankrupt, become ill and not be able to meet mortgage payments, get married then divorced and have the house assigned to her ex, etc etc).

If you're not going to live with your daughter, where will you live - and would you be able to afford a new property?

I assume that your entire estate is too small for you to worry about inheritance tax, so "gift with reservation" wont be such an issue for you. However, "deprivation of capital" might be if you need to claim benefits/go into care. If you google the phrases I've put in quotes you might find some stuff that's useful to you.

azkaban420

Hi Barbs88, just wanted to say that it all seems do-able in principle, especially if your other children agree, but do get legal advice on this to make sure you cover all bases. I'm not sure what the tax implications are for selling a house at lower than market value, not sure if you can even do it, so maybe someone with a bit more legal knowledge will come along to help.

However, just wanted to add, please don't lose sleep over it! As long as you seek suitable advice and make sure you know what you're doing, you can make an informed decision - no point worrying till you have all the facts. This place is brilliant for help/support/advice, so you've come to the right place as a starting point

Good luck!

Az

barbs88

Thanks for both replies. I will be living with my daughter when I am not exploring Britain. I just don't have any interest in owning property anymore. In my work for the NHS I have seen too many terminally ill people, younger than me, who made plans for retirement. 'Whatever happens I will just go with the flow. Do you think she should go for the larger mortgage so that I can put this money aside? Would have to think then about where to put this. Premium bonds?

00ec25

you can sell the house to whoever you want to at any price you want to charge them
however,
the tax implication is that because you are selling to what is called a "connected person" (ie your daughter), then she, as the buyer, will have to pay Stamp Duty on her purchase using the open market value of the house not the price she paid to you , so she will pay SDLT at 1% on the full £140,000
the reason being that if this rule did not exist then it is seen by HMRC to be pure and simple tax evasion because you could sell items within the family at prices below the various bands at which different (higher) tax rates kick in

as stated you may want to check out the deprivation of capital rule, this means that because you sold your main asset, then IF you ever need to go into state funded care they will treat you as still having the value of your house when they calculate what your benefit entitlement would be. Deprivation of capital is often discussed here but the age concern website gives a very good summary of it as well in one of their downloadable fact sheets

other than the above your plan is very simple, quite normal and easily done

PasturesNew

I'm not sure I'd want a parent randomly turning up and moving in with me for the rest of their life.

Seems a daft idea to me, to be honest.

What about when you're nearly 90 and a bit dipsy and wobbly and annoying?

tawse57

Annisele wrote: »

Where would you be living after you sold the house to your daughter? If with her, are you absolutely certain that she won't do anything that will mean the house is sold out from under you? (E.g. fall out with you, go bankrupt, become ill and not be able to meet mortgage payments, get married then divorced and have the house assigned to her ex, etc etc).

If you're not going to live with your daughter, where will you live - and would you be able to afford a new property?

I assume that your entire estate is too small for you to worry about inheritance tax, so "gift with reservation" wont be such an issue for you. However, "deprivation of capital" might be if you need to claim benefits/go into care. If you google the phrases I've put in quotes you might find some stuff that's useful to you.

I agree about all the above potential problems - a solicitor friend of mine has too many stories of loving parents who gifted houses to their kids only for their kids to chuck the parent out onto the streets - it happens more than you realise.

Or the, as mentioned, the child gets into enormous debt or goes bankrupt or divorces and the ex claims half the house.

With regards to tax I thought, could be wrong, that you cannot gift any sum over 3 thousand without it being liable for tax? The tax in the first few years, I thought, was 40% and then diminishes to zero after 7 or 9 years. Not sure about this.

I believe you can have the house put into a Trust with yourself and your child as trustees sometimes with a third party such as a solicitor acting as a third trustee. The trust is then worded so that you get to stay in your house until the day you die at which point the house passes in full to your daughter in your will and, likewise, she gets to stay in the house and, equally as important, she leaves the house to you in her will.

But what happens if and when you need nursing care or need to go into a nursing home? Or will your daughter nurse you. These are the kind of things you need to think about.

You really need to talk to a good solicitor who is clued up to date on the legal and moral matters involving this.

barbs88

Don't think I'll be here when I'm 90, just want to enjoy life a bit. I'm probably a bit dipsy and wobbly already!
Regarding stamp duty, my daughter is a first time buyer so I thought she wouldn't have to pay?

00ec25

barbs88 wrote: »

Don't think I'll be here when I'm 90, just want to enjoy life a bit. I'm probably a bit dipsy and wobbly already!
Regarding stamp duty, my daughter is a first time buyer so I thought she wouldn't have to pay?

correct, I forgot to mention that! (assuming she is genuinely a real 1st timer)

barbs88

It sounds as though I need to talk to a solicitor. The whole point was that I needed to release capital and I wanted to help my daughter. Looked into equity release and think it's a big con.

barbs88

Yes,definately first time buyer. Never been able to afford anything on her own.