Advice about buying in laws cottage

dave1961

Hi,
can anyone give me some advice. My in laws both in thier 80's want us to buy their cottage in devon. We have a house in london, which we intend to rent out as an income, and move to devon.

Our problem is the in laws are currently in a rent free bungalow, but they need to not own a home to be able to stay there. How much is the minimum we can buy the cottage for, is there any laws regarding this, and what is the position with inheritance tax should one or both of them die ?

Any advice would be welcomed.

Regards Dave.

McKneff

First, you must google 'deprivation of Assets'

So they dont live in the bungalow they want to sell to you.

How do you mean they have to not own a home to enable them to stay there

G_M

No minimum. They could just give it to you.

Inheritance tax. If they sell the propety to you at market price - none. If thy 'gift' it (or part gift it) then if they die within 7 years there could be IT.
Deprivation of Assets - ie deliberately passing on assets in order to become eligable fo benefits, care costs etc. The gov is not THAT stupid!
Your london letting. See here.
Caoital Gains Tax - eventually on your rental.

dave1961

Thanks McKneff & GM
In laws currently work as wardens for a charity which supplies bungalows for OAPs who don't own a property. They are being asked to retire, but may have a chance to stay in the bungalow they currently occupy if they don't own another property, which is why they are asking us to look into buying their cottage.

we have no intention of selling our london house, I understand we'ed need to pay income tax on any rental return we got from it, so why would capital gains tax come into play ?

Regards Dave.

Yorkie1

So they are planning on deliberately depriving themselves of their property, in order to stay where they currently live and thus deprive a more deserving person of a property?

I think CGT comes into play if they don't live in the property which they want you to buy - if it hasn't been their principal residence for 3 years before the sale then they are liable to CGT.

As others have mentioned, they also need to google 'deprivation of assets'. If they dispose of the property at an undervalue, and subsequently need to claim on the state for e.g. residential care, they will be treated as if they still had the asset / its value.

McKneff

Why do they not want to stay in their own property. It frees up a bungalow for an elderly person who
needs it, probably with no assets and just state pension to live on. Not on really. I'm surprised they and you dont see that.

The trouble comes if they ever need benefits or residential care, they will be deemed to have deprived themselves of assets to enable them to get the state to pay for them/it. So they will be assessed as if they still had the assets.

dave1961

Thanks guys,
Ok they will pay CGT, that makes sense.
Bungalow in the middle of a town, with good communication and travel links and no stairs. Mother in law has just had a double heart by pass, which is why they are being asked to retire, and can't do stairs.

Cottage remote, and of course stairs, too small for stair lift. Also us moving down there to look after them as they get older, is part of the plan, I had anticpaited this but not for another 5 years in which time my wife and I will both be retired.

Regards Dave.

McKneff

'So sell the cottage and tell them to buy a bungalow close to town or close to you. Problem solved.

If they are that elderly, they may well need residential care in the not too distant future.

dave1961

Cheers guys,
so Deprivation of Assets only applies if they intended to go into local residential care. This will not be the case, as my wife will be looking after them as and when the need arises, as long as we are living in devon, and not london, hence why we need to look into buying the cottage.

CGT seems to be the limiting factor, OK thanks for all the advice.

Regards Dave.

Mojisola

dave1961 wrote: »

Cheers guys,
so Deprivation of Assets only applies if they intended to go into local residential care. This will not be the case, as my wife will be looking after them as and when the need arises, as long as we are living in devon, and not london, hence why we need to look into buying the cottage.

This is an aspiration but you don't know what the future holds. You can never guarantee that they will never have to go into a home so unless you are willing to fund them out of your money, it's better if they keep their own capital.

McKneff

You dont intend on going into residential care, what happens if they have strokes/heart attacks, Alzheimers, when you wife will not be able to care for them, Things happen. My 52 year old brother died from Alzheimers, he didnt intend to go into residential care but it was unavoidable, his wife couldnt look after him when he was climbing out of windows in the middle of the night and walking up the road
in winter in his pyjamas.