Parents gifting house with oustanding mortgage - how?

holly_hobby

choc_mouse wrote: »

Thanks again everyone. Good to have some fresh input on this.

IHT: Mojisola is probably right to assume there won't be any capital/assets of sufficient value to be subject to IHT. If it wasn't the house, I could only suggest bankruptcy for my parents. If we don't step in now that we know about the problem, there might not be anything left to inherit.

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IHT threshold for 2011 (staying at this level till 2015 is 325k which is net of all liabilities and funeral costs.

So, from what you say re- little to no assets held by your parents, and looking at the property value as it stands, you (their estate technically) should avoid any IHT on the property transfer when they pass over.

Other advice still stands (esp long term care issue), including regarding making sure that the whole family are engaged in the decision, so that there are no future problems of their loss of inheritance.

Hope this helps

Holly

JimmyTheWig

I didn't know that about a maximum unsecured loan.

I'm not suggesting that the OP pay off the mortgage. I'm suggesting he pays off the other debts.
So what if he takes a £25k unsecured loan (with the same conditions as my last post) and pays off the most expensive debts.
Would that then leave the rest manageable?

holly_hobby

JimmyTheWig wrote: »

I didn't know that about a maximum unsecured loan.

I'm not suggesting that the OP pay off the mortgage. I'm suggesting he pays off the other debts.
So what if he takes a £25k unsecured loan (with the same conditions as my last post) and pays off the most expensive debts.
Would that then leave the rest manageable?

Ah I apologise Jimmy ... I thought you meant in relation to redeeming the os mge on Mum & Dads property.

Yes .. good idea and would negate the other issues too,but it would be in his name only, with "nothing" to show for it if you will, with added interest . It will also have an impact on his affordability, should he wish to move fro his parents and effect his own mge

What could happen, is the parents make sure they have a will (would have to be 2nd death looking at the figs), with a caveat in there stating that before the estate is divided between the beneficiaries (how ever they deem it to be apportioned), the total cost of the loan inc interest paid todate made by our OP, is repaid to him from the estate (the remainder of any os loan would have been already been repaid by the executor, before the assets can be apportioned to the beneficiaries).

Suppose its all down to how the OP wants to play it .. but a good alternative suggestion ...

Holly

choc_mouse

JimmyTheWig wrote: »

I didn't know that about a maximum unsecured loan.

I'm not suggesting that the OP pay off the mortgage. I'm suggesting he pays off the other debts.
So what if he takes a £25k unsecured loan (with the same conditions as my last post) and pays off the most expensive debts.
Would that then leave the rest manageable?

Yes, we had considered that and in the short term it's definitely the quickest/easiest. BUT I (and my partner) don't want to take on such a large debt with only a piece of paper saying I'm owed something. We do want to help but not just by handing a get out of jail for free card.

holly_hobby wrote: »

Hope this helps

Holly

Yes it does, thanks! I need to investigate about the care/old age part. I'll talk with family for sure.

choc_mouse

choc_mouse wrote: »

Yes, we had considered that and in the short term it's definitely the quickest/easiest. BUT I (and my partner) don't want to take on such a large debt with only a piece of paper saying I'm owed something. We do want to help but not just by handing a get out of jail for free card.

In a similar context, I have just been approved for a 0% balance transfer (for £4k) for 19 months but that's all the unsecured debt I am really willing to take on personally.

JimmyTheWig

holly_hobby wrote: »

What could happen, is the parents make sure they have a will...

I think it would have to be more than that.
What if parents decided to sell the house and p!ss the proceeds up the wall on a round the world cruise. Or, more likely, were forced to sell the house to pay care home fees.
I think the OP's money due would have to be lodged, somehow, on the property - i.e. like a mortgage.

holly_hobby

JimmyTheWig wrote: »

I think it would have to be more than that.
What if parents decided to sell the house and p!ss the proceeds up the wall on a round the world cruise. Or, more likely, were forced to sell the house to pay care home fees.
I think the OP's money due would have to be lodged, somehow, on the property - i.e. like a mortgage.

If he decides to down the personal loan route & now doesn't need the 40k releasing ... then he needs to get his solicitor to lodge a chargeable interest against the property for the given amount.

He needs legal advice whatever he decides to do ....

Hope this helps

Holly

choc_mouse

I'll get professional advice about getting the house/mortgage. If that comes with too many strings attached, then last option is for my parents to sell the house.

holly_hobby

Good luck Choc - hope all goes well for you and your parents....

Holly

Trollfever

choc_mouse wrote: »

I'll get professional advice about getting the house/mortgage. If that comes with too many strings attached, then last option is for my parents to sell the house.

And raise the issue of "transactions at an undervalue" if your parents go bankrupt within five years of the transfer.