Buying a bungalow for my parents

MoneySpendingMike

My parents are in their 80's and struggling to use the stairs in their house. Ideally, they should move to a bungalow but they are too old to deal with the pressures of selling and buying property, so I'd like to help them.

I'm in the fortunate position of having enough money to buy a bungalow for them - my idea being to buy the bungalow, move them in and then sell their house. It is almost certain that the bungalow would cost more than what would be raised by the sale of their house, so they would end up "owing" me the difference - not that I'd ever ask for it.

Is this a sensible idea?

Should I gift / loan them the money for the bungalow, buy it in their names and let them partially pay me back from the sale of their house? Or ....

Should I buy the bungalow in my name and rent it to them for a peppercorn rent? Obviously they'd have the proceeds from their house sale? Or ...

Something else?

I'm sure there must be some tax implications. Any advice is welcome.

Mike

GDB2222

If Inheritance Tax is not an issue, the house should be in their names. That is for their security, mainly, and also because it avoids Capital Gains Tax if the bungalow increases in value. Roughly how much are we talking about here?

TrickyDicky101

Loan them the money, they buy the bungalow and partially repay you on sale of their existing property. I would get this drawn up by a solicitor so that you have first charge on the property.

hazyjo

Would it be possible to install a stairlift? Surely the easiest and cheapest option. Do they actually want to move? My hubby's parents (in their 80s) had no intention of moving from their house and we're currently now adapting it for his mum (his dad recently died).

Jx

00ec25

nice idea, issues it raises are:

1. I would also question if this is a change they are able to cope with. Do not do this as a surprise, it could (literallly) kill them if you "force" them to move when they are settled in their (lifetime) home

2. if you buy the bungalow in your name then YOU will be liable for CGT when it is eventually sold - bad move

3. if it is purchased solely in their name with you gifting them the money then CGT is irrelevant but this would have IHT implications for them if: a) the combined estate totals more than £625,000 on the death of the last one of them to die and b) at least one of them dies within 7 years.

4. if they repay you with the proceeds of the sale then again this has IHT implications as it is a Partially Exempt Transfer (PET ie the "7 year rule"). The money you receive has no tax implications for you, provided you do not profit from the deal - they cannot pay you any interest or extra over the total amount you actually lent them, if they do it is taxable income for you

5. charging a peppercorn rent if either you or they own it achieves nothing, it has no affect on anyone's tax status. Instead, if you own the house and they pay you a full market rent then that removes the IHT implication against their estate but leaves you with an Income Tax bill each year and CGT liability when you sell it

best way?
it is not clear from your post if your "fortunate position" means that you have the cash to buy it outright or rather than you can afford to pay a (2nd) mortgage to buy it for them?
Lets assume its the former position, and IHT is as you say not an issue, in which case..

to my mind the best solution, is to gift them the money and let them buy it in their own name. Clearly they will not be able to do this if a mortgage is required for the difference between the 2 properties.

if you cannot afford to wait for your inheritance to get your money back then them repaying (without any profit element) from the proceeds would be second best

if a mortgage is required them obviously you will have to have ownership as they will not be allowed on the mortgage at their ages

TrickyDicky101

00ec25 wrote: »

to my mind the best solution, is to gift them the money and let them buy it in their own name. Clearly they will not be able to do this if a mortgage is required for the difference between the 2 properties.

Sorry, but this is clearly rubbish unless the OP has a desire to give away a portion of his wealth. Assuming no mortgage is required then it is clearly superior for the OP to lend his parents the money and obtain partial repayment on subsequent sale of their existing property. No CGT or IHT implications.

Mojisola

hazyjo wrote: »

Would it be possible to install a stairlift? Surely the easiest and cheapest option. Do they actually want to move? My hubby's parents (in their 80s) had no intention of moving from their house and we're currently now adapting it for his mum (his dad recently died).

I would seriously look at this option. My parents are very settled in their house. It's not only the house but the neighbours and the surroundings - the GP, the chemist, the local shop, etc.

They had an assessment by an Occupational Therapist through Social Services and she helped with ways of making the house more elderly-friendly. She arranged a grant to convert their bathroom so they now have a walk-in shower. They could have had a stair-lift through a grant but the wait was too long so that was bought privately. A range of grab handles have been put around the house, they have a kettle tipper so they can make tea safely and they have a grab rail attached to the bed so they can pull themselves up easily.

I would suggest an OT assessment and you helping financially with whatever they need. Grants are much tighter these days and you will be able to get what they need much more quickly.

MoneySpendingMike

Thank you all for your replies.

Dealing with the human issues first .....

I'd be very surprised if a stair lift could be installed but it is worth considering. The information about availability of Occupational Therapists is useful, they may well be able to advise on some form of conversion but as with the stair lift, I don't hold out a lot of hope.

It is my intention to discuss a potential move with my parents - I would not dream of instigating anything unless they were willing to consider it. I did offer to buy them a bungalow a few years ago when they were a bit healthier but they were not interested. Perversely, now they are older and less healthy, I suspect they would see the advantages but be reluctant to move for the sorts of reasons listed by Mojisola.

Looking at it from the financial side ...

I don't care about paying CGT on any windfall profit that may occur after their deaths (assuming I own the house). I don't know enough about IHT to know whether it would impact them or me but if it helps, I would expect their house to sell for somewhere between £100,000 and £150,000 - they have no further significant assets. It looks like a suitable bungalow would cost between £200,000 and £250,000. I do have enough savings to buy outright.

The perfect solution would be to find them the ideal bungalow, let them live there for the rest of their lives and for me not to lose too much money in the process.

Mike

betsie

hi
I have just done this for my mum and dad. My mum is 81 and my dad 85. They had lived in there other house for 36 years but it was in a horrible area and 30 mins drive from me. I bought them a bungalow in my name, decorated it all through then moved them in (they went out for the day and came home to the new place all ready to go). I would suggest you buy something closer to you but near a doctors, bus route, postoffice and small parade of shops. My mum and dad love their new home and it is the best thing I could have ever done for them I am still trying to sell their old house but when it is sold they are having the money. They are going to give a bit to me and my sisters and keep at least 50%. I am not worried about the CGT it will not be massive as I can't imagine house prices are going to sale away that much and my money was earning zilch in the bank. It is worth ever penny to see my mum showing her friends round brimming with pride and I can pop in whenever needed (I am only 5 mins drive away) so life is much easier and I worry alot less about them.