Buying my parent's house.

doo7375

Hi,

My parents have a house valued at around £180,000. They have investigated releasing the equity but have been offered only a 1/3 of the total value by current lenders.

Is it legal for them to sign the house over to me - whereby I will pay them £500 monthly to increase their monthly income and will in turn own their house when they go - rather than a bank. (This is instead of me having to be tied into an interest only mortgage)

Doo7375

Jeffrey_Shaw

Yes, they can, but they/you MUST obtain independent (separate) legal advice.
The transaction needs documenting very carefully, inc. Trust Deed and HMLR Restriction(s).

00ec25

Have you considered the tax implications of this transfer? If you can afford to pay them £500pcm why not just do so, the fact you would own the house has tax implications for the future…

Capital Gain Tax – you will become liable for CGT on the gain made by the house between the date you buy it from parents and the date you sell it because, I assume you are not living in it yourself, and therefore you get no relief from CGT

Inheritance tax – you would need to check this because although legal title will have passed to you, however, you remain a their debtor as you are paying for the property in instalments. Therefore if they die before you have cleared the debt it would form part of their estate for IHT purposes and may therefore be taxed if the estate is over the IHT threshold.

Deprivation of assets – this is less of a risk but technically because of the debt if your parents need state funded care home then the means test might (I am not sure of this) also include the fact they are owed the balance of the debt and therefore their contribution towards care costs would be assessed on the basis of them still getting the income