half my mum's house

jonnyb

Feel free to tell me if this is complete rubbish.
A couple of assumptions - Mum lives more than 7 years and I get an offset mortgage.

I was thinking about possible ways to reduce IHT on my mum's estate.
Would it be possible for her to sell me half her house, and still live in it ? She has no mortgage currently.

I get a mortgage for £150K, buy half her house, effectively giving her the money.
She instantly loans me the money back, so I can offset it against the mortgage, while paying her back over say 15 years.

At the end, the property value of her estate is reduced by half, mortgage is paid off.

Any opinions welcomed.

tyllwyd

I have no idea whether this would work with respect to the inheritance tax aspect.

Assuming it does, if I was a solicitor advising your mum, the question I would be asking would be what is in it for her? She gives up half of her home, plus the income from her capital, and what does she gain - a reduction in the inheritance tax bill. But, obviously, she will be dead by then so what does she care??

There are other things to think about - what if there are care home fees to be paid in the future, pension credits, any other benefits - would she lose out by this arrangement?

And what happens if your relationship with her breaks down, and you don't pay the mortgage and spend all her money? I'm sure you personally wouldn't do that, but things like that do happen in families.

Or what if she starts a new relationship, and her new partner persaudes her that they need her capital back immediately so they can spend it all on a world cruise.

You both need proper legal advice before even thinking of doing something like this. And she should have her own advice independent of you, so that it couldn't be said that you had exerted undue influence over her decision.

jonnyb

I've done my maths and it won't happen because I could not afford what I would need to pay.

In my plan, what's in it for her would be a "no risk" equity release, with the cash coming from me instead of some rip off company.
I would be paying her back the entire £150,000 over 15 years, so she has an extra monthly income.

I only had the idea after watching a programme about equity release firms.

Thanks for the reply.