selling 2 hours and moving in with parents in law.

slade2

Ok I`m not really sure where to put this becuase it will involve a number of subjects but here goes.

I am currently living with my wife and we have three young children. We are 2 years into a 30 year repayment mortgage. At the dinner table the other day it was suggested that we sell the house and at the same time so do my parents in law. We currently have a mortgage of £130,000 and the parents in laws will have no mortgage. Selling both properties and using the same £130,000 mortgage for the new house would be the plan maybe a little more given the right house, we would then be given a gift of £100,000 from the in-laws to add to the fund to purchase a new house. We then want to look for a house in the area for around £230,000. Ideally then we would purchase said house with a mortgage that would allow us a favorable rate becuase we would have a lower LTV. The in-laws would have money left over or so from the sale of there house to extend the house we buy with the addition of a granny flat or additions to that extent to provide them a seperate area of the house to live in.

How would we go about the above avoiding paying out as much money as possible and secure the house for the long term hopefully avoiding paying lots of tax in the future. Ideally the new house would be in mine and my wifes name going forward if this again is possible.

getmore4less

what tax are you thinking may be due

Thrugelmir

Basic concept is fine. Complications arise with gifting of such a large deposit. For various reasons. Not least that your in-laws will wish to protect their interests. As this is their home.

There's no issues with tax as things stand.

slade2

Any form of tax on the £100,000 that we are `gifted` going forward. My inlaws have agreed that once the money is ours they wouldnt want anyone to be able to get it, I have read somewhere there is a 7 year rule about things like this?

Thrugelmir

slade2 wrote: »

Any form of tax on the £100,000 that we are `gifted` going forward. My inlaws have agreed that once the money is ours they wouldnt want anyone to be able to get it, I have read somewhere there is a 7 year rule about things like this?

And if you divorce or separate what then?

Or default on the mortgage.

There's much to be considered.

Ms_Chocaholic

Does your wife have any siblings? This may cause a rift as much of their "inheritance" may be tied up in your home.

slade2

Thrugelmir wrote: »

And if you divorce or separate what then?

Or default on the mortgage.

There's much to be considered.

Perhaps some form of aggrement could be drawn up to say should we divorce my wife would be given the 100k first and then any other profit split 50/50. Given that we will have 4 incomes coming into what will be 1 house for at least the next few years I would hope that we are never in a position that we start defaulting on the mortgage.

My wife doesnt have any siblings.

Thrugelmir

slade2 wrote: »

Perhaps some form of aggrement could be drawn up to say should we divorce my wife would be given the 100k first and then any other profit split 50/50.

My wife doesnt have any siblings.

The lender may be uncomfortable with this level of gift. As depriviation of asset rules may still impact in the future.

Here's an extract.

Transferring an asset out of your name does not necessarily mean that it will not be taken into account in a means test. Both the local authority and the Pension Service can, when assessing a resident’s eligibility for assistance, look for evidence of deliberate, or intentional, deprivation of capital such as a property. Deliberate deprivation occurs when an individual transfers an asset out of his or her possession to put him or herself in a better position regarding the means test for care home accommodation.

slade2

Thrugelmir wrote: »

The lender may be uncomfortable with this level of gift. As depriviation of asset rules may still impact in the future.

Here's an extract.

Is were the 7 year rule comes into play? I mean after 7 years it would be concidered ours and not the inlaws? How do they go about getting the money back?

Thrugelmir

slade2 wrote: »

Is were the 7 year rule comes into play? I mean after 7 years it would be concidered ours and not the inlaws? How do they go about getting the money back?

There's no seven rule in this instance. Seven year rule relates to inheritance tax.

slade2

Thrugelmir wrote: »

There's no seven rule in this instance. Seven year rule relates to inheritance tax.

Ok thanks for your prompt replies.

I think we might have a problem then, one of my inlaws parents had dementia which resulted in a lengthly stay in a care home towards the end of her life (3 years) despite being cared for at home for a number of years beforehand by family. A charge was placed on her house which was paid when the house was sold.

Given the above and the propossed `gift` of £100.000 from the inlaws it would be clear that this would be seen as deprivation of assets rather clearly given all the facts.

Are there any insureance companys that we could contact with that would potentually insure us against this ever happening? i.e avoiding the costs of extended care home stay or insuring agaisnt it now?