House purchase with parents - inheritance/estate questions

n_tag

We are a married couple looking to purchase 1 large house (already found) with parents from one side, it has an annex where they will live.

Us = Own house, now agreed a sale (mortgage)
Parents = Own house, sale agreed (no mortgage)

New house requires the parents to put £100k in (from the sale of their house, with no financial interest in the new property) and we will take out a new mortgage (in our name only), putting in the £50k of equity we have in ours now.

Question is, how do we deal with the 'gifting' of the £100k - especially because my sister will want her half once the parents are gone (there is no other estate or savings etc).

Also, how will the government see the gift as they will be living with us - particularly should either of them need care in old age?

Sure there are lots of other scenarios we haven't thought of yet, and we will be seeking proper legal advice - thought it would be interesting to see people's thoughts on here.

Cheers.

Flugelhorn

why won;t the parents have a financial interest in a property they have put 100k into?

kingstreet

Mortgage issue first. Lenders do not like those not being party to the mortgage or ownership putting deposit money in the pot.

Abbey/Santander, for example;-

We will not accept a gifted deposit if:
provided by the vendor (unless an acceptable new build incentive from the builder/developer);
protected by a Deed of Trust (or similar);
the person providing it will be living in the property, but is not named on the mortgage; or
there is a beneficial/equitable ownership/interest in the property.

xylophone

In your position I would certainly be taking expert professional advice.
http://www.step.org/system_pages/call_to_action_navigation/member_search.aspx?link=header-menu might help.

I suppose it might be possible for your parents to consider making a gift to your sister now from the house proceeds and then for the new house to be bought as tenants- in- common, (you, spouse, mother and father) with whatever share is appropriate recorded on the deeds?

Your respective wills would then need careful consideration and drafting?

http://forum.alzheimers.org.uk/showthread.php?44409-Will-tenants-in-common-have-to-sell-Mums-house-for-care-home-fees

might be of interest.
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm
http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

Annisele

It doesn't sound as though the £100k is a gift at all.

As a minimum it's probably a "gift with reservation" (i.e. a gift given in the expectation of a benefit, eg I'll give you money to buy a house if you'll let me live in it). It may be effectively a loan. Or, if half of it is eventually to go to your sister, it might be a gift of £50k and a loan of £50k. Whatever it is, I agree with Kingstreet that lenders are unlikely to be keen.

Fire_Fox

You want your parents to gift you £100K then your sister to inherit it on your parents death? That is not a gift it is a lifetime loan, a gift has no strings whatsoever, your parents and sister would have zero rights to anything. You can't protect the money from the state in this way, that is potentially fraud. Why wouldn't you want them to have the best care they can afford in their twilight years if needed?

Why aren't your parents seeking independent legal advice privately on this matter? You should not be this heavily involved in their death planning, if they are older you are treading a fine line of elder abuse and manipulation. Your sister will want her half? Wow, it's not hers it is your parents. You should speak to your conveyancing solicitor and your lender about Deed of Trust, tenants in common, joint tenants. I suspect you cannot have your cake and eat it too.

n_tag

Thanks for the responses. Of course they will be seeking their own advice, as I mentioned in the original post we are just interested in hearing people's views on the situation. We will only proceed if everything is above board, legal and is in all parties best interests.

Perhaps we should look at joint ownership instead of the gifting route - not sure how that works with the banks though, or how we deal with inheritance a good few years in the future.

xylophone

joint ownership

tenants-in-common?
http://www.landregistry.gov.uk/public/guides/public-guide-18