ESA, Housing Benefit and property inheritance

zoebuggy

Hi

I would very grateful for some advice as I am trying to get my inheritance finances straight in my head.

Currently I am on ESA and Housing Benefit ( in rented property) (plus low rate DLA). I got bullied and discriminated against at work (winning a tribunal), I hope to get back sometime but it is a big challenge for me.

My lovely mum is 86 and apart from her home, she has a second house and a 50% share in a listed retail building in her estate. This should be good news for me.



The idea is to transfer from my mum's estate the house and a 50% retail building into my and my brother and sister's name. When my mum hopefully lives 7 years, this will help reduce inheritance tax burden. My brother and sister need this to go through, my brother has his own home & but they are both working and struggling with families etc. I am guessing that my share of the property would be worth well in excess of the £16K limit.

I gain a (insecure) predicted annual £6K income. My brother says if we try to sell the property we get hit by capital gains or inheritance tax.

Replacing my benefits with rental income would be OK, it would be nice to have a little extra money, but I realise that would be impossible.

BUT ...once I have Assets over 16K, I would loose both my Housing Benefit (£85 per week) & Rates Benefit (86%) and also my Employment Support Allowance (£100). So I would loose out financially over £12K.

I need to check do I get hit by this double benefit loss wammy... of loosing both housing benefit and ESA?

My brother says that we will not be able to (or it would be costly to) sell the property...due to capital gains/inheritance tax issues.
So I need to get more advice. I heard a Trust were I had no control might be a legal way, but mum's accountant suggested that the trust would cost money to set up and administer, though he had clearly not looked into it. Is the a difference in effect between the residential property and the retail property.


kindest regards
zoebug

paddedjohn

Why not just live off the assets and come off benefits?

Credit-Crunched

The 7 year rule is irrelevant when talking about gifting a property, this is only for Potentially Exempt Transfers, such as cash gifts etc.

Your mother I assume will retain use of the home, thus being classed as a gift with reservation. This would remain in your mothers estate, and would face IHT if total estate > £325,000 (assuming no Nil rate band available)

In addition, you would have to charge your mother commercial rent. This would require self assessments to be completed on an annual basis, and the incoem declared for benefits purposes.

You would be a professional land lord and require gas safe check etc.

I strongly recommend that you seek professional advice, as listening to your brother, or relying on forum 'advice' could have severe implications.

Somerset

paddedjohn wrote: »

Why not just live off the assets and come off benefits?

Because the asset will be owned by three people, two of whom will not sell for seven year's.

The OP will derive income from it which will be reported to DWP, but is worried about the asset value being taken into calculations.

Somerset

Credit-Crunched wrote: »

You would have to charge your mother commercial rent.

I believe the OP is talking about the second home, not her mother's PPR.

Credit-Crunched

Somerset wrote: »

I believe the OP is talking about the second home, not her mother's PPR.

It seems a little short sighted to forgo legal ownership of her mothers home, to retain her benefits?

zoebuggy

It is a share in a second home and a retail property, both let to third parties and far from where I live. I can not live off both my benefits and have capital assets, but the unpredictable rented income would only compensate for half my lost benefit. I am unlikely to be able to get back to work, though I do volunteer for two stress free charities.

buggy

Somerset

Credit-Crunched wrote: »

It seems a little short sighted to forgo legal ownership of her mothers home, to retain her benefits?

It's nothing to do with her mother's home. It's two investment properties, rented out, that the OP will 1/3 own, with the other 2/3 owner's unwilling to sell for seven year's. OP will potentially have 'legal ownership' of a share, but no real control over selling that share.

OP, aside from the income issue, I can see real problem's with the capital side. I don't have any answer's or know enough about trust's. You really need to get professional advice before anything happens.

Credit-Crunched

If it is not a primary residence then the 7 year rule, with taper relief will start from the date of transfer.

You seem to be against paying for advice on the trust, however if you could save tens of thousands then if i were you its a worthwhile expenditure.

Whatever you do, dont go on advice recevied here. At least if you pay, the person has a personal liablity and responsibility.

Capital Gains is a seperate issue, and 7 year rule has nothing to do with it. So when sold, a CGT liability may be apparent.

Dunroamin

Gambling on an 86 year old living for another 7 years doesn't seem to have very good odds, I'm afraid, and what about if she needs to go into a residential home? She'll still be treated as if she owns the properties and you'll lose your income.

Mojisola

zoebuggy wrote: »

My brother says if we try to sell the property we get hit by capital gains or inheritance tax.

The longer you keep the properties, the higher your liability for GCT - assuming the properties go up in value. Even then, it would be divided between the three owners. If you sell soon after you are given the properties, there won't be any GCT to pay.

It will be your mother's estate that pays any inheritance tax due, unless her other capital has been used up by then.

It often causes a lot of problems if a property is owned by several siblings because they will have different ideas about keeping/selling. You risk being in a very difficult financial situation - no benefits and siblings reluctant to sell.