Buying two houses when we retire

maisie1234

Hello,

Could do with some advice. We have a house in the SE worth just over £1 million. When we retire ((in about 8-10 years!) we would like to buy two properties. One in the country and a small flat in say Kew or Richmond. They will need to be no more than 90 mins away from each other, we would use the flat in Richmond at least once a week. I love London and my husband loves the country hence the query!

We will both have good pensions (I will have 35 years plus continuous working and a final salary pension) and my husband will be the same (without the final salary scheme!). At present my penions will be paying out just over £30k per year.

We have two sons but they will be grown up by the time all of this happens.

What is the best way to do this?

1. One property in each of our names?
2. Putting the property in our sons names?
3. We are likely to spend say 30% in London place and the rest in the country.
4. We will have no mortgage

Lord_Baltimore

You are minted; proper legal advice will not break the bank!

For what it's worth I would not put the properties in your sons names (fraught with potential problems) and buy them together.

Inheritance Tax will ensue; but on your estate the boys can afford it and morally its payment is right and proper. You will minimise the use of your IT allowance by joint ownership and your sons can take advantage of the surplus.

I have no idea if my comments meet with current IT rules.

Have a happy retirement .

Innys1

Lord_Baltimore wrote: »

You are minted; proper legal advice will not break the bank!

For what it's worth I would not put the properties in your sons names (fraught with potential problems) and buy them together.

Inheritance Tax will ensue; but on your estate the boys can afford it and morally its payment is right and proper. You will minimise the use of your IT allowance by joint ownership and your sons can take advantage of the surplus.

I have no idea if my comments meet with current IT rules.

Have a happy retirement .

IF, and only if you trust your sons not to make you homeless, I would not agree with the above advice.

It's far more efficient from a IHT perspective, to gift the house to your sons and have them buy the new properties in their names. Provided you live 7 years beyond that, there will be no IHT to pay. I assume you will both live a further 7 years as you are still some time from retirement

Some further points as follows:

1) Your sons will have to charge you rent on both properties at the market rate. These will be chargeable to Income Tax, subject to their individual circumstances.

2) The gifts have to be done through a solicitor and don't need to be reported to the HMRC assuming you both live 7 years.

3) You will need to draw up formal tenancy agreements for each year you are renting the properties from your children.

Finally, I don't think you need legal advice, provided someone in your family knows a little about tenancies and is happy to get clarification from the HMRC on any technicalities. However, the decision is yours - you may wish to get advice for peace of mind.

I speak from experience - my parents have gifted their house to me and, as far as they're concerned, nothing has changed, other than the rent they are having to pay me.

G_M

Don't forget Capital Gains Tax as well as Income Tax. Sons will be paying both.

Additionally, if you need Care Home in the future, the council may still take the property into account in assessing entitlement to council funding. See 'deprivation of assets".


Use google for more info, eg

http://www.taxfix.co.uk/forum/articles/things-you-should-know-about-giving-your-home-to.html

kingstreet

I'd suggest a family estate plan.

Buy properties in joint names on tenants in common basis. Two wills and two trusts to;-

protect against care home fees
protect against partner remarriage costing kids their inheritance
protect against kid partners ravaging estate on divorce
protect against future Inheritance Tax liability.

martindow

Innys1 wrote: »

IF, and only if you trust your sons not to make you homeless, I would not agree with the above advice.

It's far more efficient from a IHT perspective, to gift the house to your sons and have them buy the new properties in their names. Provided you live 7 years beyond that, there will be no IHT to pay. I assume you will both live a further 7 years as you are still some time from retirement.

It will be the OP's decision but this does not give them security - no one knows what may happen in the future.

The sons may marry and subsequently divorce, go bankrupt or fall out with you. Of course we hope none of these things happen but you only have to read this forum to see how things can and do go wrong.

When you finally go your sons will inherit substantial amounts with or without tax liabilities. I would not advise doing anything that could cause you problems later.

Mojisola

Innys1 wrote: »

IF, and only if you trust your sons not to make you homeless, I would not agree with the above advice.

It isn't just a case of trusting your sons (and any partners they might have), it's the rules on benefits you need to be aware of.

If either son had to rely on means tested benefits, they would be unable to claim while owning a property they didn't live in.

SuzieSue

Mojisola wrote: »

It isn't just a case of trusting your sons (and any partners they might have), it's the rules on benefits you need to be aware of.

If either son had to rely on means tested benefits, they would be unable to claim while owning a property they didn't live in.

And it isn't just a case of trusting your sons not to make you homeless. If they or their partners become bankrupt then you will also lose your home.

Mojisola

SuzieSue wrote: »

And it isn't just a case of trusting your sons not to make you homeless. If they or their partners become bankrupt then you will also lose your home.

Or go through a divorce - a quarter of your home could then be owned by an ex-DIL.

Lord_Baltimore

Innys1 wrote: »

IF, and only if you trust your sons not to make you homeless, I would not agree with the above advice.

It's far more efficient from a IHT perspective, to gift the house to your sons and have them buy the new properties in their names. Provided you live 7 years beyond that, there will be no IHT to pay. I assume you will both live a further 7 years as you are still some time from retirement

Some further points as follows:

1) Your sons will have to charge you rent on both properties at the market rate. These will be chargeable to Income Tax, subject to their individual circumstances.

2) The gifts have to be done through a solicitor and don't need to be reported to the HMRC assuming you both live 7 years.

3) You will need to draw up formal tenancy agreements for each year you are renting the properties from your children.

Finally, I don't think you need legal advice, provided someone in your family knows a little about tenancies and is happy to get clarification from the HMRC on any technicalities. However, the decision is yours - you may wish to get advice for peace of mind.

I speak from experience - my parents have gifted their house to me and, as far as they're concerned, nothing has changed, other than the rent they are having to pay me.

Haahaar! When looking into the future young grasshopper, it is best to look further than the end of your nose .

ognum

Lord_Baltimore wrote: »

You are minted; proper legal advice will not break the bank!

For what it's worth I would not put the properties in your sons names (fraught with potential problems) and buy them together.

Inheritance Tax will ensue; but on your estate the boys can afford it and morally its payment is right and proper. You will minimise the use of your IT allowance by joint ownership and your sons can take advantage of the surplus.

I have no idea if my comments meet with current IT rules.


Have a happy retirement .

Having a house worth a million does not make you minted!