Parents want to do a "House Swap".

My parents are 77 (father) and 71 (mother), thus coming to terms with the fact they will not be around forevermore. Recently, they have been keen to "swap" houses with my wife and I for a couple of reasons, the main one being to avoid future inheritance tax.

Our house is currently mortgaged with little equity, theirs is obviously owned outright. Their plan is for us to effectively "buy" their house for what we owe on our mortgage (£170,000) which would be less than the inheritance tax bill I will one day see for the place. They also have other assets and investments that they do not wish to see me lose through having to pay extortionate rates of tax, though will be seeing an advisor in relation to that.

Whilst in one way I feel like snapping their hand off (their house is beautiful and way beyond what my wife and I could probably ever afford), in many ways where I live at the moment is "home" and my wife would likely feel uncomfortable living in my parents house. I suppose what I'm asking for is advice on any pitfalls we may fall foul to?
2018 totals:
Savings £11,200
Mortgage Overpayments £5,500
«13456719

Comments

  • Person_one
    Person_one Posts: 28,884 Forumite
    Tenth Anniversary 10,000 Posts Combo Breaker
    What is the house actually worth if they were to sell it on the open market?]

    I'm pretty sure that's what matters for inheritance tax, not what you pay for it.

    Google 'deprivation of assets'.
  • AlexLK
    AlexLK Posts: 6,125 Forumite
    Debt-free and Proud!
    It's worth in the region of £1,000,000. Perhaps a little more, perhaps a little less. I'd be lucky to see £215,000 for mine in it's current state.
    2018 totals:
    Savings £11,200
    Mortgage Overpayments £5,500
  • Mojisola
    Mojisola Posts: 35,571 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    AlexLK wrote: »
    My parents are 77 (father) and 71 (mother), thus coming to terms with the fact they will not be around forevermore. Recently, they have been keen to "swap" houses with my wife and I for a couple of reasons, the main one being to avoid future inheritance tax.

    Whilst in one way I feel like snapping their hand off (their house is beautiful and way beyond what my wife and I could probably ever afford), in many ways where I live at the moment is "home" and my wife would likely feel uncomfortable living in my parents house. I suppose what I'm asking for is advice on any pitfalls we may fall foul to?

    Why get into the complication of swapping houses? Your parents can sell their house, buy something smaller and give you some money.
  • Person_one
    Person_one Posts: 28,884 Forumite
    Tenth Anniversary 10,000 Posts Combo Breaker
    AlexLK wrote: »
    It's worth in the region of £1,000,000. Perhaps a little more, perhaps a little less. I'd be lucky to see £215,000 for mine in it's current state.


    This is not a good plan!

    I suggest you post this on the house buying board, there are experts there, but I fully expect the answer will boil down to 'This won't work, don't do it.'

    If your parents wish to downsize, they should do that as they see fit, independently of any housing decisions you make for yourself.
  • whitewing
    whitewing Posts: 11,852 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Apart from anything else, can you afford to run a house of that value?
    :heartsmil When you find people who not only tolerate your quirks but celebrate them with glad cries of "Me too!" be sure to cherish them. Because these weirdos are your true family.
  • AlexLK
    AlexLK Posts: 6,125 Forumite
    Debt-free and Proud!
    Mojisola wrote: »
    Why get into the complication of swapping houses? Your parents can sell their house, buy something smaller and give you some money.

    My parents wish to pass the house down so to speak and hope I shall do the same in many years to come.

    They basically only want to downsize if I'm willing to swap with them. They also will not give me cash for reasons amounting to my irresponsibility with money.
    Person_one wrote: »
    This is not a good plan!

    I suggest you post this on the house buying board, there are experts there, but I fully expect the answer will boil down to 'This won't work, don't do it.'

    If your parents wish to downsize, they should do that as they see fit, independently of any housing decisions you make for yourself.

    What makes it a bad plan? I mean financially. Emotionally is a whole different ball game, of course.
    2018 totals:
    Savings £11,200
    Mortgage Overpayments £5,500
  • Person_one
    Person_one Posts: 28,884 Forumite
    Tenth Anniversary 10,000 Posts Combo Breaker
    AlexLK wrote: »
    What makes it a bad plan? I mean financially. Emotionally is a whole different ball game, of course.

    Did you google deprivation of assets?

    Why do you think it would be this easy to avoid paying a huge tax bill? It just doesn't work like that!
  • AlexLK
    AlexLK Posts: 6,125 Forumite
    Debt-free and Proud!
    whitewing wrote: »
    Apart from anything else, can you afford to run a house of that value?

    I think we could, just about if we cut back on spending unnecessarily.
    2018 totals:
    Savings £11,200
    Mortgage Overpayments £5,500
  • FatVonD
    FatVonD Posts: 5,315 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker I've been Money Tipped!
    I know somebody who did this, her grandmother sold her a 3 bedroomed London flat for basically the amount she could get as a mortgage (which was probably about a quarter of what it was worth.) The surveyor raised an eyebrow and commented on what a bargain she'd got. :rotfl:

    As far as I know her grandmother is still alive and more than 7 years have elapsed so I reckon they're probably home and dry regarding inheritance tax now.
    Make £25 a day in April £0/£750 (March £584, February £602, January £883.66)

    December £361.54, November £322.28, October £288.52, September £374.30, August £223.95, July £71.45, June £251.22, May£119.33, April £236.24, March £106.74, Feb £40.99, Jan £98.54) Total for 2017 - £2,495.10
  • Emotionally, Alex, it's another thing they have to lord over you, IMO.

    HBS x
    "I believe in ordinary acts of bravery, in the courage that drives one person to stand up for another."

    "It's easy to know what you're against, quite another to know what you're for."

    #Bremainer
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