Brother Wants To Purchase Mum's Council House..........

UnderPressure

Hello

I am hoping you can offer me some advise, my brother who lives in America has said he would like to buy my mum's council house for her to ensure she can spend the rest of her days in the house she has loved for the last 30 years. Mum has now retired she is 70 this year, fit and healthy no issues like that at all, she has no savings and is in receipt of state pension with pension credit, council tax benefit and housing benefit, she has lived in this same house for a shade over 30 years so we are all presuming she will be offered a hefty discount on the market value.

The plan is he is going to gift her whatever the cost is and then she will make a will leaving the house to him upon her death, he will not charge her rent she will live rent free for the rest of her life. Can you offer me some idea of the implications of all this please? Here is what I need to know:

a/ If the council want say £100k for the house and my brother gifts this to her, she then spends the £100k buying the house would this be classed as deprivation of capital? Or would it be OK as she has bought her home and of course will no longer need to claim housing benefit.

b/ Will any of this affect her pension credit top up? Will she still be able to claim council tax benefit?

c/ any other implications that I have not thought of?

He will be responsible for any repairs and maintenance so essentially Mum would be in the same financial position she is now but would on paper own her own home.

Before anyone starts throwing spears at me, yes one day hopefully in many many years he is going to become sole owner of the then empty house and yes no doubt he will sell it and make some money, whether I or you agree with this is irrelevant, I do not want a lecture of the moral stance as I am not interested I just want to make sure that this is going to be ok for my Mum, she likes the simple quiet life she now has and I want to make sure it stays that way.

Thanks in advance I appreciate your input :beer:

silvercar

a/ If the council want say £100k for the house and my brother gifts this to her, she then spends the £100k buying the house would this be classed as deprivation of capital? Or would it be OK as she has bought her home and of course will no longer need to claim housing benefit.

It's not deprivation of capital as she won't have disposed of it. However, should she need to go in a home in later life she would be expected to fund the cost of the home from the proceeds of the house ie sell up or at least end up with a charge on the property.

b/ Will any of this affect her pension credit top up? Will she still be able to claim council tax benefit?

should be fine on both counts.

c/ any other implications that I have not thought of?

inheritance tax. charges on the property to fund care home. What happens if brother can't afford repairs?
Wishing your mum a long and healthy life - what happens if she meets a new partner?
Once the property is in mum's name, there is nothing to stop her altering her will, or releasing equity to travel the world.

johnswife

My brother lived at home with my parents and bought the council house in his name (I believe) over 20 years ago. My dad said on condition that they both lived there until their death, not sure if any legal document was drawn up. My dad died 20 years ago when my Mum was 75 and she lived very happily there until she died a year ago.
So it could be done in the 1990's. Not sure if any rules have changed now.

Kynthia

Not an area that I know much about, particularly regarding benefits, however it seems like your brother is taking a big risk. He will be gifting your mum the money to buy the property with no protection. She could then sell the property, leave it in her will to someone else, marry and have that person become a joint owner, or need residential care and have the council sell it to pay the fees.

Yorkie1

Your mum will be a secure tenant and therefore has the home for life (health situation permitting - which would be the same irrespective of ownership). Your brother is being wholly disingenuous if he's trying to do this under the banner of disinterested care for your mother. It is a wholly self-interested move.

The greatest risk to him is as others have said, if your mum needs to go into residential accommodation then the house will need to be sold to pay for it.

However, the risk to your mum is also not to be underestimated. At present she has no responsibilities for its maintenance - either organising or paying - and therefore need not worry about that aspect. If your brother's plan comes together then she is legally responsible for its maintenance. She is wholly reliant on your brother's situation to promptly pay for anything which needs doing. She also has to arrange any of it as, in reality, how is your brother going to do that from 1000s of miles away? She will have to pay up front and then rely on your brother to repay her - or wait for his funds in the first place.

I'm sure he has all good intentions about not seeing your mum out of pocket but nobody can foresee the future and there may come a time when he cannot easily release capital for unexpected large expenditure.

This is a bad idea for your mum.

00ec25

UnderPressure wrote: »

The plan is he is going to gift her whatever the cost is and then she will make a will leaving the house to him upon her death, he will not charge her rent she will live rent free for the rest of her life. Can you offer me some idea of the implications of all this please?

she will be the sole owner so on her death there may be inheritance tax to pay. I assume father is not with us anymore so there may be some of his IHT allowance available to carry over but in essence if mother's estate, incl the property obviously, is valued at more that £325k then IHT could be an issue.

the brother will need to check himself if there are any US tax implications of his gift . There are no UK tax implications on such a gift of money

UnderPressure wrote: »

a/ If the council want say £100k for the house and my brother gifts this to her, she then spends the £100k buying the house would this be classed as deprivation of capital? Or would it be OK as she has bought her home and of course will no longer need to claim housing benefit.

not at point of purchase no, but as others said she will be the sole owner so the whole house would be included in her "worth" calculation if she needed to move into a care home. She may then be forced either to sell it any use the cash to pay the costs or (less likely where there is only a sole owner) a charging order would be put on it and the council would take its cut when sold upon her death

UnderPressure wrote: »

b/ Will any of this affect her pension credit top up? Will she still be able to claim council tax benefit?

no effect - it is her main home and both those benefits depend on income and savings levels excluding the value of the main home

johnswife wrote: »

My brother lived at home with my parents and bought the council house in his name (I believe) over 20 years ago. .... . Not sure if any rules have changed now.

the rules are basically the same . Johnswife's brother was already living in the property and so had (probably) qualified in his own name to purchase under RTB as the base level, where it involves a child of the tenant parent, is the child has to have lived in the property for the previous 12 months to allow their inclusion on the RTB

obviously the scenario is irrelevant to the OP as his brother lives in the USA

Amber_Sunshine

If he is solely concerned that your mother can "stay in the house she loves", then it would be better for him to cover any shortfall she may have in her housing benefit from the 'bedroom tax'.

jacques_chirac

Amber_Sunshine wrote: »

If he is solely concerned that your mother can "stay in the house she loves", then it would be better for him to cover any shortfall she may have in her housing benefit from the 'bedroom tax'.

No bedroom tax for pensioners.

Yorkie1 is spot on, the suggestion that this is being done to give mum security is nonsense - she already has it.

bitsandpieces

jacques_chirac wrote: »

No bedroom tax for pensioners.

Yorkie1 is spot on, the suggestion that this is being done to give mum security is nonsense - she already has it.

The intention may well be to give mum security, but it's not the best way of doing so. It's also not a very promising investment for the brother, either, if he is hoping for a good return.

Max RTB discount is 70%/£75k. This sounds like a lot of money, but remember that:
- A healthy 70 year old could have a good couple of decades left in her, or even longer. Hopefully that's the case for your mum For all this time your brother would need to pay repairs + service/maintenance charges (councils can hit homeowners hard with these) while not charging rent.
- As others have pointed out, your mum might need to use the money in the property to pay for care in future. She might also choose to release and spend some of the equity, or get into financial trouble and need to.
- Your mum might change her mind about who to leave the property to. She might meet a partner who acquires a right in the property or inherits the property.
- There may be an inheritance tax bill if she does will the property to your brother.

A likely outcome is that your brother will save a bit of taxpayers' money from being spent on the property while doing less well financially than he would from a BTL investment. There are also risks to your mum - at the moment the council will cover repairs, but what happens if something breaks and your brother's skint?

Saving taxpayers' money is a nice thing to do, but I'm not sure it's either your brother's or your mum's main goal. If he wants to improve her standard of living, maybe he could help her by giving her some money (though check it won't affect benefits) or buying her some other things she needs/wants?

monty-doggy

God forbid, mum dies within 5 years, if the house is sold, might be the case that the discount has to be paid back?

Morglin

As far as I know, the buyer has to be a tenant, on the rent agreement, and as your mum would be seen not to be able to get a mortgage, or have the cash (as she is on PC), they may refuse to sell it anyway, as she is the only one actually living there..

Your mum has a tenancy for life, and is best as she is - if she needs to ever go into sheltered accommodation (for health reasons) or into a home, it is much easier, and cheaper for her, if she is coming from a council house, and not from an owned house.

The discount has to be paid back, in reducing amounts, if she dies within 5 years, or if the house has to be sold to pay for care fees etc.,

Even if your brother does manage to buy it, in her name, the house would be in your mum's name as owner, and if she had to go into a care home, the council would sell the house, to pay the care home fees (as she lives alone) - and your brother would end up getting no benefit out of it at all.

I would forget it - there are better ways he can help her, if that's what he wants to do.

Lin