Gifting my mother money to buy her freehold.

Justaquestion_3

My 70 year old mother had a letter out of the blue asking her if she wanted to buy her freehold. She has 20 years left on the lease and the freeholder wants to get rid of it. I think he has inherited a lot of land and wants to sell it.

My mother doesn't have much money and I said I would buy it for her. He has asked for £10,000, but I think after talking to his solicitor that they would be happy with around £5-6K.

Can I do this or would there be any tax implications?

Oh, just to add - she has a small private pension & a state pension but doesn't claim anything which is means tested, so no need to worry about that side of things I guess.

It would be beneficial for me to do this, as in the long term I would hopefully inherit the house and it would be freehold instead of leasehold.

Any advice? Thanks.

anselld

Is it the entire freehold or just a share?

Justaquestion_3

Hi Anselld - Thanks.

It would be the entire freehold.

anselld

Unusual then and probably worth getting legal confirmation that buying it would do what you want, i.e. convert the whole property to freehold.

If so it sounds like it would be worth doing.

No tax implications, but bear in mind your mother could be forced to sell to pay for long term care in the future and your gift would not be protected (any more than the rest of your possible inheritance).

Mojisola

anselld wrote: »

No tax implications, but bear in mind your mother could be forced to sell to pay for long term care in the future and your gift would not be protected (any more than the rest of your possible inheritance).

Couldn't it be a loan - that would give some protection.

G_M

anselld wrote: »

Unusual then and probably worth getting legal confirmation that buying it would do what you want, i.e. convert the whole property to freehold.

If so it sounds like it would be worth doing.

No tax implications, but bear in mind your mother could be forced to sell to pay for long term care in the future and your gift would not be protected (any more than the rest of your possible inheritance).

Unlikely to affect the lease. Mum would still own a 20 year lease as well as the freehold.

Of course, as freeholder, she could renew/extend the lease at any time, and charge herself as much or as little as she wanted to do this!

As it is, a 20 year lease will have little value, so having the ability to extend it to, say, 999 years, would be worth a huge amount I would have thought....

I should think if the money was a loan, properly documented, rather than a gift, then in the event of a financial assessment for long term care, the money would be excluded from mum's assets, making care fee benefits more likely. But note I am not an expert.

Justaquestion_3

Thanks anselld, that's very helpful.

Yes, it's something weird. It's actually the land ( I think) that's the leasehold, the house was built on top of it and she pays ground rent for this.

My mother owns two houses nest door to each other, the land was all owned by the same freeholder. The other house's freehold was bought by a previous owner in the 70's/80's and so she owns the freehold on that one now (& does not pay ground rent on it), just not the house that she lives in.

My brother in law has spoken to a solicitor friend of his and he is going to do the legal side of things for us.

I know we could potentially lose the house (and my gift) to care home fees and it's something I'll accept the risk on as the lease would have to be extended in 20 years time anyway. I just wanted to check that we could not run into tax trouble.

Would it be best if I write a cheque to the solicitor myself before the sale, or give the money to my mum beforehand or no difference?

Thanks.

Justaquestion_3

Thanks GM & Mojisola, just posted before I saw your replies.

anselld

G_M wrote: »

Unlikely to affect the lease. Mum would still own a 20 year lease as well as the freehold.

Of course, as freeholder, she could renew/extend the lease at any time, and charge herself as much or as little as she wanted to do this!

As it is, a 20 year lease will have little value, so having the ability to extend it to, say, 999 years, would be worth a huge amount I would have thought....

I should think if the money was a loan, properly documented, rather than a gift, then in the event of a financial assessment for long term care, the money would be excluded from mum's assets, making care fee benefits more likely. But note I am not an expert.

I would assume, but I admit I dont know for sure, that if you own the entire freehold and the entire leasehold then you could execute some form of deed to terminate the Lease and return the property to being a simple freehold.

G_M

anselld wrote: »

I would assume, but I admit I dont know for sure, that if you own the entire freehold and the entire leasehold then you could execute some form of deed to terminate the Lease and return the property to being a simple freehold.

Yes, probobly, as a separate step.

What advantage that has (apart from reducing 2 Titles to 1) I have no idea. On the downside, there is bound to be a cost for doing this.

Justaquestion_3

Thanks all, I'll look at the other house's details and see what has happened there. There is some documentation to show that it's paid off somehow. It also shows as freehold on land registry etc.

I'll also check with the solicitor about possibly protecting the money I'm gifting somehow. If it was someone else, I'd be happy with a loan, but I know my mother would be worried about paying it back and as I am the one to potentially benefit from this in the future, then it should be me that pays and not her.