Question on fathers house and possiblility of releasing money

muffinchops

My Dad is keen that he releases some money from his house to give to family while he is still alive so he can see the benefit to them. He is mortgage free.

Other than an equity release - which I understand is a very expensive way of doing this - is there any there way to manage this?

My brother has suggested buying the house - so he owns it as an asset and is therefore able to give other family members a portion of the worth of the house, then he would inherit the whole asset when my father dies. I am not sure about this as an idea and how it could be done. We have already, as a family, decided that my father will not go into any sort of residential care in his later years so would not need to use the house proceeds to fund this.

If anyone has any thoughts I would be pleased to hear.

bris

Your father should just gift it to all who will inherit and let him live in it rent free for the rest of his life.

If you are positive depravation of assets is not an issue it's the best, fairest and cheapest way.

A solicitor will sort it all out for you.

The value of the house for tax purposes would be taken into consideration but that can't be avoided in any circumstances, what is the value? It may be under anyway.

OOPs read it wrong sorry, seem he want's to give you actual cash, if he does this there would be a mortgage to pay again, are you sure you want to put him through that again?

So the best way is for it to be gifted to your brother so he can remortgage it and give you all your share.

Bantex_2

bris wrote: »

Your father should just gift it to all who will inherit and let him live in it rent free for the rest of his life.

If you are positive depravation of assets is not an issue it's the best, fairest and cheapest way.

A solicitor will sort it all out for you.

The value of the house for tax purposes would be taken into consideration but that can't be avoided in any circumstances, what is the value? It may be under anyway.

Would this not also produce a liablilty for capital gains tax?

Mojisola

muffinchops wrote: »

My brother has suggested buying the house - so he owns it as an asset and is therefore able to give other family members a portion of the worth of the house, then he would inherit the whole asset when my father dies.

Have I misunderstood the plan?

If your brother buys the house, there won't be anything to inherit. The other family members will get money from your Dad following the sale and your brother won't get anything.

I am not sure about this as an idea and how it could be done. We have already, as a family, decided that my father will not go into any sort of residential care in his later years so would not need to use the house proceeds to fund this.

This is a worthy plan but you have no way of knowing what the future holds. It may be that 24 hour nursing care is what your father needs at some point. Would you prevent him from having the best care because of a decision you've made now?

Mojisola

bris wrote: »

Your father should just gift it to all who will inherit and let him live in it rent free for the rest of his life.

This carries its own risks.

If any of the siblings need means tested benefits in the future, they could be denied help because of the capital they have in the house.

If any of the siblings went bankrupt, divorced or died, the father's home could be at risk.

TBagpuss

I would recommend that your dad makes an appointment to see a solicitor who is a member of STEP and of Solicitors for the Elderly. They will be able to talk him through the various option, and to advise about the pros and cons of each option, and the likely tax implications.

Your brother could buy the house and your dad give a share of the proceeds to each of you. However, that would potentially leave Dad very vulnerable in the event that your brother's circumstances changed - for instance, if brother went bankrupt or was divorced then the house would be part of his assets and could be reposessed leaving Dad homeless. (same could happen if your brother and dad fell out!)

If your brother was thinking of mortgaging the house to fund the purchase he may struggle to get a mortgage as he would then be renting to a connected person (or not renting, which is even worse from a lender's perspective)

If your Dad wants to make gifts then it may be worth his considering downsizing to release some equity.

It is also worth bearing in mind, as Mojisola says , that no-one knows what the future holds and while you may all intend to care for your dad at home if he needs care in the future, depending on what happens this might not be possible when the time comes.

Mardle

Would downsizing into a flat or bungalow be a possibility?

xylophone

I would think that a better idea would be for father to sell the house and buy an (as far as possible) "future proof" property - or one that can be "future proofed" - ground floor flat or bungalow, accessible shower, waist height power points, hard floors so that a wheelchair could be used if necessary etc?

He should retain enough capital to give him an adequate cushion and then make cash gifts in the hope that they will be PETS?

muffinchops

Downsizing is not a possibility. Also take on board the inability to predict the future but we do have robust plans in place for if/ when Dad's health deteriorates - you'll have to trust me on that one.

Brother is mortgage free so would take on a new mortgage to release the money for Dad to distribute- although ideally he would only want to release half the value of the house. Mojisola you're right I didn't explain it well.

What is PETS?

xylophone

PETS?

Potentially Exempt Transfers. http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

Your brother might consider buying half your father's interest in the property ie becoming a tenant in common with him - your father would then be in a position to use the cash to make gifts if he wished.

Your brother would have the right to will his share as he wished as would father.

00ec25

muffinchops wrote: »

Brother is mortgage free so would take on a new mortgage to release the money for Dad to distribute- although ideally he would only want to release half the value of the house.

this is nuts

at the moment your father does not have any cash but wants to pass out some "inheritance" in the form of cash money to the whole family now

your plan is that father gets the cash by selling his only asset and then gives away the cash

so your brother is effectively buying his share of his own inheritance,
brother will then have to pay interest on a mortgage secured on a house in which the original owner continues to live which means he will be lucky to get a mortgage at all as lenders hate that scenario and charge accordingly.

the rest of the family then get the cash that brother has borrowed because father gives out the money brother has paid over for brother's share of the house,

at the same time brother is now liable for capital gains tax on his share of the father's property but brother would have inherited it without any CGT liability when father dies anyway

It would be cheaper in terms of interest costs on a loan for brother to simply mortgage his own house and give the money himself direct to his siblings and leave father out of it because father has not given away anything - your brother has paid for it himself