Investing in dad's house

justlaugh2

Mojisola wrote: »

As inheritance tax will be paid from the estate, will the house have to be sold in order to release the money?

If I buy into my dad's house for say 30%share, his share would fall below the inheritance tax threshold but my brothers will probably want to sell up, I don't mind this, it would be enough for all 3 of us to make a deposit on a house of our own. My concern was that my investment would be split 3 ways as part of his estate

TBagpuss

I would suggest that you speak to a solicitor who is a member of STEP. You and your dad will probably need to each take separate advice.

The simplest way would be for you to lend the money to your dad, secure the borrowing by way f a legal charge (private mortgage) against the house, either for £30K plus simple interest, or for a % of the value of the property - say for 6.7% of the value of the house (£30K is 6.7% of £450K - if the money you put in increases the value to £490K you would then get £32.8K back, and you and your brothers would get 1/3 each of any remainder.

The charge would be a first charge over the house so it would take priority over any claim for care fees.

Equally, you could arrange a declaration of trust naming you and your dad as tenants in common as to 6.7% to you, 93.3% to him. Your share would be yours, his would be his, and he could leave this by will.

In the case of a dec. of trust or a charge over the house, these could be set up so that you got your money back on his death or on the house being sold, f that happened sooner, so if he did, at a later stage, decide to downsize or if he went into care, the house could be sold and you could have your money back at that point.

He could remake his will to leave you £30K and the balance to you and your siblings equally, but the £30K would reduce in value in real terms over time. Alternatively he could leave you a lump sum in his will based on a % of the value of the house at the date of his death, but that could be an issue if he had sold the house prior to that date.

Consumerist

justlaugh2 wrote: »

If I buy into my dad's house for say 30%share, his share would fall below the inheritance tax threshold . . .

The problem is that your 30% share would be realised as cash in your dad's bank, in which case the value of his estate would be unchanged, or else it would be considered to be a gift, in which case Dad would need to survive for 7 years after the gift in order to be wholly free of inheritance tax.

Get professional advice before committing to anything.

RAS

We do not know in which country this house is but in England and Wales there would be 3 issues

1. Any gift would be with reservation so this would not reduce the value of the estate for IHT purposes.

2. Buying a 30% share of the house discounted to 7% of the house value would be deprivation of assets.

3. You need to make absolutely sure that there was no possibility of allegations of coercion and that dad was held by the doctors and solicors to be of sound mind.

There was a thread recently where mum's house had been sold to another member of the family at a small discount with the intention of using the money to support mum living with brother. Another brother kicked off.

There was a very useful link to a court case where something similar was done; the court accepted that the daughter cared for her mother but held that the cost of repairs was more than necessary for mother's need and the money spent benefitted the daughter and her OH. The court costs were £75K and the woman was banned from taking financial decisions about mother's affairs.