Gifting problems (big problems!)

Dkeates

Okay here's a complex situation I'll try to keep simple!
My mother and father in law gifted their house to their three daughters and said they didn't expect the girls to pay for several old jobs that needed doing around the house (half finished drive, ceilings coming down, shower leak, new carpets throughout etc). They have been paying for about 14 months a rent that we don't consider market value (£1000 vice £1200-1400 as per estate agent estimates) so have felt for some time they are still benefitting from the house and therefore not acheiving what they wanted which was to get their total estate below the IHT threshold.
Now they are saying they want the girls to pay for all these jobs and no of them had been putting away sufficient savings to cover it all.
It has caused lots of grief and the girls decided they should just give the house back. That is going to get complicated I'm sure but how do we go about it, is there capital gains for them to pay (the property has increased in value substantially, about £80k but they won't actually see the capital as they are giving it back).
Help in this unique situation would be appreciated. We don't want to fall out and want to keep it simple and amicable.

Andypandyboy

Let me get this straight. Your parents in law gifted a house to their kids, but also paid them £1000 pcm for the use of the house? You don't think that is enough?

Jobs need doing but the new owners don't want to do them? Not even for the comfort of their parents?

Now, they want to give it back so saving themselves the cost and hassle of making it more habitable? The jobs you have listed are not major repairs by any standards.

Yet they want to pass that hassle and cost back to their parents......who have been paying them £1000pcm?

Words fail me.

In their place I would remortgage, have the house brought up to standard and either cover the cost between the three girls, or if really necessary, only charge the parents the amount of the remortgage payments.

In the parents place I would happily take it back, and change my will immediately.

WillowCat

I believe the reference to underpaying rent is that for IHT rules it will be regarded as a 'gift with reservation' and therefore will not fall out of the parent's estate. It would only do so if they were paying market rent.

It does seem an expensive thing for the parents to do - to have to pay rent for the house they owned outright previously. Much better to downsize and gift the money, or to take out equity release, get the repairs done and blow the rest of the money on a holiday of a lifetime - or gift it to the children.

pigpen

they didnt 'gift' the house they rented it to them.. if it was a gift why were they paying rent?

The parents won't get market value rent for a house which needs the work doing.. would you want to live like that? leaky water, collapsed ceilings?? It sounds not much better than a slum!

And landlords the parents have a duty to keep their house in a decent state of repair for their tenants.. though I doubt they have a proper tenancy set up.

More fool the daughters for living in such squalor and dirt.. I wouldnt do it!


eta.. There seems to be some confusion over who is living in the house and who is paying rent.. I read it as the daughters living in it and paying rent..

missbiggles1

"Gave" not "gifted"!

Person_one

missbiggles1 wrote: »

"Gave" not "gifted"!

If I could thank this post 1000 times...

As to the original topic, sometimes people should accept that paying tax is the right thing to do and not tie themselves up in knots and risk family relationships trying everything they can to avoid it!

Keep_pedalling

How much is their estate worth?

Sounds like they have been given very poor advice (if they actually took any that is) the only way you can reduce IHT when giving away property and to continue living there away is to pay full market rent, if you don't then you are considered to maintain a beneficial interest so it will never fall out of your estate.

Unless the entire estate is tied up in the house they should have giving some capital away instead which not only would have avoided this mess but would have increased their nil rate band as the new property allowance introduced by George Osbourn kicks in.

If everything is tied up in the house then they should have either forgotten the whole thing, or downsized and passed some of the cash on.

meritaten

DKeates could you clear up the confusion please? Who was living in and paying rent on the house? Your Parents or the Daughters?

meritaten

missbiggles1 wrote: »

"Gave" not "gifted"!

er, no - it IS gifted because you have to sign a 'Deed of Gift'. I just did that myself, because I 'gifted' my share of my mothers house to my son. So that legally, I cannot say in future it was a loan or expect any recompense.

but generally speaking you would be correct. one does 'give' a gift.

Keep_pedalling

meritaten wrote: »

DKeates could you clear up the confusion please? Who was living in and paying rent on the house? Your Parents or the Daughters?

I think it is quite clear that the parents are paying their daughters in an attempt to avoid maintaining a beneficial interest. The OPs concerns seems to be that they are are not paying the full market rate, and that the daughters are not for filling their duty as landlords in maintaining the house.

As an aside, I hope these sisters are declaring these payments as they are taxable. The other tax issue they may be building up is capital gains when the house eventually sold.

meritaten

I read it that the parents had gifted the house the daughters were living in and paying rent on. that the rent was low because the house was substandard. When I read it back I realised it could be taken either way.