Buying parent house

Nancym13

My parents are both in their late 70's and still love travelling but their funds are dwindling. I have agreed to buy my parents house at a reduced rate as they could then live in it for no charge. This way I get a property in the UK and my parents release their equity. I currently work overseas and own no other property. What are the tax implications, if any?

booksurr

were you born in the UK?
how much longer are you going to be working abroad?

both answers impact your long term tax status (your "tax domicile")

you would be exposed to CGT when you sell it depending on whatever the rules are by that time! (eg the allowance for non doms may have been withdrawn by then)

as a non dom your estate might not have to pay UK inheritance tax when you die - depends on your exact circumstances

the discount your parents give you will remain as part of their estate for when they die as it is a Gift With Reservation ("GWR") for their inheritance tax exposure.

xylophone

And should your parents require means tested care, the discount given could be regarded as deprivation of assets.

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS40_deprivation_of_assets_in_the_means_test_for_care_home_provision_fcs.pdf?dtrk=true

getmore4less

Depending on the size of your parents estate they could look at retaining a life interest as part of the purchase agreement.

Avoids them having the place taken from under their feet and avoids your CGT exposure should that apply.

Also might be worth considering full market value to avoid deprivation issues some of that could be a debt to you parents if you can't raise all the funds immediately.

TBagpuss

Another option might be for eyou to buy a % of the property at full market value - i.e. if you can only afford to pay 60% of the value then buy a 60% interest and you and they can own it jointly.

Or you could led them the money, secured by way of a charge over the propery. That way, it is debt not an investment.

You would need to get some professional advice as would your parents.

If you are not careful you may end up creating a situation where there is a gift with reservation (so there is no saving in IHT for your parents) but you are deemed to have invested and have to pay CGT.

Nancym13

I aim to live abroad for another 10 years when I hope to return to the uk when I am 60. At which time my parents will be in their late 80's and need the support. Their estate is currently worth £650k

G_M

Research:

* Capital Gains Tax.

* Inheritance Tax (gift with reservation)

* Deprivation of assets

It leaves your parents pretty vulnerable too. No property of their own.....

And what if, say, you married, then divorced? Your ex might claim all/part of the property in divorce proceedings, forcing your parents to leave...

There are other ways they can release equity.

Cakeguts

Your parents need to take control of their own lives. What is best for them is to downsize into a retirement property which will most likely be a flat. Retirement properties are cheaper to buy because of the age restrictions. They can then spend the remainder of the money from selling their property on traveling while they are still fit. There is no need for you to buy their existing property.

You also need to remember that a 60 year old isn't really fit enough to lift 80 year old people so don't do this thinking that you will be able to look after them in their home when they are in their 80s.

You also need to consider moving to what is effectively now a foreign country when you are 60. Where will your pension be paid?