Helping parents to buy a house

boots_babe

Hi,

My parents really need to be in a stair free house due to health issues, but couldn't afford to move.

We've offered to help them move by buying into their new property, which we're all very happy with.

In the next few days I'll be contacting a solicitor to get some advice, but I like to be fully prepared. So would ideally like some idea of the things the solicitor should talk through with us, so I can make sure everything is covered and that I ask the right questions.

The house buying/selling process I'm fine with, having done before. It's more around the complications of things like:

1. We'll own a part share in a second home, what are the tax implications for us?
2. What would happen if in the future my parents needs to move into a home, would they be expected to pay towards that, from the money they have invested in the house?
3. We'd possibly put in an even higher amount to the property, on the basis that we will be getting 50% of my mum and dad's share of this second house in their will (my sister gets other 50%). But what happens here if point 2 above happens, will this affect anything?

Haven't thought of anything else yet but that's the point, I'm sure there's lots to consider!

Just after any pointers on what sorts of things we need to consider here. Not advice, as we'll get that from the solicitor, but more what elements we need to bring up when we meet the solicitor.

Many thanks.

goodwithsaving

Just check and re-check any potential inheritance implications. Also, what if the house has to be sold to fund care etc

G_M

boots_babe wrote: »

1. We'll own a part share in a second home, what are the tax implications for us?
* SDLT As it's a 2nd property the extra 3% SDLT will be due
* Capital Gains Tax. As it's not your main residence, when the property is sold you'll be liable for CGT on your share

2. What would happen if in the future my parents needs to move into a home, would they be expected to pay towards that, from the money they have invested in the house?
* If they have assets (including the property) of more than (around) £18K, they will not be elgible for Local authority care funding. This applies whether they stay where they are now or move.

So either
* they'd have to pay from their savings/investments, or
* they'd have to sell the property, or
* you or someone else would have to pay their care costs

However, if just one of them goes into care, the other cannot be forced to sell /move since it is his/her home.

* before you ask (!), giving away their assets (whether cash, investments, or the property) is unlikely to help - see 'Deprivation of Assets' (and in the case of property they continue to live in see 'Gifts with Reservation")


3. We'd possibly put in an even higher amount to the property, on the basis that we will be getting 50% of my mum and dad's share of this second house in their will (my sister gets other 50%). But what happens here if point 2 above happens, will this affect anything?
* If the property has to be sold to finance their care, you will obviously not inherit it.
* however, if it were sold for this reason you would get your 'share' of the sale price (whatever that was). The remainder would belong to your parents and would /could be used to fund their care.

1) If you DO buy jointly would you and/or your parents be paying cash or getting a mortgage? Most mortgage lenders would require the same names to appear on the property Title, and on the mortgage. Would you/they qualify for a mortgage?

2) you'd be wise to jointly own as 'Tenants in Common' (not 'Joint Tenants'). You should draw up a Deed stating who owns what %, what happens in case of a sale, etc

3) your parents should both write wills

4) you should read advice on the AgeUK website and elsewhere

Marvel1

Another question what would happen if you and your partner split up, as I see you have mentioned we.

xylophone

Your parents would sell their existing property and the proceeds, together with the money from you, would mean that the new property would be owned outright?

You could consider lending your parents the money against a formal legal agreement involving taking a first charge on the property - the loan could be interest free/interest rolled up/ involve taking a share of the equity on sale etc - you would take advice on the Income/CG Tax implications.

Presumably your parents would then register their ownership as tenants-in-common and each parent in his/ her Will would bequeath his/her 50% share to you and your siblings.

If both parents remained in the house until death, you would receive (on sale) the repayment of your loan (plus whatever was agreed) before the balance was divided between the beneficiaries.

The house would belong wholly to your parents - if one required care, the house would be disregarded in the means test - if both and the house had to be sold, you would receive the repayment of the loan capital (plus whatever else hd been agreed) before the balance of the proceeds could be used to finance care.

You and your parents should take qualified, independent advice.

boots_babe

G_M wrote: »

1) If you DO buy jointly would you and/or your parents be paying cash or getting a mortgage? Most mortgage lenders would require the same names to appear on the property Title, and on the mortgage. Would you/they qualify for a mortgage?

2) you'd be wise to jointly own as 'Tenants in Common' (not 'Joint Tenants'). You should draw up a Deed stating who owns what %, what happens in case of a sale, etc

3) your parents should both write wills

4) you should read advice on the AgeUK website and elsewhere

No mortgage required. My mum and dad are in their mid 70s so definitely not wanting to take on a mortgage. And we'll just put our contribution in from our savings.


Thanks for the point about tenants in common vs. joint tenants. Will add this to the list to ask the solicitor about.


Parents have both had wills for years. Very straightforward, everything just split between myself and my sister. Not sure whether these will need updating in light of a house move (hopefully not but will make sure they check).


Thanks for AgeUK pointer, I will look at that / point my parent at it too.


Was aware of the SDLT being applicable to our portion of the purchase, and also any CGT liability on sale, thanks for pointing out though.


Re your comments on my parents assets and home care funding, they have no assets whatsoever currently, other than their current house (mortgage paid off) plus enough money as they put it, to bury them. That's all. I realise giving away their assets isn't an option, and I think this whole question around what would happen if they go into care, is something we really do need to talk to the solicitor about. I suspect this will be complex to sort out.

boots_babe

cjdavies wrote: »

Another question what would happen if you and your partner split up, as I see you have mentioned we.

Fair question. My husband and I have been together for more than half of our lives so honestly don't see this as an issue. I'm sure lots of people say that and turn out to be wrong but it's not something I feel the need to worry about.

boots_babe

xylophone wrote: »

Your parents would sell their existing property and the proceeds, together with the money from you, would mean that the new property would be owned outright?

You could consider lending your parents the money against a formal legal agreement involving taking a first charge on the property - the loan could be interest free/interest rolled up/ involve taking a share of the equity on sale etc - you would take advice on the Income/CG Tax implications.

Presumably your parents would then register their ownership as tenants-in-common and each parent in his/ her Will would bequeath his/her 50% share to you and your siblings.

If both parents remained in the house until death, you would receive (on sale) the repayment of your loan (plus whatever was agreed) before the balance was divided between the beneficiaries.

The house would belong wholly to your parents - if one required care, the house would be disregarded in the means test - if both and the house had to be sold, you would receive the repayment of the loan capital (plus whatever else hd been agreed) before the balance of the proceeds could be used to finance care.

You and your parents should take qualified, independent advice.

Yes new property would be owned outright. Parents would put in the money from selling their house (minus solicitor costs, removal costs, EA fees) and we will top up the remainder from our own savings.


Hmm thanks for the info on the lending option. I will look into this to see whether it may be better than a part-share of the property.


Will definitely be taking legal advice, the only reason I posted was to get any pointers as to what things I should be bringing up when we meet with the solicitor. I like to be prepared and do my research!

martindow

Are you making this more complicated than it needs to be as you appear to be proposing your parents buying a more expensive house.

I assume there is no mortgage on their current house so can they not sell it and buy another more suitable at the same price? This would avoid all of the complications of a loan and extra outgoings for them repaying you.

boots_babe

martindow wrote: »

Are you making this more complicated than it needs to be as you appear to be proposing your parents buying a more expensive house.

I assume there is no mortgage on their current house so can they not sell it and buy another more suitable at the same price? This would avoid all of the complications of a loan and extra outgoings for them repaying you.

That would be an ideal scenario. But unfortunately this isn't feasible. My mum and dad's house is very low in value, and the only reason they've not moved before now is because they simply cannot afford it. Without our extra injection of cash they wouldn't be able to find anywhere within budget unfortunately.


Edited to add, they're not after anything fancy, they have low expectations of a new property. But the main requirement being to get rid of stairs straightaway makes it more expensive than their current house, as bungalows seem to demand a premium.


Plus they are considering moving closer to us (they're currently 2.5 hours away) as that would not only mean they see more of us but also that from a practical point of view, we are able to be there to help them as they get older and need further support etc. Anywhere within a local-ish area to us is quite a lot more expensive than their current location. So that makes things even worse sadly :-(

davidmcn

boots_babe wrote: »

Was aware of the SDLT being applicable to our portion of the purchase

The additional rate is applicable on the whole price, not just your bit.