Buying house with elderly relative.

booksurr

Netts71 wrote: »

I've read somewhere that 'cash gifts' from a parent to a child are exempt from tax providing they are under a certain value...

as explained above by mojisola, for the purposes of Inheritance tax yes cash gifts are "not" taxed unless you trigger the thresholds he explains

however, what your MIL is proposing to do with her "gift" is a classic way of avoiding IHT because she has "given" the money to you but she continues to benefit from it because she lives in the property she has effectively purchased with her own money. Normally that is caught by the Gift with Reservation of benefit rules so it is not actually exempt from IHT as explained by mojisola. There are however certain circumstances where a GWR will not apply and it is in that very niche case where your MIL could be caught by a POAT

given your age and that of your MIL plus young age of your kids it sounds like you all need to do some serious thinking about inheritance and how to plan for it.

on that basis (although expensive) the "best" professional adviser to see would be a member of STEP as they are specifically qualified to advise on inheritance planning
http://www.step.org/for-the-public

Netts71 wrote: »

Neither of us are over 60 but we do have children under the age of 7 if that makes any difference?

they cannot be registered as the legal owners of a property until they reach age 18. If you make them owners before that age you must do so via a Trust. That introduces a whole new world of complexity and tax related issues...

Mojisola

booksurr wrote: »

however, what your MIL is proposing to do with her "gift" is a classic way of avoiding IHT because she has "given" the money to you but she continues to benefit from it because she lives in the property she has effectively purchased with her own money.

Normally that is caught by the Gift with Reservation of benefit rules so it is not actually exempt from IHT as explained by mojisola.

In this particular case, the lady concerned already has carers paid for by the council (so obviously doesn't have much capital) and, property-wise, only has a shared-ownership HA flat - it's not likely that inheritance tax will be an issue.

TBagpuss

One option would be for her to gift you the money and then for her to have a charge ovber the new property reflecting her interest. The charge would be an asset which would then fall to you on her death, as her beneficiary. This may be better than her having an interet in the property itself in terms of your ability to get a mortgage, etc.

If she neded care then the charge would be an asset which could be taken into account. I think it would probably be possibl t arrange things so that you would not have to pay until her death but you might at that point, if you were not able to remortgage to pay off what was owed, have to downsize at that point.

A STEP solicitor is proably the best place to start. I think that if you can show that she has an interest in the porperty, rather than having made a gift, there is less concern about deprivation of assets, but you do ned proper advice about how to arrange it to ensure that neither she nor you is disadvantaged

Mojisola

Netts71 wrote: »

We're thinking of selling our family home along with my mother in laws property (she owns a share of the flat she lives in) to enable us to purchase a property that we can all live in.

She's in her 80's, registered as disabled & is very depressed being so far away from us and her grandchildren.

TBagpuss wrote: »

A STEP solicitor is proably the best place to start. I think that if you can show that she has an interest in the porperty, rather than having made a gift, there is less concern about deprivation of assets, but you do ned proper advice about how to arrange it to ensure that neither she nor you is disadvantaged

I'm not sure that combining the two lots of money would count as deliberate deprivation. Usually, the council has to show that the money has been given away in order to become able to claim benefits.

In this case, there is a good clear reason other than wanting to claim benefits.

I second getting good quality advice from someone experienced in these issues.

Pricivius

I'll leave everyone else to focus on tax and finance issues as they are far more knowledgeable than I am.

One point I would make is to be sure that you have all thought through the practicalities of living with Granny. As someone who was brought up in a house with my grandma, and my great-grandma for the first 4 years of my life, there are some amazing benefits, but also some significant downsides.

Downsides such as:
how we do things - sounds ridiculous, but when Granny shrinks your favourite cashmere jumper in the wash, loads the dishwasher "wrongly" or insists everyone eats tea at 6pm, patience begins to run thin.

going out - family nights out may become harder if it means Granny staying at home alone while you all head out (presuming either she physically cannot come, or there is no room in the car). Guilt-trip time. Same goes for holidays - can you leave Granny home alone (both for safety and loneliness)?

decorating - Granny will own part of your home (even if she is not listed as owning it, she has paid towards it) and may want a say in style of decor. Is everyone okay with Laura Ashley chintz?

quiet time - Granny will not be used to a house with young kids and whilst she is lonely now and wishes she could see you all, this may wear thin when you are a 24/7 presence, waking her with Peppa Pig at 6.30am and in years to come, teenage shouting wars at 11.30pm over staying out late.

guests - my Granny (bless her) did not like house guests and would hide away until they had left. This makes life very difficult for everyone.

Just a few things to flag up - there are huge upsides, but please think about the possible trigger points...

Netts71

Thank you all very much for your input - we will certainly seek advice from a STEP solicitor before going any further!

And thank you Pricivius - we have thought very long & hard about how this move would impact every member of the family (even our dog!!).

We're hoping to buy a property large enough for MIL to have her own downstairs bedroom, living room & bathroom so that she can have privacy and quiet time when she needs it.
I would do all the cooking etc as she already finds this difficult to manage.

I know we will all be 'sacrificing' quite a lot in terms of freedom & privacy, but it's something myself & husband have been weighing up for many years - we just want her to spend the rest of her life around people who love her & want to care for her rather than over 200 miles away.

Her depression is worsened by the fact that she has another grown up child & 5 grown up grandchildren who live 10 minutes away from her but have had nothing to do with her for years - even when she was recently rushed into hospital... it's so sad - we need her to be close to us & want her to be happy xx