Buying off parent on the cheap before they flog it cheap

dmt491

Some very clear and helpful posts on this thread.

Would anyone be able to explain what difference it would make if:
(i) the seller was not a relative; and/or
(ii) the seller wanted to remain in the property after the sale (until they move to a care home for example), but with all parties' intentions being that it will later become the buyer's main residence?

teddysmum

dmt491 wrote: »

Some very clear and helpful posts on this thread.

Would anyone be able to explain what difference it would make if:
(i) the seller was not a relative; and/or
(ii) the seller wanted to remain in the property after the sale (until they move to a care home for example), but with all parties' intentions being that it will later become the buyer's main residence?

If the person undersold to a relative, knowing that they were going into care, there would be no problem with care fees, provided that they had enough money left to meet those fees.


However, if this meant that they would soon be within the asset range where they would normally be eligible for some help, that would not be forthcoming as they would be considered to still have the money they deliberately gave away to a relative.


This is deprivation of assets, a fiddle which councils are very aware of. People cannot give away their assets just so they can get benefits. Someone doing this would be considered as though they still had the assets disposed of.

Marvel1

AdrianC wrote: »

BUT in practice, it's not going to be an issue. First off, she's probably going to last a lot longer than the seven years. She's only 56! But also, if her house is her main asset, she's nowhere near IHT territory anyway.

My Dad "died" at 60. I put "" meanings defibrillator was used and it was being at the right place right time.

AdrianC

Condolences - but I did say "probably".

The average 56 year old female in the UK in 2017 has an expected life of just under another 29 years, without taking any risk factors into account.

dmt491

"If the person undersold to a relative, knowing that they were going into care, there would be no problem with care fees, provided that they had enough money left to meet those fees. "

Thank you, but what about where the sale isn't to a relative e.g. to a friend?

And, what if there is no current need for care, but the seller would like the sale to be enough to cover potential care fees if that became necessary (that is basically how they have determined the under value figure they want to sell at)?

Owain_Moneysaver

G_M wrote: »

I did not say inheritance tax would be payable. OP asked specifically about taxes, so I included that possibility.

* if mum survives 7 years - no IHT
* if mum survives 3, or 5 years- reduced IHT
* if mum's estate is below the threshold - no IHT
* if mum bequeaths her estate to spouse - no IHT
* if mum's Executers can show OP paid full value (eg by keeping the Quick Sale valuation, or other valuation) - no IHT

Mum might have inherited an IHT allowance if dad is deceased and left all to spouse, too.

AdrianC

dmt491 wrote: »

Thank you, but what about where the sale isn't to a relative e.g. to a friend?

The same applies. If somebody is determined to have deprived themselves of assets, the beneficiary is irrelevant.

And, what if there is no current need for care, but the seller would like the sale to be enough to cover potential care fees if that became necessary (that is basically how they have determined the under value figure they want to sell at)?

That'd be a heck of a neat trick - knowing in advance how long you'll reside in care, and how much the fees will be...

But the determination of whether you've deprived yourself of assets will come at the time that your assets cease to provide for your care, and you become reliant on LA funds.

00ec25

supa34 wrote: »

thats a shame, if she sells to website then no inheritance gift, but if she sells to son then inheritance. If it was me i would get the website quote and keep hold of it to prove there was no gift involved.

tax closed such an obvious ploy years ago. The reason you cannot escape the "gift" aspect is because an asset is being passed down from one generation to another, ie inheritance!

therefore, the asset must be valued at current market value since in tax speak they are "connected persons" (parent child!) precisely in order to establish if there is a "discount" involved. The discount obviously is the gift value and so should be subject to inheritance. If you sell a house to a stranger at a discount then your children will get that money when you die but they will obviously get a smaller inheritance because you sold your house at a discount, and the discounted amount if now with a stranger and has not been given to the children before death. If you sell/transfer the asset for a discount to the children, they have of course got part of their inheritance early and in a form which they can still convert to cash and so get the full value of the inheritance for themselves thereby evading inheritance tax were the rules not in place to address that.

as GM has stated, the value of the gift is probably only a hypothetical issue anyway given the fact mother will not be living there herself afterwards so the 7 year rule will apply and, by the sounds of it, mother's estate when she eventually dies will be below the IHT threshold anyway.

Clendon

Help! My daughter has a mortgage offer of 160 grand from our bank which includes a 50 grand 'gift' from me (mother) and 45 grand 'gift' (from her grandmother) as a deposit. She's placed an offer on a property at the asking price ( 147,500) but faces competition from other buyers who we suspect will offer more than the asking price. I have enough cash to buy the property as a cash buyer to give her the maximum chance of purchasing the property. I already own a property with my husband her stepfather. If I bought the house cash, I would need the 45 grand promised from my mother and my daughter to 'buy' it off me via an approx a 55 grand mortgage. Hence purchase by me for say 150 grand followed by immeadiate purchase by my daughter for 55 grand mortgage ( including 95 grand gifts ). Messy but lots chasing this house! I'm guessing stamp duty paid by me would be at the higher rate but what are the tax implications, would mortgage lenders be difficult for my daughter and would she have to pay stamp duty again. I'll never live in it just want to help her get this house.

gettingtheresometime

Clendon wrote: »

Help! My daughter has a mortgage offer of 160 grand from our bank which includes a 50 grand 'gift' from me (mother) and 45 grand 'gift' (from her grandmother) as a deposit. She's placed an offer on a property at the asking price ( 147,500) but faces competition from other buyers who we suspect will offer more than the asking price. I have enough cash to buy the property as a cash buyer to give her the maximum chance of purchasing the property. I already own a property with my husband her stepfather. If I bought the house cash, I would need the 45 grand promised from my mother and my daughter to 'buy' it off me via an approx a 55 grand mortgage. Hence purchase by me for say 150 grand followed by immeadiate purchase by my daughter for 55 grand mortgage ( including 95 grand gifts ). Messy but lots chasing this house! I'm guessing stamp duty paid by me would be at the higher rate but what are the tax implications, would mortgage lenders be difficult for my daughter and would she have to pay stamp duty again. I'll never live in it just want to help her get this house.

It would probably be a good idea to start your own thread rather than tag your question onto an old thread.

Up at the top there's a button marked start new thread.

Alternatively if any of the mods see this and can 'de-tag' clendon's post please could they do it.