Buying my Grandparents House - clarification advice

FitzyJ

Hello,

I've been reading through the numerous threads on the forum regarding grandchildren buying their grandparents house but I still have a few queries/questions that I would like clarification on.

My Granddad has recently passed away and my Nan is considering the option of moving into a care home. Their home was owned by my Granddad but part of his will meant my Nan took full ownership of the house and there is no mortgage.

My wife and I are looking to move back to the area our Mum and Dad's live and where my Nan currently lives, so it's a viable option to buy my Nan's house to start a family.

This is where my queries start. As my Nan will be paying for her care she will need as much cash from the house to support her for as long as she is alive. I wouldn't expect my Nan to gift me a large proportion of the house as this would jeopardise her future in the care home she chooses plus there may be other family members who disapprove of such a large gift.

Comparing similar properties in the area the value for the property is in the region of £450k but will require extensive work as in re-wire, central heating, re-plaster, kitchen, bathroom etc. So true market value may be in the region of £400k. If I was to buy the property for £375k and the property was valued at £400k would the £25k difference be classed as a gift?

If I was to buy the property for £375k and spend £50k, the house may be worth £450k up wards, does any increase in value come with its pitfalls in my situation?

I dont plan to move from the property for some time but if I was to sell the property in the future would I be liable for Capital Gains Tax, if my Nan was alive or not?

I will be funding the move with a mortgage (LTV 70%), I understand lenders may not accept borrowers who are buying from family, but are there any other stumbling blocks I should be aware of?

I plan to meet with a solicitor but wanted to find some clarification before I book an appointment.

Apologies for the lengthy first post but this topic seems to be a minefield.

ViolaLass

If you buy and live in it as your principle residence, no CGT when you sell.

If you buy and do it up, subsequent increases in value have nothing to do with your Nan.

FitzyJ

Thanks Viola,

The house will be our permanent and only residence, so no CGT when we sell is good news.

00ec25

FitzyJ wrote: »

Comparing similar properties in the area the value for the property is in the region of £450k but will require extensive work as in re-wire, central heating, re-plaster, kitchen, bathroom etc. So true market value may be in the region of £400k. If I was to buy the property for £375k and the property was valued at £400k would the £25k difference be classed as a gift?

it would be a gift under inheritance tax rules and it would also be deprivation of capital to the value of 25k for her care home fees

FitzyJ wrote: »

If I was to buy the property for £375k and spend £50k, the house may be worth £450k up wards, does any increase in value come with its pitfalls in my situation?

it is the price up pay that matters, not what you do with the property once you own it

FitzyJ wrote: »

I dont plan to move from the property for some time but if I was to sell the property in the future would I be liable for Capital Gains Tax, if my Nan was alive or not?

You will not pay CGT as it would be your main home.

Your Nan's gift, if there is such an element, will be a gift under the IHT rules. Whether her estate is above the IHT threshold is then the key issue, if not, the gift is irrelevant for tax purposes (but not deprivation of capital)

FitzyJ

00ec25 wrote: »

Your Nan's gift, if there is such an element, will be a gift under the IHT rules. Whether her estate is above the IHT threshold is then the key issue, if not, the gift is irrelevant for tax purposes (but not deprivation of capital)

Deprivation of Capital is my main worry.

Do such laws apply if I pay market value for the house? Say £400k, that way no gift as such is given by selling under value?

I can manage a purchase price of this just renovation of the house would be delayed. It seems it may be worth paying market price so there are no pitfalls.

Mardle

Your nan needs to get a few estate agents round to value the house then you'll have a better idea of what the market price is. You could go in slightly under as she won't have estate agents selling fees to pay.

G_M

As I understand it, your grandmther is going to pay for her Care Home costs herself. Not claim from the Local authority.

This makes sense as she clearly has more money than the maximum allowed (around £18K I think is the limit).

So 'Deprivation of Assets' is irrelevant. That only applies if a claim is made for LA funding.

CCGT is irrelevantt as others have said.

I would get your grandmother to invite 3 estate agents round. No ned to mention selling to you - just say planning to sell.

Ask for

1) how much they suggest she market it for in current condition AND
2) hw much they realistically expect it to sell for in current condition

Pay her the average.

FitzyJ

G_M wrote: »

As I understand it, your grandmther is going to pay for her Care Home costs herself. Not claim from the Local authority.

This makes sense as she clearly has more money than the maximum allowed (around £18K I think is the limit).

So 'Deprivation of Assets' is irrelevant. That only applies if a claim is made for LA funding.

CCGT is irrelevantt as others have said.

I would get your grandmother to invite 3 estate agents round. No ned to mention selling to you - just say planning to see.

Ask for

1) how much they suggest she market it for in current condition AND
2) hw much they realistically expect it to sell for in current condition

Pay her the average.

Thanks G_M

Correct my Nan will be paying for 100% of her care. Local Authority have already refused funding due to her assets portfolio (i.e. the house mentioned).

Having trawled through the internet I'm understanding the situation a bit more and where I stand.

00ec25

FitzyJ wrote: »

Deprivation of Capital is my main worry.

Do such laws apply if I pay market value for the house? Say £400k, that way no gift as such is given by selling under value?

I can manage a purchase price of this just renovation of the house would be delayed. It seems it may be worth paying market price so there are no pitfalls.

whilst GM is correct that deprivation is not applicable whilst nan is paying her own way, there may come a time when she has spent all her money and must make a claim for means tested care home fees. That of course is a gamble given the average length of stay in a care home before death can be only a few years so even a 375k sum may outlive her

at that point there are no time limits for how far back a council may go when looking for deprivation. And in your case, as nan had sold and moved into care, it would be immediately clear that the possibility of needing to claim for means tested was very realistically foreseeable when she sold and thus deprivation would be "easy" to raise.

to answer your question, if nan sells it to you for its then full market value there obviously cannot ever be a query over nan having deprived herself of anything. As others say, you best "defence" will be the quality of your evidence supporting the valuation nan gets and the fact that you paid "full" value based on that evidence.

chelseablue

My brother bought my flat from me, with a mortgage from Santander.

It was valued at £250,000 and I sold it to him for £235,000

I just had to sign a document saying I wouldn't come after him in the future for the £15,000

xylophone

Your grandmother ( unlike the vendor in post 10), is moving into a care home so that "deprivation" comes into consideration.

Therefore you need to establish and pay open market value for the house in its current condition.

In your position, I would engage a RICS qualified surveyor.