Buying from parents

ld123098

Hi Guys,

Bit of a strange one but....

My parents have decided to move permanently to their bungalow in Spain. They've offered to sell me their house, but instead of me paying a mortgage, they've said I can pay them an agreed amount monthly for the next 15 years, which would equate to the value of the house (no interest). I have a few concerns which I'm struggling to find info about.
As I have a brother, should my parents pass away, the remainder of what I owe would be split between us as part of our inheritance. How do we make this legal and is this possible?
Secondly, my parents would be using our monthly payment to supplement their pensions, but this isn't an income as such, as it's the proceeds from the sale of their home. How do they avoid paying income tax on this money?
Are their any other pitfalls we need to be aware of.
Much apreciated,

Leon

theartfullodger

How were you going to arrange that with Land registry? How will the regular payment be documented?

Sounds like a recipe for a disaster, so many things could go wrong. Much better you simply buy, normal market value, and then parents can leave whatever they like to whoever they like.

(No offence but usually one of a couple depart this life 1st, remaining one meets someone else & remarries and changes will and who gets wot... These cunning plans fall apart for this & many many other reasons...)

ld123098

Hi
These are the sort of things we are wanting to know. We can't possibly be the first people to do this. If I buy, through the normal route, I will pay over £100000 in interest.

theartfullodger

ld123098 wrote: »

......... If I buy, through the normal route, I will pay over £100000 in interest.

So, the converse of that, mum & dad and proposing to subsidise you with over £100,000.... How's bruv feeling about that?

Go talk to a solicitor: And advise mum & dad to also (different solicitor) and advise brother to talk to a 3rd solicitor...

davidmcn

If there's any balance of the loan due at the date of death of your surviving parent, the loan is an asset of the estate - so up to your parents' Wills who gets the benefit of it.

Repayments of an interest-free loan aren't "income" for the purpose of (UK) Income Tax. Parents will need to check if there's any Spanish tax implications.

ld123098

theartfullodger wrote: »

So, the converse of that, mum & dad and proposing to subsidise you with over £100,000.... How's bruv feeling about that?

Go talk to a solicitor: And advise mum & dad to also (different solicitor) and advise brother to talk to a 3rd solicitor...

My brother's ok with it, he couldn't afford to buy the house anyway. My parents aren't giving me anything, just saving me the interest, which would just go straight to the bank.

eddddy

Most people here will tell you not to get into arrangements like this with your family, because things are likely to go sour - that's for you to decide.

Anyway, there are many options you could follow (let's assume the house's value is £250k), here's 2 of them...

Option 1

• Your parents could gift the house worth £250k to you
• You could gift £1k per month to your parents for 250 months
• Should your parents die sooner than 250 months, you start gifting £500 per month to your brother

Assuming your parents don't die within 7 years, this could be very tax efficient.

But... if you 'fall-out' with your parents/brother and stop gifting them - there would be nothing they could do to make you pay.

Option 2

• Your parents formally lend you £250k to buy their property (perhaps they put a charge on the property)
• You repay the loan to them at £1k per month

If you 'fall-out' with your parents and stop paying, they can take you to court (so they are better protected)

But... if your parents die before the loan is paid off, the outstanding part of the loan will be added to their estate, which might increase the inheritance tax bill.


Plus there are numerous other possibilities.

ld123098

Cheers for the advice. Option 2 was the sort of thing we were looking at. Whilst personally I know there's no chance of us falling out and me not paying, I want to keep it all correct so everyone's happy. We will of course, be seeing a solicitor, but I'm just keen to get all the options and pitfalls straight in my head before we proceed.

Mojisola

ld123098 wrote: »

Option 2 was the sort of thing we were looking at.

It's fairly straightforward to set up.

For some families, getting involved financially with each other is a nightmare; for others, it works well.

eddddy

ld123098 wrote: »

My parents have decided to move permanently to their bungalow in Spain.

Completely off topic... but if your parents own that bungalow in Spain (or have other assets in Spain) have they taken advice on Spanish Succession law?

If they don't set up things correctly, they can find that Spanish law overrides their wishes in their UK will. (I know of a 'complicated' family that was torn-apart because of this.)

There's a discussion here: https://www.spanishpropertyinsight.com/2015/01/08/spanish-wills-probate-law-light-european-regulation/

ld123098

eddddy wrote: »

Completely off topic... but if your parents own that bungalow in Spain (or have other assets in Spain) have they taken advice on Spanish Succession law?

If they don't set up things correctly, they can find that Spanish law overrides their wishes in their UK will. (I know of a 'complicated' family that was torn-apart because of this.)

They haven't yet, but I will make sure they do. They're currently classed as UK residents, but are going to apply for residencia in Spain this year. Cheers for the help. Much appreciated.