Could a gifted house deposit be considered part of an estate?

Keep_pedalling

If they own their current house outright, why not just sell up, downsize and pay off at least some of the debt? Another alternative would be to sell up pay off the debt and rent somewhere.

It sounds like you are being pressurised to do this by your partner. What happens to your in laws if you run into financial difficulties or end up getting divorced?

Keep_pedalling

Before you do anything else you need to establish exactly what level of debt he is currently in and at what stage his creditors are at with regard to recovering the debt.

Once that is established he should contact StepChange the dept charity to discus his options, which could involve an IVA or declaring bankruptcy.

https://www.stepchange.org

You may also get better advice posting over on the Bankruptsy and Living with it board, which has experts on dept hanging out on it.

Brynsam

Some or all of a gifted deposit certainly would be part of the estate if the donor dies within 7 years of making the gift.

Why don't they sell their house and then use the funds to rent a property closer to you? Saves this becoming a grim can of worms, which it surely will, especially if either of your inlaws needs residential care in the future.

Linton

To answer one of your specific questions...


"Gifts with reservation" is only a factor in the calculation of IHT. It does not for example cause the gifted assets to become subject to the terms of the will.


Possible problems with the creditors are solely linked to the sum of money.

Gavin83

Ergates wrote: »

I'll clarify my questions - I didn't put them very well in the first post:

1) Normally, if a husband and wife are joint tenants, then his share would pass to her automatically on his death and wouldn't be considered part of his estate (and thus is safe from his creditors). However, could this still be the case if they're only part owners of the house?

2) Is it possible that, via some gift with reservation type thing, the could be considered to own the *whole* house (because they live there) despite only having contributed the deposit (say 35%). Worst case scenario, could his estate be considered to own 50% of the property even though his portion of the deposit was only 17.5%?

I'm not concerned about what the lenders will or won't do at the moment - that's for another day.

1) They can still recover the debts in this situation. Debts are recovered before any other payments are made.

2) No, but I could see that they'll potentially see him as owning 17.5% of the property. Therefore let's say the value of your property doubles then his investment will be considered as having doubled. So if he gives you £20k he'll be considered as owning £40k of the property.

However this is complicated, you need proper legal advice.

Tom99

[FONT=Verdana, sans-serif]You can buy a Insolvency Act Indemnity Policy which is designed to protect you from a future claim in just this sort of situation – gifted deposit. Eg[/FONT]
[FONT=Verdana, sans-serif]https://isis-icon.co.uk/legal-indemnity-products/insolvency-act-legal-indemnity-policies/13[/FONT]
[FONT=Verdana, sans-serif]However FIL's existing debt may rule that option out, but worth enquiring about I would think.[/FONT]

konark

Can everybody stop talking about IHT rules? The OPs in-law does not need to worry about IHT and those rules do not apply to anything else..


As I see it the creditors will have no claim on the house because the house will not be owned by the OP's in-law.


As long as there are no current court proceedings for debt or bankrupcy the OP's in-law can gift as much money as he wants to his family.

Linton

konark wrote: »

Can everybody stop talking about IHT rules? The OPs in-law does not need to worry about IHT and those rules do not apply to anything else..


As I see it the creditors will have no claim on the house because the house will not be owned by the OP's in-law.


As long as there are no current court proceedings for debt or bankrupcy the OP's in-law can gift as much money as he wants to his family.

The OP was concerned that the rules for IHT would also apply to non-IHT issues. See post #1.

Keep_pedalling

konark wrote: »

Can everybody stop talking about IHT rules? The OPs in-law does not need to worry about IHT and those rules do not apply to anything else..


As I see it the creditors will have no claim on the house because the house will not be owned by the OP's in-law.


As long as there are no current court proceedings for debt or bankrupcy the OP's in-law can gift as much money as he wants to his family.

Wrong, if your creditors make you bankrupt within 5 years the OR can overturn that transaction to retrieve the the money.

https://bankruptcyexpert.co.uk/articles/can-i-give-assets-to-someone-else-before-i-go-bankrupt

Tom99

Keep_pedalling wrote: »

Wrong, if your creditors make you bankrupt within 5 years the OR can overturn that transaction to retrieve the the money.
https://bankruptcyexpert.co.uk/articles/can-i-give-assets-to-someone-else-before-i-go-bankrupt

[FONT=Verdana, sans-serif]Hence the need for an Insolvency Act Indemnity Policy, if it was available.[/FONT]