Should we give our flat to the inlaws?

ACG

You may be renting it out for less than the going rate but the upside there (especially for your wife) is less income tax.
Also, have you ever been a landlord before? I have and tenants are a PITA, I would never be a landlord again.

I would also keep the property personally, yes there is a stamp duty implications, but the flip side is you could lose the property to housing care costs, you could split up with your wife and lose your share of it or you may need to pay IHT if/when you get the property back.

One thing I am not sure about it how the benefits system works if you are renting a property off a relative. Does anything change there to prevent the system being abused?

One other question, do the in laws want to live n the city centre? 10 years ago in my 20s I would have loved to live in town, but now im in my 30s, I do not think I could think I would fancy it.

Red-Squirrel_2

moneyistooshorttomention wrote: »

it didn't just head into the government's coffers (ie used for any care home fees that arise).

When homes are sold to be used for care costs, the money goes to the care providers themselves, not into some Scrooge McDuck style big government vault full of appropriated money!

tlc678910

Hi,
In your position I wouldn't want to give the flat to your wife's parents unless I had oodles of cash and other owned (not mortgaged) property. Otherwise if you and your wife were to separate (or she were to die without being adequately insured) you could find yourself unable to afford a home, and have given yours away.

If you did give the flat away it should be without strings. No rent no restrictions. How will you feel if you give away the flat and your wife's parents quickly sell it for somewhere they consider more suitable. If you had genuinely given it away would you care? If you had 150k in cash would you give it to your wife's parents?

You will have to pay an extra 14k in stamp duty if you keep the flat. If you sell it you save that 14k but could buy a flat to rent out in the future between 100k and 150k say for much less stamp duty and even including purchase costs would be much less.

If you sell the flat and then buy a property to let after you have bought your new home your wife's parents could help choose where they would like to live (if it was for them) or you could consider what type of property would be in good demand and get good tenants if it were for general letting.

You mention you would like your wife's parents to be more available to help with childcare (among other reasons for them retiring). So there are benefits to you of assisting them with an affordable property to live in. If you are talking full time childcare or after school care for several children the savings to you will be considerable so don't forget the favour will be working both ways in what you are doing for them. You should chat and be in agreement about what is reasonable before you go ahead in case you and they have different expectations about what is reasonable. They shouldn't feel they have to have the children whenever you want because you help with their housing.

Due to your circumstances of a good household income and needing childcare support I suggest you consider buying a property that your wife's parents help to choose and not charging rent. If you charge £500 per month that will be 6k a year but you will have tax to pay from that (for your wife higher rate), repairs and maintenance and landlord insurance/gas checks etc to do from that. Buy somewhere in good condition, don't charge rent but agree that for decoration and day to day maintenance your inlaws take care of it themselves. If major works became required you would need to be willing to pay.

Tlc

moneyistooshorttomention

Definitely agree re clarifying (in advance) what expectations everyone all round has as to childcare to be given.

It would be a nasty shock for the in-laws to be given/or virtually given a flat and think "How nice. Big present:D" and only then find out the "price" they were paying for that was an expectation of lots of free childcare. That would be an analogous situation to thinking a wealthy man wanted to marry you for your sake/really loved you and then finding out a few years down the line you'd been married for your youth and looks and once they'd vanished he'd decided to "trade you in for a younger model".

Kynthia

You're trying to do two things, help you in-laws but still have an investment/income. Maybe you shouldn't mix the two as it gets very complicated.

Renting to them, even at reduced ren't, means you pay higher stamp duty and you still need to declare the income to HMRC (and reduced rent means you can't claim allowable expenses exceed the income). It may be viewed as a contrived tenancy and no benefits will be paid towards ren't, and if your in-laws stopped paying you rent would you really evict them with what it would do to your family relations.

You don't seem wealthy enough to be giving away a property and it doesn't seem like you're really comfortable with that and the possibility the flat could be sold.

Maybe helping them in some other way may be best.

xylophone

See a solicitor about selling them the flat - they pay you monthly what they are currently paying in rent ( or whatever other amount you specify) and you take a first charge on the property so that in the event of the flat needing to be sold to fund care, you will be repaid?

lcauk

SandraX wrote: »

Keep the flat, simples, but give them the security of a lifetime rental guarantee at a fixed price. The rental lifetime guarantee would ensure that should your circumstances changed and you needed to sell, eg divorce, loss of job/etc, then new buyers could not kick them out or increase the rent

Btw what floor is it on, i ask as stairs get difficult over time and what are the service charges.

Service charge is £100 a month. It's on the 6th floor, and it's a mezzanine apartment with stairs inside.

lcauk

xylophone wrote: »

See a solicitor about selling them the flat - they pay you monthly what they are currently paying in rent ( or whatever other amount you specify) and you take a first charge on the property so that in the event of the flat needing to be sold to fund care, you will be repaid?

Thank you, I've never heard of a First Charge. I will look into it

lcauk

Thank you everyone for your responses on here. I've been stewing about this all christmas and we're still not quite resolved. I'm bowled over at the detail and excellent knowledge everyone has offered.

I just wanted to say that I don't think we are trying to be greedy in working out the smartest solution to this dilemma. This is about trying to make a sensible economic decision all round and not make a stupid mistake that costs us lots of money now and further down the line. Bumbling into this ill-informed makes that a risk.

A couple of people have asked what strings are attached. I agree, clarifying the strings attached on either side would seem sensible, however, with family, it's almost impossible to live without strings. There's a genuine will on both sides to find a happy solution that alleviates anxiety on both sides. A decision will have to be made in trust and good faith either way. It seems like the general consensus is don't give the flat away. I can see that by just accepting paying the SDLT £14k now, we obviously retain the right to sell and release equity etc. I'm also conscious that having that money in the bank now will help us with the new house and our new baby.

However, the prevailing wind over here at the moment is still with 'give the flat away'. Psychologically we know it would create a great sense of security for them if they know they have their own property which is almost priceless.

sal_III

lcauk wrote: »

Service charge is £100 a month. It's on the 6th floor, and it's a mezzanine apartment with stairs inside.

So less than ideal for a retirement.

I would just keep it, swallow the higher SDLT and rent it out to the in-laws. This will give them higher security than they currently have, renting from strangers and you will keep your property as an investment. This way you "lose" 14k, if you gift it to them you lose 160k.

If you decide to keep the property long term, definitely look at transferring it to a limited company, the main on-off cost will be SDLT on that transfer, but ti will be more or less off-set by the SDLT rebate you will get for your new home. There will also be small ongoing cost for ltd. admin, but it will be off-set by lower/more manageable tax on the rental income.