Purchasing 50% of parents home.

D94ccm

I am considering purchasing a stake in my parent's home and would like some advice on my assumptions.

Current State:

- My parents live in our family home and own it mortgage free.
- My legal primary residence (Bank statements, voting register etc) is the same home.
- I work at the other end of the country (Residing as a lodger)
- I own a house elsewhere in the country, that I rent out. I pay tax on the rental income.

I am thinking of doing the following:

- Selling my house and using the equity that is left over to purchase 50% of my parents house, circa £150,000.
- My parents then paying me X pcm as lodgers. Because this would fall under the £7,500 'rent a room' threshold I should technically be able to to achieve this with no tax implications (Except for stamp duty).

Is this correct?

Grateful for any advice.

Thank you in advance.

pinkshoes

Why do your parents want £150k cash?

D94ccm

They don't necessarily.
When my parents pass away I will inherit 50% and my brother the other 50%. But instead of getting the house he will get the £150,000 from them and I will just get the house outright.

But in the intervening period my £150,000 is generating tax free income for me.

Browntoa

It could still be identified as deprivation of assets if your parents need to pay for their own care

AdrianC

D94ccm wrote: »

They don't necessarily.

So what's in it for them?

When my parents pass away I will inherit 50% and my brother the other 50%. But instead of getting the house he will get the £150,000 from them and I will just get the house outright.

And what if they want to move in the interim? What if they need residential care and have to sell the house? What if they get divorced or go bankrupt? What if YOU get divorced or go bankrupt? What if they simply fall out with you and decide to disinherit you? What if you die first?

As and when they die, you can just give your brother 50% of the probate value at that time. He doesn't need to inherit "half the house" - just half the value of it. What if your brother WANTS to keep a half-share in the house, and would rather buy you out?

But in the intervening period my £150,000 is generating tax free income for me.

Is it a particularly good investment?

Why would your parents want to pay a relatively high rent to give you a good investment?
If your parents are making less from investing the £150k than the rent they're paying you, then this scheme costs them money every month - what's in it for them?
If they are making more, then why don't you simply take their investment advice?

(Oh, and it wouldn't fall under rent-a-room, because you aren't resident there, so you would be paying income tax.)

Browntoa wrote: »

It could still be identified as deprivation of assets if your parents need to pay for their own care

No, because instead of £300k house, they'll have £150k half-share in house plus £150k invested.

00ec25

it may become the only property you own, but that does not mean it will simply be your main residence for RAR purposes.
There is more to the test than the 2 things you have listed - your lodgings can easily be shown to be your main residence

plus your parents retain 50% ownership so even if you do chance it and claim RAR they are entitled to half of the allowance, so your tax free income will be 3,750 not the 7,500 you think it is

Is £3,750 (£312 pcm) a realistic market rent for a property they half own? I doubt it...

antrobus

D94ccm wrote: »

...
Grateful for any advice.

....

Ask your parents and your brother what they think about your cunning plan first.

tlc678910

Hi,
Your parents have paid off their mortgage ready for their retirement - why would they want to go back to not fully owning their home and paying rent to you if they don't need the money?

The whole plan just seems unnecessary and causes problems without solving any. Are there any problems. Your parents live in their own paid off home - why not leave them well alone.

In a few years this could become -" I want to buy a home to live in but own half my parents home and will owe a shed load of stamp duty ... How do I get off the mortgage/ get them to sell? " or one of many other problems created.

Tlc

pinkshoes

D94ccm wrote: »

They don't necessarily.
When my parents pass away I will inherit 50% and my brother the other 50%. But instead of getting the house he will get the £150,000 from them and I will just get the house outright.

But in the intervening period my £150,000 is generating tax free income for me.

This would count as deprivation of assets.

Should your parents need any care in their old age the equity in their home will be used to pay for it.

Unless you are planning on being their full time carer if they require one?

G_M

D94ccm wrote: »

I am considering purchasing a stake in my parent's home and would like some advice on my assumptions.Use of the word 'stake' suggests an investment and is clearly designed to make this appear as a simple objective financial decision. It isn't. It's a famaily matter.

Current State:

- My parents live in our family home and own it mortgage free.
- My legal primary residence (Bank statements, voting register etc) is the same home. So you have taken some measures tomake it seem to be your primary residence.
- I work at the other end of the country (Residing as a lodger) Clearly this is your primary residence.
- I own a house elsewhere in the country, that I rent out. I pay tax on the rental income. OK.

I am thinking of doing the following:

- Selling my house and using the equity that is left over to purchase 50% of my parents house, circa £150,000.
See 'Deprivation of Assets'
Be aware the property will remain in their Estate for Inheritance Tax
There are significant downsides to this for your parents, and zero upside that I can see - they should take independant advice before agreeing. I trust you are not asserting undue influence (emotional blackmail?) on them to agree?

- My parents then paying me X pcm as lodgers. Because this would fall under the £7,500 'rent a room' threshold I should technically be able to to achieve this with no tax implications (Except for stamp duty).
Don't forget Capital Gains Tax. Your primary residence is where you live and work - your 'lodgings'. Simply using your parents' property as a postal address for banks etc does not alter that.


Is this correct?
Partially yes partially no.


Grateful for any advice.
Don't do this.

You are in a good financialposition with a successful letting business and full-time employment. Be satisfied with this and forget trying to manipulate your parents and the system.

csgohan4

What does your parents say about it, too much me, myself and I in your post