Another helping family with house purchase question

enthusiasticsaver

When the son eventually buys his own house to live in he will have to pay double stamp duty as a second home as he will already own the property his parents live in.

The parents are giving up all their capital and control of it so unless they have large pensions later on or other high savings they will have to accept council care homes should they need residential care in old age providing they don't get accused of deprivation of assets.

Son or daughter in law if son is married now or in future decide they want to liquidate and throw parents out. Son could refuse to give 50% to daughter or he could predecease them all and the property goes to his wife or children effectively making parents homeless.

It sounds like a daft idea to me.

tlc678910

Hi,
As already mentioned the son will have to pay an additional 3% stamp duty when he buys his own home and will lose all first time buyer perks/ won't be able to use "help to buy".

If their son went bancrupt then parents would lose their home as it is their sons asset and not theirs.

In a marriage/divorce it wouldn't be possible for the son to protect his parents house so in a longer marriage / children born etc the parents house would certainly be considered in the division of marital assets.

As already stated if the son died the parents position is uncertain. If he was married would his wife then own the house. Is the son legally able to leave such a large asset to his parents if he has a wife and children dependant on him? If his wife owned the property this could affect her entitlement to benefits so that she has to sell the house in order to live on the money.

As the son owns the property but does not live in it he will owe capital gains tax on any increase in value from when he takes ownership to when he sells. When he divides the house with his sister if he pays his own capital gains tax he could get significantly less than her.

As the parents continue to live in the property without paying a market rent it is still included in their estate for inheritance tax and as they have given it away as a scheme to avoid care fees (they are not helping their son as he doesn't live there and they don't pay him rent) then the local authority could try to recover care fees under deprivation if assets.

In short lots of down sides and the upsides don't work as they would wish them to.

As a further thought if the parents do need care in old age are they happy to have no funds to influence who cares for them and no choice but to accept the cheapest care package that they are allocated. It might be that in old age they could choose to release some money from the house for repairs/maintenance or for private carers to pop in daily allowing them to stay at home in comfort longer - wouldn't they want that choice? Will their son have the money to maintain their house - or the time to care for them?

Some scenarios might sound far fetched - e.g," he won't marry and divorce causing his parents to lose the house" but if you read this board regularly these things do happen. In my real life I know of a case where a man lost his parents and grandparents house to funding addiction and where a man lost the parents house in a divorce and they had to move to a mobile home.

Tlc

shinytop

All, thanks for the replies, they confirm my initial thoughts that this is a very bad idea. They won't listen to anything to do with their kids doing anything wrong. The SDLT argument will probably work because it looks like they would collectively be paying more of it using their cunning plan. And they won't have thought about CGT either.

Fortunately they said they were going to discuss this with their Financial Advisor so hopefully s/he will put them right.