How best to sell half a property for inheritance

corrado999

Hi all ,

I'd like some help please with the following questions if possible thanks.

Basically my mum and sister live together following my dad's death. They jointly bought property and it is now mortgage free all paid off.

Both names are on property deeds etc. My mum wants some money to spend for her retirement and also to give us our inheritance while we can all use it. There are three siblings (inc daughter in house) .

How would she go about this freeing up of equity?. I'm guessing the house needs valuing, then my sister remortgage for half the value. That money then goes to my mum which she will split 4 ways so that the 3 siblings get a share and the last share is my mum's?. Is there Tax to pay? What are the laws and basic details about the issues surrounding this kind of process? Any help gratefully received thanks .
I can give more info also if needed thanks

ThePants999

You didn't say this explicitly, but I assume you also mean that your mum would then relinquish her half share of the property to your sister, so that your sister is effectively buying your mum out of the house.

The most significant issues are:

1. While your mum's still alive, your sister would effectively be getting no benefit from the additional half a house she's bought and is paying a mortgage on, so what's in it for her to do this? Yes, she'd get a quarter of her mortgage back, but let's say she used that to part-repay the mortgage - she's still going from paying nothing to paying a mortgage on 37.5% of the house. Arguably, your mum should pay rent if she's living in a house that your sister fully owns and is paying a mortgage on.

2. If your mum needs care in the next few years, she'll be assessed as if she still owned half the house ("deprivation of assets"), so the council may require her to fund her own care with money she no longer has.

3. If your mum passes away in the next few years, her estate will be assessed for inheritance tax as if she still owned half the house (though if that's below the IHT threshold this doesn't matter).

lisyloo

Re 2, I believe the LA would be entitled to “roll back” the transaction if they decided it was deliberate deprivation.

Also would like to add that many (not all) homes within the LA budget are not the place you’d aspire to have your mother taken care of and a few fit into the “over my dead body category”.

AdrianC

corrado999 wrote: »

My mum wants some money to spend for her retirement

Seems fair, but...

and also to give us our inheritance while we can all use it.

Umm, no. It's not an "inheritance" until she dies - then you inherit what she hasn't spent during her life.


While she's still alive, it's a "gift".

How would she go about this freeing up of equity?. I'm guessing the house needs valuing, then my sister remortgage for half the value. That money then goes to my mum

So your sister and mother are currently joint owners. Joint tenants? Tenants in Common?

Your sister is going to give your mother half of the value of the property in cash, in return for becoming sole owner.

which she will split 4 ways so that the 3 siblings get a share and the last share is my mum's?

So your mother gives 12.5% of the value of the property to three people, and keeps 12.5% for herself.


She has just given away 37.5% of the value of the property, probably something close to 75% of her assets. If she needs residential care...


Also, if your sister hits financial trouble, and fails to repay her mortgage - your mother could end up homeless.

Is there Tax to pay?

If she dies in the next 7yrs, there might be inheritance tax to pay - but since I suspect the house is not £800k+, that's unlikely to be an issue.

corrado999

Hi thanks for speedy replies.
So yes they are joint owners. My sister will always live in the house that's why my mum wanted to sort the ownership out a long time (hopefully) before it's a issue. They have lived together since my dad died in 2005, I cant see this changing they get along very well and when my mum needs care it will be by us all in the house they currently live in.

Is it as straight forward as they think? So yes my mum keeps 12.5 percent with the other 3 x 12.5 percent going to each sibling and then probably being paid off the mortgage lump sum by the sister living at the house. Will the banks lend money for this reason? There is no current mortgage on the house, my sister is single and no dependants with a steady job and savings I can't see this changing. Assuming she lives past 7 years there will be no tax? Sorry for all the query S. Just want a basic knowledge so I can assist them with basic stuff before they approach the solicitors and banks etc

hb2

corrado999 wrote: »

and when my mum needs care it will be by us all in the house they currently live in.

This is often more easily said than done!

lookstraightahead

You cannot guarantee that your mum won't need professional care at some point. Hopefully she won't, but you can never be certain

Tom99

If you mum were to die now and your sister wanted to own the house she would have to take out a mortgage on 50%/3x2=33.33% to pay you and 3rd sibling off.
Under this proposal your sister will have to take out a mortgage of 50%/4x3=37.5%
So unlike you, you sister does not only not get any 'inheritance' straight away but will actually be left with even less than she would have got in the 1st place.
It seems sister is indebting herself so you get and early inheritance, your mum gets some money to spend and your mum lives rent free.
Hardly seems very fair, you need to rethink this.

getmore4less

A current owner selling their share but remaining in the property.

Getting a mortgage may be a problem.

Is the property currently owned joint tenants or tenants in common?
(only makes a difference on death)

Has the situation where the sibling owners dies before you mum been considered?

tlc678910

Hi,
Is your sister (that lives with mum) supposed to pay for mums housing for the rest of her life then? This sister is supposed to start paying a further mortgage that might be for 20 years while mum is still alive and kicking and living in (what's now her) house so the other sisters can have a pay out? Bit rich.

It seems fairer to me if mum reminds your sister to save (into ISA etc) as one day she will need to buy her sisters out of the house or sell it to give them their share. Your sister won't be paying interest to the bank doing this.

Mums money is invested and paying for her own housing. If she wants to release this money (and is no longer paying for her housing) then she should pay rent to your sister that at least covers the extra costs involved. Would you (the other sisters) have your mum paying rent again when she has a paid off house just to get a pay day?

Tlc

lisyloo

My MIL is in a nursing home where the needs are high.
Most of the people in there need assistance of 2 carers 24/7.
My MIL doesn’t have good enough balance to stand whilst someone deals with her clothing, so one person needs to hold her up whilst another deals with dressing, washing, showering, toileting
Most of the people need a masssive hoist and wheelchair.
The bathrooms are huge with room for hoist, wheelchair, client and 2 carers. All of course on the ground floor or lift.

People with dimensia can at times be vile/cruel.
“None of you care you’re just after my money” etc.
This is hard for family to take.

Obviously we don’t know what will happen in your case, but people do these days get to a point where it’s very hard - space, equipment, emotionally - to look after and keep them safe.
Could 2 of you be there 24/7?

Also people do have lives. they might have children or might need to earn an income etc.

It’s still a minority that go into care homes but with people living longer it’s increasingly likely.

The carers can cope because they are not emotionally involved and also they work limited hours not 24/7.