Buying a house in our name but with mil's money. Issues?

Jeepers_Creepers

Hello.

We aren't as lucky as it may seem in the title - mil will be sharing our new house (and she's looking over my shoulder... :-) .

Our situation is; mil sold her house (husband passed away last year), has the sale cash in the bank and has moved in with us as we look for a larger property for us all to move in to we can look after her.

The new property (yet to be found) will almost certainly require extending to provide this dual-occupancy. Our hopes are that we can find a place which can initially be bought outright with mil's money and that we can then extend after we sell our current home and use the proceeds of our sale for this.

So, the new house would be in our name as it would become our new main residence, but mil would initially be paying for it as she has the cash (and being a cash buyer seems to help).

The plan is - once we sell our current house, we will then fully repay mil for the new house purchase, and then mil will pay for the extension required for her.

Question is, how best to arrange this convoluted purchase/payment malarkey? Are there any legal/tax issues with mil paying temporarily for the new house which will be in our name?

Or is there an easier option of mil buying this new house in her name, but then transferring it to us once we all move in and the extension is completed? Any tax/stamp duty issues with doing it this way?

Many thanks for any advice.

davidmcn

Why doesn't she just lend you the money? She can get a mortgage over the property to protect her position.

foxy-stoat

You are better off all being on the mortgage and all being on the Deeds, Tenants in Common with shares split accordingly - keeps everyone's money save. Trust Deed will state equity paid by each party and exit strategy.

xylophone

She lends you the money to buy the new house in your and spouse's names against a first charge on the property.


There will be the SDLT issue but this can be sorted once your property has sold.

You extend/refurbish.

She releases the charge in return for the re-registration of the property as tenants-in-common in the appropriate proportions.

Tom99

Will you require a mortgage on the new house?

xylophone

Will you require a mortgage on the new house?

It would appear not - see first post.

G_M

Why is it being bought in your name? Makes no sense!

On a tax point, as it'll be a 2nd home for you there'll be an extra 3% SDLT to pay. OK, you can reclaim that when you sell your curent property, but it's an unecessary hassle and ties up cash.

On a personal front, it's MIL's money! So why is she not buying it (ie her name on the Title?) It's not as if there's a mortgage issue.

Then you sell yours, freeing up the capital to extend. At that point if you wished, you could be added to the Title and own jointly as 'Tenants In Common' with a Deed specifying who owns how much.

It would also be wise to agree/specify what would happen in various scenarios eg
* you get divorced
* lose your jobs
* get a new job the other end of the country
* MIL re-marries
* property needs renovation beyond the cash available

etc etc

Red-Squirrel_2

There is a very wise saying that you shouldn't make any big decisions in the first 12 months after a bereavement.

Your MIL has already sold her home and all three of you have decided to massively change your living arrangements and your relationships (they will change!)

Is this really the best idea? Are you sure you aren't rushing?

00ec25

I appreciate the intention is for MIL to end up with her own annex on "your" by then extended house.

However, before that happens, there are significant tax implications

MIL's money will be used to buy a property that she will have no share of its ownership.
meantime MIL will live in that property
That means MIL will be liable to Pre Owned Asset Tax (POAT) because her money is being used to provide her with living accommodation which you own. POAT is charged at income tax rates unless MIL pays you a market rate rent for living in that property.

Obviously when you and her sort out the final position that risk disappears.

Jeepers_Creepers

Many thanks for all the replies.

In order to clarify a few raised outline points first - this is not a 'hasty' decision; it had always been our talked-about intention for us to buy a joint home for both of my wife's parents to move in with us as they'd become more in need of our care over the coming years; we wanted to do this before it was actually 'needed' and whilst they were still active so that they simply get on with their lives without that impending change looming over them (and us) in the future. The situation was only advanced by the passing of my dad-in-law and mil not happy continuing to live in their home; having moved in with us for the past 5 months, she is very clear she would now want to continue to move our shared living plans forward - she's just turned 80, although in fine fettle.

I don't understand the comments about why it's strange that this house would be in our - my wife and I's - name as this would be our new residence for us and our two children for the foreseeable future. The contribution made for an extension to provide room for mil - a sitting room, bedroom and bathroom - in order for her to continue with as much independence as possible for as long as she wants - would be relatively minimal, and she has no desire for the property to be in joint names. (She also has another daughter, so the money she has made from the sale of her house would be split two ways.) The idea is that, on her passing, the house would simply remain as our family home - no complications to sort out at that unfortunate time.

So, on the basis that we - my wife and I - would ultimately be fully paying for the next new home, and mil would only be contributing a sum for an almost-certainly required extension (there have been zero properties on the market for the past year+ which would be suitable for our joint living as is), I am trying to work out the pros-and-cons of what appears to me to be two approaches to handling this:

1) We (wife and I) buy the new property in our name (as it is with our current home) and mil provides the funds for this on a temporary basis. We sell our current home, repay mil in full and then mil uses part of her money to add any required extension. There must surely be a basis on which mil can provide these funds without complications or tax-implications; I mean, there is nothing to stop her simply 'gifting' that money to us provided she lives for another 7 seven years, is there? In which case she is extremely likely to survive the 7 months or so which is what the likely time frame would be for us to buy a place and sell this one. Her 'gift' would only be temporary in any case - once we sell our house, we repay - in full - her loan. Isn't this a simple solution?

Or,

2) Mil buys our new home in her name and with her money, and once we sell our current home and move in together, she transfers it to us somehow. I don't know how that works, but I suspect it'll have complications as you surely cannot simply 'hand over' a house or just change the title deeds, can you?

(Or something simpler I don't know about).

(I don't see any capital gains implications for us as this new home would be our sole main residence once we sell our current home; yes there would be a time overlap of a few months when we own two properties, but this is a common situation and I understand there is provision for this.)

On the basis that mil could simply 'gift' her money to us (and her other daughter) if she wants to with no tax implication provided she lives for at least 7 years (and even if she didn't, the sum involved is well below the inheritance threshold), is there any reason she cannot provide these temporary funds for the new house purchase in our name?

Many thanks for all the help on this. :-)

Jeepers_Creepers

G_M wrote: »

Why is it being bought in your name? Makes no sense!

On a tax point, as it'll be a 2nd home for you there'll be an extra 3% SDLT to pay. OK, you can reclaim that when you sell your curent property, but it's an unecessary hassle and ties up cash.

On a personal front, it's MIL's money! So why is she not buying it (ie her name on the Title?) It's not as if there's a mortgage issue.

Then you sell yours, freeing up the capital to extend. At that point if you wished, you could be added to the Title and own jointly as 'Tenants In Common' with a Deed specifying who owns how much.

It would also be wise to agree/specify what would happen in various scenarios eg
* you get divorced
* lose your jobs
* get a new job the other end of the country
* MIL re-marries
* property needs renovation beyond the cash available

etc etc

These are very good points, G_M.

These sorts of issues - well similar - have been talked about, but as you say there would be no security provision for these eventualities should the property be solely in our (wife and my) name - no protection for mil.

That does need looking at, and I dare say our conveyancing solicitor would raise these issues too.

To be honest and blunt about this, although our intended plans are being driven by doing the right thing by mil, it must also ensure that our new family home is secure and cannot be compromised in the future by the sorts of things you mention. This next move will be to the sole family home for me, wife, 2 kids & Nan, very probably for good, and pretty much everything we have will be tied up in it after we pay off our mortgage with part of the sale of our current home. The move is seen by my family as 'it' - make it the perfect home for keeps. If being 'tenants in common' means that we could be forced to sell up because mil runs off with a fellow Bridge player and wants her extension money back, then that is not a situation I am happy to risk. (Tho' she promises us she won't...)

Being serious, tho', since we are making virtually all the compromises here, and are putting the vast proportion of the money in to this next house, and are doing this mainly for her, if something like her having a tiff with my wife in a couple of years time and declaring she's now moving in with other daughter and she wants the house sold and can force us as she's tenants in common is at all a possibility, then - gulp. Sorry, I can't live with that.

It might seem unfair to have the risk mitigated like this, but I do see it as us making virtually all the compromises here, and this whole move is being driven by mil's needs. I am more than happy to do this, but I am not happy to carry an associated risk.

Mil's financial contribution to this new home will be relatively small, and once we repay her the loan, half of that money will be going to her other daughter. To continue the blunt theme, virtually all the compromises being made are by us, but that is something we are committed to as we are a very close family and we also want to look after her, especially when she'll really need our help in the future. But, whilst I am more than prepared for this, I cannot have it leaving our new home at risk.

This move is not something we 'have' to do, and the financial benefits for us will certainly be useful but not huge (hopefully clear off small mortgage, and slightly larger home - both of which we'd achieve in a few years in any case if we wished). Without being toooo blunt - we are mainly doing this for Nan (and she appreciates this) and because it's a good close family with three generations getting on really well, and I would very much want this to continue - but not make it a risk.