Inheritance/ purchasing share before death

efes_shareholder

My sister and I will one day inherit my mothers house.
The house is worth circa 350k however it has 35k equity release against it.

At some point in the near future I will recieve my share of the equity of my ex marital home
I currently live with my mum.

Eventually I would like to have ownership of my mums house and would on reciept of my equity have enough to pay off the equity.

I would also have the means to purchase my sisters share via my own equity and a mortgage however I am not sure I can do this at this stage
Is this possible , my intention would be for my mother and I to continue to live in the house

Cakeguts

By pay off the equity do you mean pay off the £35k?



You say that you will inherit your mother's house. The chances are that you will but it isn't guaranteed. If your mother gets a disabling disease like Parkinsons she will need 24 hour nursing care. You will not be able to provide this for her and she will have to go to live in a nursing home at which point the equity in her house will be used to pay for her care. This is totally fair it is her equity basically her money not yours or your sisters that she will use to pay for her comfort in a nursing home when she needs it.

00ec25

not sure what your question is


yes you can buy a share before mother's death.
Provided it remains the main/only home you live in then owning it before death won't have any tax implications for you and will of course reduce mother's estate for inheritance purposes


what is your sister going to do? If she buys before death but does not live there as her home, that is very poor tax planning for her.


for your mother selling off a share of the property before her death has implications that you need to investigate further:
- will the equity release company agree to such a reduction? They may have paid mother 35k but they will be expecting to get a lot more than that when she dies and the house must be sold to repay them. Is the equity release expressed as a sum of money or as a % of the property?


- how much will you pay for what share? If mother sells you a share at a discount to the 350k value then mother is depriving herself of her own capital which will impact her ability to claim means tested benefits and care home fees if she needs them in the future.


- if mother moves out and you remain living there, any discount she gave you will be a "gift|" for inheritance tax rules - if IHT is relevant on her estate of course


- if you cease living there you will be liable for capital gains tax from the date you move out. There would be no CGT if you simply wait until she dies and you inherit it then




what is it you actually want to know? There are many other issues that could eb listed

efes_shareholder

00ec25 wrote: »

not sure what your question is


yes you can buy a share before mother's death.
Provided it remains the main/only home you live in then owning it before death won't have any tax implications for you and will of course reduce mother's estate for inheritance purposes


what is your sister going to do? If she buys before death but does not live there as her home, that is very poor tax planning for her.

My sister has her own home and would not be in a position to purchase the 50% share intended for myself
Her preference would be the cash to enable her to purchase another property

for your mother selling off a share of the property before her death has implications that you need to investigate further:
- will the equity release company agree to such a reduction? They may have paid mother 35k but they will be expecting to get a lot more than that when she dies and the house must be sold to repay them. Is the equity release expressed as a sum of money or as a % of the property?
We are able to repay the equity release at any time , the 35k is an estimation of the returned amount based on the timescale I expect to have the funds and the schedule of payment they supplied at the time.
It is a sum of money per year of age.


- how much will you pay for what share? If mother sells you a share at a discount to the 350k value then mother is depriving herself of her own capital which will impact her ability to claim means tested benefits and care home fees if she needs them in the future.
The equity released is 35k , this enables the oppurtunity to retain the property upon death rather sell it.
My mother said she would increase my share to 60% if I repaid the equity as technically its 10% of the value.
I would rather purchase this now at market rate then have to find somewhere else to put my money
The care home etc is a concern and although it seems unlikely at the moment , you never know how things change over a period of time.


- if mother moves out and you remain living there, any discount she gave you will be a "gift|" for inheritance tax rules - if IHT is relevant on her estate of course

There would be no possibilty of her moving out unless into hospital etc.
I don't think the estate would be liable for IHT


- if you cease living there you will be liable for capital gains tax from the date you move out. There would be no CGT if you simply wait until she dies and you inherit it then

This is option B however as I will be in the position to "buy" now I would rather tie the money in to that property then another and then have to sell when and if the time comes to inherit.




what is it you actually want to know? There are many other issues that could eb listed

Basically , I am going to have money to invest and want to own the house eventually , its whether this is still possible whilst she is alive or if this is problematic with future care etc.
The cash I will have coming also enables me to clear the equity release and would cover a large deposit on a flat for myself however I would rather remain in the house as she relies on me and this would also mean the cash is tied up in the property

efes_shareholder

Cakeguts wrote: »

By pay off the equity do you mean pay off the £35k?



You say that you will inherit your mother's house. The chances are that you will but it isn't guaranteed. If your mother gets a disabling disease like Parkinsons she will need 24 hour nursing care. You will not be able to provide this for her and she will have to go to live in a nursing home at which point the equity in her house will be used to pay for her care. This is totally fair it is her equity basically her money not yours or your sisters that she will use to pay for her comfort in a nursing home when she needs it.

I am aware of this which is one of the reasons I am reluctant to pay of the equity release without suring up the future of the house

TBagpuss

OK, you could buy 10% of the house for £35K, with your mum usingthe £35K to pay off the mortgage. You would need to have a declaration of trust drawn up showing that you own the property 90% to your mum, 10% to you.

If you wanted to buy a larger share, you pay her more and own a larger %.

If, when she dies, you want to buy the house from the estate then (provided the other beneficiries agree) you can do that.
If your mum left everything 50/50 to you and your sister, you would each be entitled to 45% of the value of the house (as you would already own 10%, so your mum would only have 90% to leave) so you would need to pay your sister 45% of the house value to buy her share.

If you pay off the mortgsage butthe house stays in your mum's name, then even if she left it 60% to you, 40% to your sister (which I think would be wrong, it ought to be 55% to you, 45% to her) that doesn't prtect you in the event that the hosue is needed to fund care or indeed in the event that she were to change her will.

A transfer of equity putting the hosue into both your and your mum's name, plus a declaration of trust, is probably more secure,.

However, you would also need to discuss and agree with your mum what happens if either of you wants to move or stop living together - how long would the other person have, to buy them out?

G_M

Lend your mum £35K.
Have the loan written up & stored with her will - her Executers will then repay you from her Estate on her death.


Leave the property in her name - it's hers, not yours.


On her death, you can agree whatever you want with your sister regarding distribution of the Estate (subject to the agreement of the Executers)