Inheritance affecting first time buyer status

Rhibarney

Hi all,

I am due to inherit part of a house of a relative (no will and I’m next of kin along with my brother and sister). My share will be 33.3%. My sister is planning to keep the house to rent out so is going to “buy out” my share so she can keep it and rent it. Probate is currently in process.

My question is: does this mean I’m no longer a first time buyer? And what will the impact of this be if the person I’m planning to buy a house with is? (My partner will be). We live in London so stamp duty is likely to be high.

Thanks!

davidmcn

If it doesn't get registered in your name (i.e. it goes directly from executors to sister and in return you just get cash) then you'll retain your FTB virginity.

G_M

If the property is transferred into your (joint) names, you will no longer be a FTB.

Who are the Administrators? If they transfer the property from the deceased's name directly into your sister's name (or jointly sister and brother' names unless she's buying him out too?), then you will not have inherited the property - you'll have inherited some cash.

You'll then still be a FTB.


David's response faster than mine. Plus more interesting to read!

Rich2808

davidmcn wrote: »

If it doesn't get registered in your name (i.e. it goes directly from executors to sister and in return you just get cash) then you'll retain your FTB virginity.

Its not quite as simple as that.

If you have had or acquired an interest in a property (e.g. via a gift or inheritance) then you may not be eligible for the first time buyer incentives (e.g. HTB isa/lifetime isa bonuses or first time buyer stamp duty exemption). If your name was never on the deeds or the fact you never lived there isn’t the issue – what matters is if you acquired an interest in a home. Getting the proceeds from selling a home where you were given a share of via a will means you had an interest in a home. Now this may not be found out if you inherited a house abroad – but it is likely to be on HMRC records if you inherit in the UK. Best to ask your solicitor to clarify as it may depend also on how the will was worded.

https://www.helptobuy.gov.uk/documents/2015/12/eligibility-of-ftbs.pdf/

It would make things easier if these government schemes were described as first time owner schemes not first time buyer schemes – many people inherit a share of a home from grandparents or relatives and they use the proceeds to buy their first house. So while they are first time buyers – they aren’t first time buyers in the government’s eyes!

What the OP could do is disclaim their 33% share pre probate - and then your sister could give you a large gift post sale (i.e. independent of the house sale) - just depends how much you trust your sister! A bit risky possibly just to save up to £5k in stamp duty and get a £3k help to buy isa bonus.

Rhibarney

Thanks all. Will this affect me getting a mortgage? I know some mortgage companies give you a better mortgage if you are a first time buyer?

LilElvis

Rich2808 wrote: »

Its not quite as simple as that.

If you have had or acquired an interest in a property (e.g. via a gift or inheritance) then you may not be eligible for the first time buyer incentives (e.g. HTB isa/lifetime isa bonuses or first time buyer stamp duty exemption). If your name was never on the deeds or the fact you never lived there isn’t the issue – what matters is if you acquired an interest in a home. Getting the proceeds from selling a home where you were given a share of via a will means you had an interest in a home. Now this may not be found out if you inherited a house abroad – but it is likely to be on HMRC records if you inherit in the UK. Best to ask your solicitor to clarify as it may depend also on how the will was worded.

https://www.helptobuy.gov.uk/documents/2015/12/eligibility-of-ftbs.pdf/

It would make things easier if these government schemes were described as first time owner schemes not first time buyer schemes – many people inherit a share of a home from grandparents or relatives and they use the proceeds to buy their first house. So while they are first time buyers – they aren’t first time buyers in the government’s eyes!

What the OP could do is disclaim their 33% share pre probate - and then your sister could give you a large gift post sale (i.e. independent of the house sale) - just depends how much you trust your sister! A bit risky possibly just to save up to £5k in stamp duty and get a £3k help to buy isa bonus.

But the OP has not been given a share in a home in a will. The relative died intestate and the OP is receiving a share of the value of the estate. The administrators will liquidate the assets and distribute the estate according to the laws surrounding intestacy - the OP has no involvement in the property which forms part of the estate.

G_M

Rich2808 wrote: »

..... what matters is if you acquired an interest in a home. Getting the proceeds from selling a home where you were given a share of via a will means you had an interest in a home......

There was no will.

Under the rules of intestacy, OP inherits 1/3rd of 'the estate' along with his brother and sister. Not 1/3rd of the property.

How the estate is managed and distributed is a matter for the Administrators, who may, for example sell/liquify investments in order to share them out equitably, and likewise sell the property before distribution.

LilElvis

Rhibarney wrote: »

Thanks all. Will this affect me getting a mortgage? I know some mortgage companies give you a better mortgage if you are a first time buyer?

Unless the estate administrators foolishly (and unnecessarily) transfer the property into the names of you and your siblings then you will still retain your first time buyer status. You did not inherit a house, you inherited a share of an estate which just happens to include a property.

Norman_Castle

Rich2808 wrote: »

If your name was never on the deeds or the fact you never lived there isn’t the issue – what matters is if you acquired an interest in a home. Getting the proceeds from selling a home where you were given a share of via a will means you had an interest in a home.

My understanding would be if the property was sold as part of the deceased estate then the assets distributed as cash they wouldn't have owned a property. Beneficiaries of a will don't own the estate, anything they are inheriting becomes theirs when its distributed.


edit, as above. One day I'll learn to type and think at the same time. Is that multitasking?

Rich2808

Re the above points I merely suggest the OP reads the declarations they would have to sign to claim their first time buyer lifetime or HTB isa bonuses and first time buyer stamp duty exemptions and consult their solicitor.

Whether they inherit a property as part of a will or as part of the disposal of an estate which was infestate they have arguably acquired an interest in a property - as by definition they wouldn’t have got the proceeds from the sale of the property otherwise.

I - based on advice given on this site previously and elsewhere - don’t think they would necessarily be eligible for the government’s first time buyer incentives.

Best to clarify with your solicitor!

G_M

Never a bad idea to check with a solicitor. But not really necessary.

The property was owned by the deceased (not the OP).
The deceased died infestate (sic).
The Administrator (not the OP) took control of the Estate including the property.
The Administrator (not the OP) liquified the Estate's assets including selling the property.
The Administrator (not the OP) distributed the cash raised to the Beneficiaries of the Estate (including the OP).
The OP never had an interest in a property.
The OP is a FTB.