Buying property with an annex that my parents will live in

SDLT_Geek

Mrcsmrs said:

theartfullodger said:

Mrcsmrs said:

theartfullodger said:

Is the annex physically attached/part of main building?  It’s a separate building with a small fenced garden area of its own, albeit quite close to the main house. 

Are the two dwellings on separate utility meters (water, gas, electric) and different council tax accounts It doesn’t have any separate meters and isn’t currently rated for Council Tax either. 

The answers are next to the questions, I just didn’t know how to highlight them, but they’re all in the post you quoted. Sorry, need to figure out the bold bit! But yes, it’s a totally separate building but has no separate meters nor is it council tax rated. Thank you. 

You should ask your solicitor to look into the stamp duty land tax implications of this.  Perhaps you are buying two dwellings, not one.  On the up side, this might mean multiple dwellings relief is available.  On the down side, the 3% surcharge could apply if you are buying two dwellings and the smaller one is not "subsidiary" to the main one.  I mention this because you say the smaller one has a garden area of its own and you say it is "close" to the main house, rather than being in the grounds of the main house.

Mrcsmrs

SDLT_Geek said:

Mrcsmrs said:

theartfullodger said:

Mrcsmrs said:

theartfullodger said:

Is the annex physically attached/part of main building?  It’s a separate building with a small fenced garden area of its own, albeit quite close to the main house. 

Are the two dwellings on separate utility meters (water, gas, electric) and different council tax accounts It doesn’t have any separate meters and isn’t currently rated for Council Tax either. 

The answers are next to the questions, I just didn’t know how to highlight them, but they’re all in the post you quoted. Sorry, need to figure out the bold bit! But yes, it’s a totally separate building but has no separate meters nor is it council tax rated. Thank you. 

You should ask your solicitor to look into the stamp duty land tax implications of this.  Perhaps you are buying two dwellings, not one.  On the up side, this might mean multiple dwellings relief is available.  On the down side, the 3% surcharge could apply if you are buying two dwellings and the smaller one is not "subsidiary" to the main one.  I mention this because you say the smaller one has a garden area of its own and you say it is "close" to the main house, rather than being in the grounds of the main house.

When I say close I mean it’s close as in the end of the annex is about 6 feet from the side of the house. It has a little enclosed garden area which is about 6ft wide but it is still very much in the grounds of the main house. We’ve already spoken to the solicitor and the multiple dwellings relief is applicable (but not the surcharge due to the annex because this is a second property for us anyway) which is great for us.  The main house is an L shaped bungalow and the annex turns that L shape into a U shape if you see what I mean? It’s not that side of it that we’re concerned about, it’s more the fact that my dad wants to extend it to allow for a live in carer if they ever need one and insists on paying for the extension himself because they’ll basically be living there for free. Whereas we don’t want to open a can of worms by him paying for anything. It’s not actually going to make any difference to our bills having them there and to be honest I’d rather they were closer as they get older because we’ve been several hours away up until now. 

I hope that makes sense? It does in my head I think! 

Mrcsmrs

Mickey666 said:

I think it's a good idea that is being over-complicated.

Firstly, the OP says that the parental estate is worth around £300k, so IHT is not going to be an issue regarding gifts and seven-year rules is it?  So not worth raising in the first place.

Secondly, the OP said that the parents are going to keep their current house and rent it out, so deprivation of assets is not going to be an issue is it?  So not worth raising in the first place.

Thirdly, even if the annexe becomes assessed for council tax it's irrelevant because the parents are over 65 so will be deemed to be 'dependent', which means a 100% CT exemption.

As for the summerhouse, I'm guessing this won't be built immediately, so the OP will already have bought the property and the parents will already have moved in by the time it is built.   Therefore, should the parents decide to subsequently gift the OP the money to build a summerhouse, it's hardly a 'consideration' is it?  After all, it's the sort of thing generous parents do all the time for their children isn't it?  Just do it and forget about it . . . besides, who will ever know that it wasn't a spur of the moment decision a year after the parents moved in?  Or a Christmas present?  Or, what about the parents just buying it in their own name, owning it themselves, letting their family use it as they wish and explicitly leaving it to the OP in their will.  I'm sure these are the sorts of things the OP would like to hear - how something CAN be done rather than a million reasons why NOT (within reason of course).

Finally, if there is a subsequent need for an extension, I tend to agree with the OP that it should be done by the OP rather than the parents.  There will be planning consents required etc etc, and it could get complicated if this is done in the parents name.  Also, if I was the OP, I would not want a chunk of the property being legally owned by anyone else.  Funding is a different issue but again, what's the problem with the parents gifting the money if they have the cash to spare and it doesn't require their own house to be sold?  Even as a PET it has no IHT implications (due to parents estate value) and if they still own their own home then no real grounds for DoA issues.

Regarding the potential for family splits,arguments, falling outs etc etc, well yes anything is possible, but I'd guess that the OP has already given that aspect of things a great deal of thought and wouldn't be entertaining such an arrangement if there was any hint of such things.  Not a guarantee of course, but nothing in life is guaranteed is it?

Thank you, yes that’s more the kind of response I was hoping for. I didn’t know what the IHT limits were, nor about the tax free gift amounts so that’s all been useful and I really appreciate people explaining those things. 

The whole point is really to give my parents a worry free life where they can take their 6 to 8 week long holidays to see my sister in Australia without having to worry about getting someone to check on their house, run their car and so on. The problems only started when my dad insisted they wanted to ‘pay their way’. Effectively though they’re not going to make any notices difference to our bills and we don’t want to be their landlords so I jokingly said I’d settle for expensive Christmas and birthday presents, meaning a nice bottle of Chanel, not a summer house or extension! They don’t want to have ownership of any part of the property and there’s already planning for an extension to the annex in place so that side isn’t the issue, it’s just that my dad feels he should pay for what he’s asking for. 

Personally hubby and I just want it to be simple and easy. Luckily he gets on extremely well with them both and is looking forward to shared projects building kit cars with dad, and of course I’m happy to have meals cooked for us occasionally 😉

Mrcsmrs

Mickey666 said:

Expensive presents sound like the ideal family arrangement.
If dad is really concerned about paying his way you could point out that the less he pays now the more you’ll inherit later (assuming no will surprises!) so he’ll pay his way eventually and you sound fortunate enough not to need it immediately. 

Personally, in these times of families becoming geographically distant and old folks being left to the care home industry, I think the idea of multi-generational homes and closer family support is a lovely thing to do.

Thank you, I like that argument! He could well go for the leaving us more idea. Though in all honestly sister and I were very lucky, our parents both worked hard all their lives to give us a good education, degrees and so on with which we’ve both managed to land far better jobs than they had. This is partly why I want to help them enjoy their retirement. He’s a stubborn old wotsit though and I didn’t want that to land us in legal hot water! 

Soozegirl

Hi - I realise this post is a few months old now.  I am in a similar situation, but slightly more complicated.  My husband and I are buying a house with his mother.  She is gifting us a large sum to enable us to buy a bigger place, but as this is in effect his inheritance coming early, the property is just in our name.  This will not be subject to IHT as it is below the threshold.  She is very well off and the intention is that she will be able to pay for her own care costs, should they be needed - ie we will not be relying on Council care etc.  So, all good.  However, I would also like my own parents to move into an annexe (I have seen a property where me, hubby and mother in law would live in main house, and my parents could live in separate large annexe).  My parents have savings of around £150k and I would need this to enable the purchase of this much more expensive property.  They only live on their smallish pension so if either of them needed council care, what would happen?  They are fit and well and do not look in any danger of needing care at the moment.  I am 55 and hubby slightly younger.  Obviously we do not want to be put in a position where we would be forced to sell the house to pay for care (unless of course we chose to do that). I would not be charging anyone any rent. Like the OP says, it seems that in trying to do right by our elderly parents and provide the best for them, we are being penalised and viewed with suspicion.  The other option is that my elderly parents purchase their own property, but I would feel much happier with them living close by and I do not want them to go through the hassle of buying something at their age and they would not get anything as nice for their budget in a nice location.  Who should I go to for formal, official advice on this sort of thing?

fewcloudy

Soozegirl said:

Hi - I realise this post is a few months old now.  I am in a similar situation, but slightly more complicated.  My husband and I are buying a house with his mother.  She is gifting us a large sum to enable us to buy a bigger place, but as this is in effect his inheritance coming early, the property is just in our name.  This will not be subject to IHT as it is below the threshold.  She is very well off and the intention is that she will be able to pay for her own care costs, should they be needed - ie we will not be relying on Council care etc.  So, all good.  However, I would also like my own parents to move into an annexe (I have seen a property where me, hubby and mother in law would live in main house, and my parents could live in separate large annexe).  My parents have savings of around £150k and I would need this to enable the purchase of this much more expensive property.  They only live on their smallish pension so if either of them needed council care, what would happen?  They are fit and well and do not look in any danger of needing care at the moment.  I am 55 and hubby slightly younger.  Obviously we do not want to be put in a position where we would be forced to sell the house to pay for care (unless of course we chose to do that). I would not be charging anyone any rent. Like the OP says, it seems that in trying to do right by our elderly parents and provide the best for them, we are being penalised and viewed with suspicion.  The other option is that my elderly parents purchase their own property, but I would feel much happier with them living close by and I do not want them to go through the hassle of buying something at their age and they would not get anything as nice for their budget in a nice location.  Who should I go to for formal, official advice on this sort of thing?

Start a new thread is my advice.