Extend mum's home

nicknook

I am my mother's carer and I spend fifty percent of my time between my own main residence and her house, which is in need of repairs and improvements. I usually work from her home as I can more easily juggle her needs between my own work.

She is finding it difficult to manage the stairs and I am thinking about extending her house where the garage is, building her a downstairs bedroom with ensuite bathrroom and an office for myself on top. My main concern is that the extension will increase the value of her home and not only will I be paying for the cost of it but also increased Inheritance Tax in the future. The house in it's current state is worth about £1m. Neighbouring house that have already been extended have sold for between £1.3m and £1.4m.

Is there a way for me to pay for the extension without increasing the future Inheritance Tax liability?

Jeremy535897

The simplest solution would be for her funds to be used to extend the property. Is that a possibility?

nicknook

Unfortunately she has only a small amount of funds. I am paying for most of her household expenses

Keep_pedalling

Under the circumstances I would seriously look at downsizing to a more suitable property. The priority here should be the security and comfort of your mother rather than minimising IHT. Alternatively if you can raise the funds to provide the adaptations required you could always place a charge against the property which would count as a debt against the estate.

naedanger

nicknook said:

I am my mother's carer and I spend fifty percent of my time between my own main residence and her house, which is in need of repairs and improvements. I usually work from her home as I can more easily juggle her needs between my own work.

She is finding it difficult to manage the stairs and I am thinking about extending her house where the garage is, building her a downstairs bedroom with ensuite bathrroom and an office for myself on top. My main concern is that the extension will increase the value of her home and not only will I be paying for the cost of it but also increased Inheritance Tax in the future. The house in it's current state is worth about £1m. Neighbouring house that have already been extended have sold for between £1.3m and £1.4m.

Is there a way for me to pay for the extension without increasing the future Inheritance Tax liability?

You could lend the money. However I would speak to a solicitor to ensure it is done properly given the relationship and the risk that, if not properly documented now, it creates future issues.

Would the disruption while the work is taking place be manageable?

lincroft1710

I suppose downsizing to a less expensive bungalow is not an option

Jeremy535897

The obvious solution is for her to downsize into a bungalow big enough for you to work from, but I am guessing this is not what you want? I think we can also rule out concerns over deprivation of assets as I cannot imagine she will ever be in council funded care?
One option might be for you to purchase part of the property from her, in exchange for doing the future work on the property. Your share would need to be commensurate with the area you actually occupy. There would be no capital gains tax if the property has always been her main residence, and I assume the transfer price would be within the stamp duty holiday of £500,000, although unfortunately the higher rate of stamp duty would be payable, as you would have an interest in more than one residential property. You would also pay capital gains tax on your share when the property was sold. Care would have to be taken with regard to the gifts with reservation rules, and also the pre-owned asset rules.

You could also make her an interest free loan, repayable on demand, which you then use to finance her share of the household expenses. The weakness of this planning is that the loan will mount up to a level where it might be hard to argue that it really is repayable on demand, and then you would be making a gift to her, but you are already doing that anyway.

I don't think the problem is insurmountable, but it needs proper tax and legal advice, rather than a forum like this. If she has inherited your father's nil rate bands, it may be that up to £1 million of her estate is exempt from inheritance tax.

nicknook

naedanger said:

nicknook said:

I am my mother's carer and I spend fifty percent of my time between my own main residence and her house, which is in need of repairs and improvements. I usually work from her home as I can more easily juggle her needs between my own work.

She is finding it difficult to manage the stairs and I am thinking about extending her house where the garage is, building her a downstairs bedroom with ensuite bathrroom and an office for myself on top. My main concern is that the extension will increase the value of her home and not only will I be paying for the cost of it but also increased Inheritance Tax in the future. The house in it's current state is worth about £1m. Neighbouring house that have already been extended have sold for between £1.3m and £1.4m.

Is there a way for me to pay for the extension without increasing the future Inheritance Tax liability?

You could lend the money. However I would speak to a solicitor to ensure it is done properly given the relationship and the risk that, if not properly documented now, it creates future issues.

Would the disruption while the work is taking place be manageable?

She could move into my own house while the work is being carried out. I have plenty of space but it would have to be temporary as it's a town house. The bedrooms and bathrooms are two flights of stairs up. alternatively she could stay with my sister who has a downstairs bedroom and bathroom. Unfortunately they tend to argue a lot when with each other.

XoCAlop

nicknook said:

I am my mother's carer and I spend fifty percent of my time between my own main residence and her house, which is in need of repairs and improvements. I usually work from her home as I can more easily juggle her needs between my own work.

She is finding it difficult to manage the stairs and I am thinking about extending her house where the garage is, building her a downstairs bedroom with ensuite bathrroom and an office for myself on top. My main concern is that the extension will increase the value of her home and not only will I be paying for the cost of it but also increased Inheritance Tax in the future. The house in it's current state is worth about £1m. Neighbouring house that have already been extended have sold for between £1.3m and £1.4m.

Is there a way for me to pay for the extension without increasing the future Inheritance Tax liability?

Where abouts is this property £1m wow.. 

Downsize to a  cute bungalow and then you’ll have probs about £850k to splash about with , a bought outright £200k bungalow is good , 

downsize is the best option I reckon 

sending love to your mum bless her 

nicknook

Both of our houses are in South West London. Wherever she moves to it would have to be not too far away from my house, which is currently only a few minutes walk away. If she moves much further out I would have to move too. Although I work from home now because of the pandemic, I envisage having to travel into the City two or three times per week when the pandemic is over, so I need to keep within commuting distance from the City.

p00hsticks

She is finding it difficult to manage the stairs

I presume you've already looked into and discounted simply installing a stair lift ?