Selling grandparents and parents house ?capital gains tax

Hygieia

Hi, looking for some advice on the feasability of this:

(for context, I live about 4 and half hours away from both my grandparents and parents)

My grandparents are both in their 90s and are very independent, but they have declined significantly and need quite a bit more support now (falling constantly etc). They own their bungalow (around £220k).

My parents live 2 hours away from my grandparents so it's not easy to jump in the car and help then when they need it. Aside from this, my parents are now in their late 60s and are looking to take things a bit easier as well in their retirement. They also own their home outright (around £130k).

We would never want to let my grandparents be taken into a carehome and wish to look after them as a family. To do this, my parents want to retire to where I live (South Wales), and bring my grandparents with them to both live together in a bungalow and look after them in their final years).

I am wondering how difficult it would be to sell my grandparents house, my parents house, and then combine both to buy a bungalow down here closeby to me? Would it be better for my grandparents to transfer the deeds and then my parents sell the house and add the two amounts together, or my grandparents to sell the house and then gift the money over to my mother to purchase a house here?

I'm a little bit confused on how this would affect capital gains tax? I know for inheritence tax, if they don't live for 7 years after then you are allowed £325,000 which their assets fall below, but if they gifted my mother the money or the house, would she have to pay capital gains tax?

Many thanks for any help!

greatcrested

Hygieia said:

1) I am wondering how difficult it would be to sell my grandparents house, my parents house, and then combine both to buy a bungalow down here closeby to me?

2) Would it be better for my grandparents to transfer the deeds and then my parents sell the house and add the two amounts together,

3) or my grandparents to sell the house and then gift the money over to my mother to purchase a house here?

4) I'm a little bit confused on how this would affect capital gains tax?

5) I know for inheritence tax, if they don't live for 7 years after then you are allowed £325,000 which their assets fall below, but

6) if they gifted my mother the money or the house, would she have to pay capital gains tax?

1) do you mean financially or practically?

In practical terms the difficulty is in coordinating two sales and a purchase. If they can afford to buy somewhere first, then sell as and when, that's easier.

Or if they can move in somewhere(with you?) temporarily, and then sell as and when, release the money and then buy, again easier.

2) why on earth does this help? Either financially or practically. You/they  still (presumably) still have two houses to sell and one to buy. Why add legal costs, hassle etc? Plus make GP's house harder to sell as few buyers' mortgage lenders will lend on a property sold/transferred within 6 months.

3) which achieves what?

4) CGT is irrelevant if GPs and Ps are both selling their main residence.

5) again, IHT only applies to a gift. Who is gifting who what, and why?

6) if GPs gift you mother money, IHT would be due if they die within 7 years

The key missing information is who is going to own the new property/ As I understand it, it will be owned jointly by 2 GPs and 2 Ps, yes?

But if you are also looking for Inheritance tax planning, that's a different question.

[Deleted User]

Why would your grandparents need to gift anyone their house or money? Your parents sell their house and your grandparents sell their house. Both pool the money together and jointly own the property in Wales, all 4 of them together. Simple. 

Capital gain tax won’t be due if both your parents and grandparents are selling their only or main residences that have always been their only or main residences the whole time they have owned the properties. 

oldbikebloke

since your question appears to be tax related, no your various proposed options all have problems with them
both parents and GP live in the properties they respectively own at present. Therefore the sale of those has no tax implications to either couple 

your understanding of IHT is inadequate in the scenario you pose: New property - parents and GPs live together in it - however, is any of the 4  estates actually big enough for IHT to ever be an issue? If not, everything that follows below is irrelevant, if it is (and you can check that yourself) then read on...

option A) all persons are co-owners
when eventually sold, CGT is irrelevant as it is the main home of each person
IHT implications depend, as ever,  on total value of each person's estate and who "inherits" the share of the property of the deceased person - unless GP have significant sums of money on top of the property it would appear based on the amounts quoted their respective estates will be well below IHT territory 

i know you make a point about avoiding care homes, and yes few people do end up in them in reality, but as each person owns a share then that share would be taken into account in the event that person goes into care. However, as GP already in their 90;s unlikely they would survive in care for very long, so "you" would still have some of their money left by the time they die. 
As parents already in their 60s, the council could not force sale of the property to fund care fees as that would make parents homeless at an age where that is not allowed, The council would have to wait for their money until parents themselves either die or voluntarily sell up

option b - only parents are owners 
GP's money from sale of own house would have part paid for the one they now live in. for IHT that money is a Gift With reservation (of benefit) as they continue to benefit from their own money by having free accommodation.
Therefore the value of the money GP spent will remain part of GP's estate until earlier of i) death or ii) they move out of that property and cease living with parents in any property owned by parents, not them. 

In scenario ii) the money gift to parents for the purchase would then cease to be a GWR and would instead become a potential exempt transfer (P{ET) which is often called the "7 year rule" - live for 7 years and the money falls outside the estate of the donors.
All the above is utterly irrelevant if GP's estate is not subject to IHT in the first place.

As GP already in their 90s, if they end in care, then there would be a risk of a claim for deprivation of capital because at that age it is reasonably foreseeable the care will be needed "soon". The money would therefore be counted for the purposes of paying for the care as though they had never gifted it 

option c) GP and/or parents gift money to you and you are owner 
poor idea
The gift is a GWR so remains in donor's estate.
It is not your home, so the purchase would be subject to higher rate LTT
It is not your home, so the eventual sale would make you liable for CGT
So money that might have passed down the family via property inheritance without incurring IHT because the estate was too small, now for sure will be taxed (CGT) because the property is no longer owned by the estate 

Keep_pedalling

If you parents and GPS want to do this I can’t see where there is any need for gifting, they could just buy a place together.

You may not want to see you GPS ever go into residential care but you parents should consider very carefully what they could be taking on especially at their age, I know how hard caring for dependant parents is, and I have seen it wreck people’s lives and health, and there is no way I will inflict that on my children.

You say your GPS are independently minded, so are they up for moving away from all there social contacts and activities?

getmore4less

Will ~£300k-£350k buy a place big enough for 4 people probably needing 2 living rooms to give space.

if not where is the rest coming from?

Unless there is a load(~ £1m total) of other money slashing around there will be no need to worry about  IHT even if GP gift the value of their house.
 

xylophone

Both parents and grandparents are selling their principal private residences so there is no CGT on sale.

Perhaps your parents could sell their property first, store their belongings and move in with your grandparents to assist them in the sale of the bungalow while they look for a suitable property in Wales- no doubt you could help with this.

The new Welsh property would then be held by your parents and grandparents as tenants - in- common.

DCFC79

Any news OP ?

thirtytoseventy

How far away are the GP and P from south wales? I just wonder how the GPs in the 90s would react to moving out of their area at their age? In my experience, a move outside of a familiar area at that sort of age is a lot for people to cope with. As others have answered, the sums involved sound as though IHT is unlikely to be an issue, and since they would not have CGT to pay on selling their main residences then surely it's best to just pool resources? Is their ultimate aim to pass everything to you or are you thinking more about how the GPs assets pass along to your parents in the first instance?