Remove property from trust - to sell whilst still alive

sambodidly

Hi,  I hope someone can help please, and sorry if its long....
My FIL wants to sell us his house, and we will move in and care for him (He is recently blind) but there are some complication....
1....My FIL put his property into a 'family trust' 4 years ago which we didnt really know about.
2....He has an 'equity release mortgage' which is currently around 115k which is mentally driving him insane as he hates the fact the mortgage company will probably own the property outright within the next 5-10 years and he thought he would have passed away a long time ago! (He;s still generally fit, just blind)
3....We have a solicitor who is drawing up a 'Deed'  to end the trust, for the Trustees to sign (Husband and his 2 brothers) and they are all in agreement to end this trust and sell us the house.
4....We will 'buy' his house for the total of the equity release, which he will pay off with the sale and we will care for him ( he is currently paying carers to come in but we will take over this)
5...The price we pay is less that the general market value.
This is where I am having sleepless nights.  Will any of us be liable to pay and Inheritance or Capital Gains Tax?  He has a around 20k savings.
Ive been reading about 'deed exit fee's' and taxes and getting in a spin.
Thanks for any help.

naedanger

What is the value of the house?

Another issue to consider is deprivation of assets. If your fil sells the house for less than its market value then he may be treated as having deprived himself of assets, for example if he were ever to go into a care home. (The council may decide to add back the value of the assets he deprived himself of when determining whether they should pay any care costs.)

Also is this to be your main residence? And do you own another house?

getmore4less

Your husband is a trustee of a trust he knew nothing about?

Keep_pedalling

It sounds like he fell for one of these firms who sell a useless trust for several thousand pounds on the lie that this will protect the house from care costs. It won’t because it is deliberate deprivation of assets. That will still apply if he sells it to you at a knock down price keeping his assets below the threshold of self funding.

Now as the plan is for you to care for him that in theory should not be an issue, but these arrangements don’t always go the way they are planed so that risk is still there, but now it is compounded by him planning to give away his long term security. What happens to him if anything happens to you? You dying, losing the capacity to care for him, getting divorced or going bankrupt could all lead to him loosing his home.

sambodidly

Hi all, thank you for your comments.
FIL house is worth around 160k
Husband and brothers thought it was a trust to put the will into, as it was done with part of FIL trust, signed in his kitchen with a neighbour as witness and yes, they didnt really look into it...(grrrr).  It now transpires some 'sales fella' spent hours with FIL and charged him ££££ for this 'trust'! :-(
Depravation of assets. We have thought about this.    We are selling our home to  buy FIL so this will be our main residence and as FIL needs care, we will be doing the full time care.
We have advised solicitors  to draw up a lease so if anything should happen to us (divorce/death of us etc) then FIL will still be able to live in the house until death/care home.

My main concern is IHT and CGT.... Any advice on that would be great please.

naedanger

The amounts your father-in-law has means IHT should not be an issue (unless the rules and limits change significantly) other than the forms will be harder to complete since you will probably have to enter that your father gave a gift with reservation.

CGT should not be an issue as far as I am aware because the property is to become your main residence.

Deprivation of assets could be an issue. This will only arise if your father needs care from social services. However this is probably quite likely since there may well come a point at which you won't be able to care for him yourselves. This means that the £20k of savings could go in care costs and I am not sure if the council could come after you if the amount your father is seen to have deprived himself of exceeds the amount he has.

Having said all that I am no expert and this situation is unusual so don't place much weight on this assessment.

Keep_pedalling

His estate is far to small for IHT to be an issue. Assuming your FIL had a a right to remain in the house under the rules of the trust then there should be no CG liability either.

I am afraid the only people who gain from this sort of trust are the unregulated people who sell them, and the professions you have to turn to to unwind the mess.

getmore4less

1....My FIL put his property into a 'family trust' 4 years ago which we didnt really know about.
2....He has an 'equity release mortgage' which is currently around 115k 
FIL house is worth around 160k

How old is this mortgage?

Keep_pedalling

getmore4less said:

1....My FIL put his property into a 'family trust' 4 years ago which we didnt really know about.
2....He has an 'equity release mortgage' which is currently around 115k 
FIL house is worth around 160k

How old is this mortgage?

I am rather surprised that a mortgaged property could be put into into trust.

sambodidly

The mortgage is around 16 years old. He initially took out the equity release for 40k, and it now stands at 115k...(rates are quite high) :-(  Both him and MIL (deceased) didnt think either would live this long!
The 'Trust' company, Town & Country have obviously led him down the garden path so to speak.
Both the ER and Trust both state he can stay in the home until death/care home and I am surprised too that the Trust was allowed when there was a ER mortgage on the house!
We will have a lease that FIL can stay in the house regardless, until death/care home.
Thanks

sambodidly

To note, the Trust will be cancelled by way of a new 'Deed' created by solicitors before we purchase the property, so in effect, we are buying the home as a 'normal' house sale, although under market value...