Buying Home With Large Gift From Parents

ArnieUK

Looking to buy a home with an annexe that my family can live in with my parents in the annexe now that they are retired. Parents mortgage-free and their home worth about £300k. After sale of my home and deducting for stamp duty, paying off debts, solicitors, removals, EA fees etc. I will have £75k deposit from myself. Home we want is £475k. Parents willing to state in writing full £300k of theirs is a gift to us, so in my head that means a £100k mortage for me and my partner which is half what we have currently and we all get to live together as we wanted. Parents won't be on mortgage and won't have any stake in the property so whether they live with us or not shouldn't be anyone's business right? Does the 7yr inherticance tax apply if one of my parents dies but the gift was jointly made, or would they both have to die within 7yrs before it became an issue? Is a gift of that size even allowed? Is there anything else I'd need to be aware of in this particular situation? Would the gift be better stated as a 'loan to be repaid once the house is sold' (gifted loan) instead of an unconditional gift, or no difference as far as inheritance tax goes? In my head they just gift the money, I get a mortage, we pay all the usual costs of moving home and nothing extra and we all live happily ever after...

user1977

ArnieUK said:

Looking to buy a home with an annexe that my family can live in with my parents in the annexe now that they are retired. Parents mortgage-free and their home worth about £300k. After sale of my home and deducting for stamp duty, paying off debts, solicitors, removals, EA fees etc. I will have £75k deposit from myself. Home we want is £475k. Parents willing to state in writing full £300k of theirs is a gift to us, so in my head that means a £100k mortage for me and my partner which is half what we have currently and we all get to live together as we wanted. Parents won't be on mortgage and won't have any stake in the property so whether they live with us or not shouldn't be anyone's business right?

Wrong. If in exchange for the "gift" they're being allowed to live in your house, then it doesn't sound like a no-strings-attached gift, does it? And your lender would want to know about your parents' occupancy even if there wasn't a gift involved.

Does the 7yr inherticance tax apply if one of my parents dies but the gift was jointly made, or would they both have to die within 7yrs before it became an issue? Is a gift of that size even allowed? Is there anything else I'd need to be aware of in this particular situation? Would the gift be better stated as a 'loan to be repaid once the house is sold' (gifted loan) instead of an unconditional gift, or no difference as far as inheritance tax goes?

Think you might be confused about lifetime gifts (assuming they're a genuine gift in the first place). They don't create an additional Inheritance Tax liability compared to not making the gift, they just might get taken into account (to some extent) in calculating the size of the estate on death. If your parents turn it into a loan, that will form part of their estate. And if they don't give you the money at all, then it will form part of their estate.

AdrianC

...and, of course, deprivation of assets should they need care...

Jeffrey_Shaw

ArnieUK said:

Looking to buy a home with an annexe that my family can live in with my parents in the annexe now that they are retired. Parents mortgage-free and their home worth about £300k. After sale of my home and deducting for stamp duty, paying off debts, solicitors, removals, EA fees etc. I will have £75k deposit from myself. Home we want is £475k. Parents willing to state in writing full £300k of theirs is a gift to us, so in my head that means a £100k mortage for me and my partner which is half what we have currently and we all get to live together as we wanted. Parents won't be on mortgage and won't have any stake in the property so whether they live with us or not shouldn't be anyone's business right? Does the 7yr inherticance tax apply if one of my parents dies but the gift was jointly made, or would they both have to die within 7yrs before it became an issue? Is a gift of that size even allowed? Is there anything else I'd need to be aware of in this particular situation? Would the gift be better stated as a 'loan to be repaid once the house is sold' (gifted loan) instead of an unconditional gift, or no difference as far as inheritance tax goes? In my head they just gift the money, I get a mortage, we pay all the usual costs of moving home and nothing extra and we all live happily ever after...

Post #2 is largely correct- but why on earth aren't you asking these questions of your own solicitors?

NEVER reply on website answers. Nobody other than you and your own solicitors can know the precise details, surely, and anonymous replies proceed on the basis on only what you've already placed in the public domain.

Mojisola

And in trouble if you and your partner ever break up - the house will have to sold to share out the money.  Where would they live then?

What would happen if you died before them - would your partner (and any future partner they may get together with) be happy to have your parents living with them?

Thrugelmir

Where's the £300k coming from that your parents plan to use as a deposit? 

Pixie5740

It is very much the business of the mortgage lender if a large part of the deposit is coming from people who are giving you that money for exchange of people allowed to live in the property being purchased. If in doubt ask your solicitor. 

The 7 year rule for gifts won’t apply because it’s a gift with reservation not a no-strings-attached gift. IHT might not be an issue though depending on the rest of your parents estate when they die…assuming they pre-decease you…they might not. 

Brie

Should they need to pay for care for either of them then the value that they have given you will be taken into account and depending on the situation at that time you may need to sell to pay for that care.  Doesn't matter if that makes you homeless.   The only way around this is if you are over 60 at that point and then a lien may be put against the house for when you (or your heirs) do eventually sell.

Our lender was fine with this situation as my MiL provided a letter to say she had no interest in the house we were buying with her gift.  Small difference being that she lives in the same house as we do not an annexe but I don't thing that would make a difference.

dimbo61

So you have a 75K deposit.
Can you get a large mortgage ? 
Maybe offset mortgage with YBS and your parents can keep the money from the sale of there home in an offset account saving you interest on your mortgage.
Think you might need a bigger deposit.

Flugelhorn

I think many people find it is better to live near each other rather than in the same building and to keep the finances separate

Thrugelmir

Flugelhorn said:

I think many people find it is better to live near each other rather than in the same building and to keep the finances separate

All you need is the couple who own the property to get divorced.