'buying' the family home

skyblues87

Slightly odd situation that I'm struggling to find the answer to by googling. My parents, in their 80s, live in the family home and the plan has always been that I would take that house on when the unfortunate time comes. 

After years of me suggesting they should downsize to somewhere more manageable and them point blank refusing my Mum has now announced the house is too big for them and they've been talking about moving because what really makes it easier is when you leave that last big move until your 80s! When I've spoken about this with them in the past I've assumed they would sell up and move but they have other ideas. Their plan is to essentially give me their house and then with the proceeds from selling my house they could either buy or rent somewhere smaller and more suitable. 

Obviously we'd take legal advice on this but their solicitor is on holiday at the moment so thought I'd get some input from here. Are there any traps to watch for? In particular we're thinking with regards to any potential care needs and claims of deprivation of assets. 

Its a very fluid situation given their age and health but the general theory is I move into the family home and ownership is transferred. I assume there's nothing that stops you essentially giving away your house? They would then buy or rent a smaller place. If, between the equity in the house I sell and the money its come to light they have stashed away in ISAs, that was enough to cover the purchase / rent then that's relatively easy. However if additional funds were needed it would be via mortgage or me paying their rent. Obviously they won't get a mortgage at their age so it would be in my name which I assume means my name being on the deeds along with my parents which presumably has an implication when it comes to factoring in the value of the property with regard to any future care needs. My personal feeling is renting would probably be the easier option but the priority would be getting them in the most suitable property. 

Has anyone done similar? My gut feeling is that it seems fairly simple in theory but I suspect there's some catch that we wouldn't want to come to light when it was too late.

Snookie12cat

Instantly the extra 3% stamp duty comes to mind. This will be payable on your parents home if they give it to you, although if you sell your main residence within 3 years you can claim the extra back.

I'm not an expert but if they die or go into care within 7 years you could get stung? 

julicorn

skyblues87 said:

 I assume there's nothing that stops you essentially giving away your house? T

It doesn't really sound like that's their plan though, right? It sounds like they want you to buy the house, for the same amount of money you'd get for selling your own property? 

Do you know roughly what the difference is between what their house might be worth, and how much they are looking to sell it to you for? 

user1977

Snookie12cat said:

Instantly the extra 3% stamp duty comes to mind. This will be payable on your parents home if they give it to you, although if you sell your main residence within 3 years you can claim the extra back.

I'm not an expert but if they die or go into care within 7 years you could get stung? 

Stamp duty would only be payable on the consideration - so if it's genuinely a gift, zero. But it sounds like the consideration is actually whatever the OP sells their current house for?

7 years is the relevant period for Inheritance Tax i.e. if they die within 7 years of a lifetime gift, it gets treated (at least partially) as being part of their estate - though that's not going to be any worse than it actually still being in their estate when they die.

skyblues87

julicorn said:

skyblues87 said:

 I assume there's nothing that stops you essentially giving away your house? T

It doesn't really sound like that's their plan though, right? It sounds like they want you to buy the house, for the same amount of money you'd get for selling your own property? 

Do you know roughly what the difference is between what their house might be worth, and how much they are looking to sell it to you for? 

You could certainly look at it that way and would need a solicitor to guide on the best way to actually end up with what they want as the end result. 

Essentially you're right though, I'd sell my house and the equity, likely to be in the range of £80K or slightly more would go to them. The difference in values is pretty significant, probably talking £300K more. 

skyblues87

Snookie12cat said:

Instantly the extra 3% stamp duty comes to mind. This will be payable on your parents home if they give it to you, although if you sell your main residence within 3 years you can claim the extra back.

I'm not an expert but if they die or go into care within 7 years you could get stung? 

Don't think the stamp would be an issue. I'd be selling up and moving ASAP. 

When they mentioned this the 7 years was the first thing that came to mind for me.

I do know they spoke to their solicitor about this years ago and he put something in place to try and minimise how much could be taken as they were worried that potentially they could lose the whole value of the house and have no inheritance to leave. I told them not to worry about that but they do.

From what I understand the house was moved into shared ownership, originally it was just in my Dads name, so they own half each. If one dies before the other, which would seem common, their half comes straight to me but there's something (deed of trust?) which basically means I can't kick the remaining parent out against their will to sell it, not that I would every do that.

Snookie12cat

Sounds like tenants in common on land registry. Each half owns 50% and the other half cannot be taken for the others care etc. .

skyblues87

Snookie12cat said:

Sounds like tenants in common on land registry. Each half owns 50% and the other half cannot be taken for the others care etc. .

I was just googling and tenants in common came up and that defiantly rings a bell. 

MovingForwards

Depravation of assets is one your parents will need to be aware of.

elsien

There isn’t a time limit on deliberate deprivation of assets. Wouldn’t be an issue if they stayed put because if a partner is living there then the value is disregarded anyway. 
However if I’m reading it right, they’re planning on giving you the equivalent of 300K. If either of them do end up needing care, and it is foreseeable that at their age needing care in the future is within the realms of possibility, that gift is going to raise some eyebrows if their other assets are not enough to cover it. 

TripleH

Op, I assume you do not have any siblings?

If your house is worth less than your parents' there is always the risk of a messy inheritance issue where you argue over shares. (Accept relevant only if you do have siblings).