Elderly parent putting money into our property

Walters_mum

My husband and I are moving to a more expensive house £550,000. My 83 year old mother would like to put £50k into the pot. Her name would be on the paperwork.  She owns her own home.  What happens if she has to go into a care home before the 7 year thing is up? Thanks 

Brie

Nothing to do with 7 years as that's IHT.  

What you are concerned about is deprivation of assets and there is effectively no time limit on that.  Does she have loads of money?  How likely would it be that it runs out including after selling her home?  It's at that point that local authorities might come to you to foot care bills. 

fyi - costs for care will depend on where she is and the level of care provided.  Ancient uncle in London a couple of years back was paying something like £6k a month.  MiL not in London was being covered at £4k a month.  

Keep_pedalling

What do you mean by “her name would be on the paperwork”? 

If she is making an outright gift then the “7 year thing” only applies to inheritance tax, for care costs it could be considered as deprivation of assets, but as it sounds like she has other assets that could pay for residencial care then that should not be an issue.

If she is just making a loan and there is going to be a second charge on your property or she is buying a share of your home then her £50k will never leave here estate and would be included in any financial assessment for care costs although might not be needed if she has plenty of other assets.

Walters_mum

Thanks. I did mean deprivation of assets. She has a house worth about £240K, a couple of pensions and maybe another 30k after she's put money in with us. By paperwork I mean she'd part own the house. 

SDLT_Geek

Walters_mum said:

My husband and I are moving to a more expensive house £550,000. My 83 year old mother would like to put £50k into the pot. Her name would be on the paperwork.  She owns her own home.  What happens if she has to go into a care home before the 7 year thing is up? Thanks 

Walters_mum said:

Thanks. I did mean deprivation of assets. She has a house worth about £240K, a couple of pensions and maybe another 30k after she's put money in with us. By paperwork I mean she'd part own the house. 

Have you allowed for the extra stamp duty on account of her having a share in the house?  If you are buying in England that would be an extra 3% stamp duty land tax.

Chris_English

How would it benefit her to be buying a share in a house at her age?

Would you be paying her rent for the use of her share of the house?

Walters_mum

Good question.  It wouldn't benefit her. She'd be helping her precious only child move to a safer area!  Would it be any different from her going on a luxury cruise for a year? She'd still have spent money 

Walters_mum

Is the extra stamp duty because she has another home? 

kingstreet

Will a mortgage be involved?

At this time there is no lender willing to have more owners than borrowers so she would be unable to be party to the ownership without being named on the mortgage.

A small number of lenders will allow her to contribute to the deposit and occupy the property (if that is the intention at some point) but then she would be party to neither the mortgage nor the ownership.

As has been suggested, a second charge would give her some protection but this would remain an estate asset for IHT and care purposes.

lisyloo

There is an issue that if she went into a care home for a long time then she could run out of money and then her £50k equity stake would be required.
there is a cap but that doesn’t cover anyone who wants a higher standard that the local authority offer (which is most people).
deprivation of assets doesn’t come into it because she’s not giving you £50k, she will own a £50k stake in your property so she hasn’t given anything away.

if you think you’d be able to extend your mortgage in future then this many not be an issue, but if you could not then the local authority might want to liquidate her stake and the only way to do that is to sell your home.

what about on death, are there other beneficiaries who might inherit that £50k?
what if she gets a toy boy? Write you out of her will?
changes her will to leave it all to the cats home?
Those might sound like unlikely scenarios but it’s worth bearing in mind she can do what she likes so you cannot 100% rely on inheriting the £50k.

Slithery

Walters_mum said:

Is the extra stamp duty because she has another home? 

Correct. An extra £16,500 in SDLT will be due on top of the £17,500 that you would usually pay as it will be an additional property for her.