Elderly parent putting money into our property

Walters_mum

Thank you everyone. So many things I didn't know about. Sounds like it's not going to be doable or worth it.  
Cheers 

user1977

Walters_mum said:

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 

Is there a reason why she wants to be a joint owner, rather than just gift the money? I'm guessing she's not relying on seeing the money again?

If you're buying with a mortgage then in any event a gift might be the only arrangement your lender would accept.

Walters_mum

I thought if it was a gift we'd be back to the 7 year tax thing. Maybe I'll just get her to take her money out in used fivers and stash it under her mattress 🤣.  Thanks again. I'll close this discussion now (if I can) 

user1977

Walters_mum said:

I thought if it was a gift we'd be back to the 7 year tax thing.

Think you misunderstand the point about gifts and Inheritance Tax - lifetime gifts can be taken into account when assessing the amount of the estate, if they were made within the 7 years before death. But if she still has the money in her account when she dies, then it's definitely going to be part of her estate for IHT purposes! Gifting doesn't make things any worse. And the amount tapers off after two years.

Walters_mum

She doesn't have enough to qualify for inheritance tax. I thought you had to have £325000

Chris_English

Walters_mum said:

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 .

Those are not the only two choices; another option is for her to keep the money in case she needs to go into care and this could mean the difference between the beautiful facility where she’d be happy and the sort of place featured on the news.

lisyloo

Walters_mum said:

I thought if it was a gift we'd be back to the 7 year tax thing. Maybe I'll just get her to take her money out in used fivers and stash it under her mattress 🤣.  Thanks again. I'll close this discussion now (if I can) 

If she gifts then she could still run out of money then you’d be into deprivation of assets I.e. the local authority could want the gift back.

I’ve had a second charge (from a builder before) so in these days of shared ownership that can be done,

Keep_pedalling

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. 

If your mother is comfortable with it then gifting is the best option. Her total net worth is currently around £320k which is significantly below the £500k she can leave IHT free, so although the 7 year rule still applies it makes absolutely no difference as her estate will never have to pay IHT regardless of when she dies.

She will still be left with a decent emergency fund and an asset that would pay for several years residential care if it was ever needed, certainly more than the 2 year average stay.

The alternative is that she lends you the money and puts a second charge on your new home, but that requires finding mortgage provider who is happy with that arrangement. 

lisyloo

Note that there are outlier cases where people stay in homes a long time even though average is about 2 years (and also some are shorter).

she could buy an annuity.
this is where you pay a lump sum up front and buy an insurance policy to pay for the care fees.
if someone live a long time then they are “quids in”. If they don’t then they’ve lost a large (6 figure) premium to an insurer.

I did look into this for my MIL.
we didn’t do it because she did not have enough to cover a “top up” if it became necessary so it didn’t give us the reassurance we wanted.
she died prematurely of covid. I mentioned that as it just goes to show you cannot predict what will happen as no one factored in a global pandemic.

if she bought an annuity then it would give her assurance of never running out of money, being moved to a horrible care home and also being able to leave something for beneficiaries.

she should also get LPA set up if not already.
I’ve done court of protection and believe me it’s a right PITA.

Walters_mum

Thanks, we have LPA. My great Aunt spent 30 years in a care home (although I think that's unlikely for my 83 year old mother!)