Purchasing a house outright for my mother

2bFrank

Hello,

I'm just after some thoughts really about buying a property for my mum, she's getting a little older and want her to move closer to me, a house a couple of streets down is being put up for sale, and I am thinking of buying it for her.

It will mainly be funded with a little bit of saving, but mostly remortgaging our house (currently 40% LTV mortgage on it, looking to increase back to 80%). This will then allow us to buy the property fully without a mortgage and pay the extra SDLT.

My issue is things such as inheritance tax or if mum needs to go into long term care. Also my mum is on benefits, will this be affected if I bought her the property. I know the housing benefit will stop, which is absolutely fine, but don't want her other benefits to stop.

What would be the best way to buy the property, could I buy the house, then gift it my mum keeping a 100% charge on the property, or will I have to gift the house too my mum fully, what will happen if she has to sell the house, i.e. long term care. I want my mum to feel secure, so would prefer her to have ownership of the property, no matter what happens to me (If I die, or get divorced etc my mum will have a roof over her head).

Any thoughts will be appreciated.

GDB2222

You don’t have to gift the house to mum at all. I’m not entirely convinced that housing benefit would be out of the question. 

canaldumidi

If you gift her the house

* then yes, the LA would include its value when means testing her for care. She would likely have to sell it to fund her care

* If that did not happen, then yes, when she died, the house would be part of her Estate for Inheritance Tax purposes. Whether her Estate would actually have to pay IHT would depend on the total value of her \estate including the house. I assume if she's on benefits she has limited other assets (savings, investmets), so it would be the value of the house that mattered. IHT allowances are here:

https://www.gov.uk/inheritance-tax

* I can't comment on what benefits she might or might not lose if she owned her home. Post on the benefits board here?

https://forums.moneysavingexpert.com/categories/work-benefits-business

You could keep the property in your name, but then

* additional SDLT

* possible issues around being a landlord/complying with leglislation, insurance etc, though if she paid no rent (neither cash nor kind) and there were no mortgage on the property, that might not be an issue.

* less security for her. Are you married? Worst case example you get divorced and your ex claims half (or more?) your asets and you have to sell the property leaving mum homeless. Or you go bankrupt? Lose your job and can't pay your new mortgage?   Or....or...

TBagpuss

It might be possible for you to keep it in your name and provide her with a tenancy at a peppercorn rent - you'd need to get advice but it would probably be possible to set it up in a way which meant that you could not evict her .

You would pay the extra SDLT and would potentially have a CGT liability when you ultimately came to sell the property.

You would also have the normal landlord obligation, although of course if your aim is to care for you mum them I assume that you would be making sure that things such as gas safety checks were done in any event

If you loan her the money to buy it - i.e. it went into her name but with a legal charge in your favour for the full value you paid (plus interest if you wanted) then I believe that that would be the same as any other secured debt - it would mean that she only owned the equity after the loan was take into account, so for the purposes of assessing care fees etc. the net equity, rather than the full value, of the property would be relevant. 

A third option might be to put the property into your and her joint names, perhaps 95% to you, 5% to her, and have a declaration of trust which clearly sets out the terms of ownership, which as I understand it could include provisions about whether and in what circumstances it could be sold, so you could probably build in provisions that it would not be sold unless she had died or no longer occupied it as her main home (i.e. if she went into full time residential care) 

you would still have the higher stamp duty and CGT issue. You could tweak the % interests - her having a higher % would mean lower CGT for you in the long term but the % she owned would be relevant for any care costs assessment. I don't believe that equity in your home is normally taken into account when you are claiming means tested benefits.

IF you talk to a solicitor who is a member of STEP or Solicitors for the Elderly they may be best placed to talk you through the pros and cons of different options

getmore4less

You loan her the money 

She buys the house, no extra SDLT(assume she will sell her property, if she has one, in the refund time frame)

You get first dibs on her assets as you have the loan which you can secure on the property.

There was a long running thread about a loan as a % of the property and if you get a beneficial interest if you do it that way.

You may be happy to just secure the cash paid and take the hit on the return/interest costs as you are borrowing.
 

2bFrank

Thank you very much for your responses, think it might be a trip to the solicitors to see the best way forward. The CGT and extra SDLT wouldn't be an issue (We are prepared to pay the extra SDLT, and cannot see the house value increasing that much it will breach the CGT allowance), but want mum to feel secure but not affect any benefits (apart from housing, which we don't mind at all). Thanks again.

dimbo61

Have you looked at over 55,s sheltered housing.
My Dad has now been living in a SH flat for 17 years having sold his old house.
Loves it and the freedom to spend the money he had in his old house.
No gardens to maintain, any issues just call the warden.
Close to shops and pubs/cafés

2bFrank

dimbo61 said:

Have you looked at over 55,s sheltered housing.
My Dad has now been living in a SH flat for 17 years having sold his old house.
Loves it and the freedom to spend the money he had in his old house.
No gardens to maintain, any issues just call the warden.
Close to shops and pubs/cafés

We have indeed, this would be ideal (but still a similar problem in that we would still have to buy the property for my mum) but the nearest one is quite a few miles away, the idea of buying the house is to move my mum close to use, in the fact we can walk round within seconds etc. the house available is only a couple of streets down.