Buying a house for a personal agreement

Oliver32

I currently live with my uncle, I pay him rent every month. The house is mortgage free and he wants me to have the house in my name in return I pay him the agreed amount every month and he can remain in his part of the house until he dies, it’s his way of securing an income and doesn’t want the stress of upkeep and maintenance on the property.  Would this agreement come under being gifted the house or would it be a sale on agreement? Is it even legal? Where do we start 

user1977

What happens if you want to move on before your uncle dies? Or if he needs to move somewhere else? How long do you carry on making the monthly payment? (i.e. aren't you going to have paid the full price for the house by some point?)

elsien

He’s already got an income. He’s got the rent you’re paying him.
It would count as a gift with reservations for inheritance tax purposes.
Then there are all the implications if you meet someone and want to move away, or you get offered a really good job in a different town, or you get into financial difficulty, and various other scenarios.
How old is he and is there a foreseeable possibility that  he might need care at some point, because then you’re into deliberate deprivation of assets territory.
 What if he can’t manage to stay in his current home, his mobility changes and the house can’t be adapted and he needs to move somewhere more accessible? He’s given away the asset that would allow him to do that with more choice.

It’s not impossible, and there are ways around a lot of the difficulties, but there are a lot more implications than just the financial ones that you probably both need to think through. All the things that could go wrong but you need to plan for just in case.

Oliver32

elsien said:

He’s already got an income. He’s got the rent you’re paying him.
It would count as a gift with reservations for inheritance tax purposes.
Then there are all the implications if you meet someone and want to move away, or you get offered a really good job in a different town, or you get into financial difficulty, and various other scenarios.
How old is he and is there a foreseeable possibility that  he might need care at some point, because then you’re into deliberate deprivation of assets territory.
 What if he can’t manage to stay in his current home, his mobility changes and the house can’t be adapted and he needs to move somewhere more accessible? He’s given away the asset that would allow him to do that with more choice.

It’s not impossible, and there are ways around a lot of the difficulties, but there are a lot more implications than just the financial ones that you probably both need to think through. All the things that could go wrong but you need to plan for just in case.

I live here with my 2 daughters and partner, he lives in the extension on his own and is 70 years old, all my family live within a stones throw away so caring for him wouldn’t be a problem, he wants to see me with a nice house for me and my family. So it would be a gift with reservations we are looking at? Ive no idea what deliberate deprivation of assets is but it doesn’t sound good 😂

elsien

Deliberate deprivation of assets is where people give assets / property away with the primary aim of avoiding paying care home fees in the future if needed. If that is the case then they will be treated as if they still have the notional capital when it comes to any means testing. 

It’s more of an issue where someone already has health issues and there’s a reasonable expectation that they might need care in the future. Always worth reading up about though just to be on the safe side.

km1500

"It would count as a gift with reservations for inheritance tax purposes."

No it wouldn't, as the nephew  would be then living there as their main personal residence.

Uncle gifts house to nephew - this is nephew's only and main residence - the 7 year IHT clock starts ticking it is not a gift with reservation.

Once it is the nephew's house he can invite his uncle (or indeed anyone else) to stay with him on whatever terms he wishes, for example the 'rent a room' scheme

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

Keep_pedalling

So what happens if you pre- decease your uncle? Doing this is a threat to his long term security. As an alternative he could make you joint owner. As joint tenants you would become the sole owner on his death and visa versa. 

That still leaves the issue of what happens if your circumstances change and you need / want to move elsewhere. 

macman

He already has your rental income, and there is nothing to stop you contributing to the upkeep and maintenance, whether by paying more rent, or a direct contribution to his bills.
So what is the real or perceived reason for doing this? Do this and he has no security whatsoever, should you fall out, go bankrupt or predecease him.

martindow

Oliver32 said:

I live here with my 2 daughters and partner, he lives in the extension on his own and is 70 years old, all my family live within a stones throw away so caring for him wouldn’t be a problem, he wants to see me with a nice house for me and my family. So it would be a gift with reservations we are looking at? Ive no idea what deliberate deprivation of assets is but it doesn’t sound good 😂

This may be the case, but no-one knows what care will be required in the future.  Providing 24 hour care, which some people end up needing, could be beyond the family's resources to provide.

There have been threads here where people who wanted to provide care for a relative were not able to do it.

TheJP

km1500 said:

"It would count as a gift with reservations for inheritance tax purposes."

No it wouldn't, as the nephew  would be then living there as their main personal residence.

Uncle gifts house to nephew - this is nephew's only and main residence - the 7 year IHT clock starts ticking it is not a gift with reservation.

Once it is the nephew's house he can invite his uncle (or indeed anyone else) to stay with him on whatever terms he wishes, for example the 'rent a room' scheme

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

The uncle isn't renting the room though. Uncle gifts home, the nephew pays uncle an amount each month, the uncle stays in the home he gifted for free.

That is a clear gift with reservation/IHT avoidance/deprivation of assets. 

Oliver32

Thanks for all your reply’s, booked a meeting with a solicitor who specialises in these things, the last thing we want to do is break the law or not do anything properly.
many thanks