Buying a property with my parents for my parents - implications

me107

I am considering helping my parents to move house (for personal reasons which I won’t go in to). The house would be for them to live in; i already have a home which i own outright.

I would be contributing approx. £200k in cash which would be added to the proceeds from the sale of their current home, worth about £260k.

I realise this is not the most sensible use of my money (in terms of profit I might make, cost of stamp duty for a second home etc), but I have personal reasons for wanting to assist them. I realise the money may be tied up for some time.

I am however keen not to lose money, and I had some concerns that if either of them have to go into care then the council might try and get at my money as part of this. I thought that if we owned proportionate shares three ways as tenants in common then the council would not be able to consider my share in any means test for care home fees for them later in life. Is that correct?

Are there any other financial implications for me to be aware of which could risk my capital? (I realise I would likely make more money if the money was invested in the markets etc).

Are there any tax implications other than having to pay stamp duty for a second home?

Any thoughts would be welcome.

Keep_pedalling

Why not lend them the money and put a charge on the property. That would avoid the additional stamp duty. Which ever way you do it your share is safe from care costs.

Mutton_Geoff

The advice you'll get here will be worth as much as you are paying for it. For such a situation, I would get proper legal/tax/inheritance advice rather than risk anything you read in response here since this forum is full of very convincing but legally inaccurate posters.

me107

Mutton_Geoff said:

The advice you'll get here will be worth as much as you are paying for it. For such a situation, I would get proper legal/tax/inheritance advice rather than risk anything you read in response here since this forum is full of very convincing but legally inaccurate posters.

Thanks. Yes i do intend to speak to a solicitor. But thought canvassing views here a sensible first step.

me107

Keep_pedalling said:

Why not lend them the money and put a charge on the property. That would avoid the additional stamp duty. Which ever way you do it your share is safe from care costs.

Yes, that is another option. I guess i was thinking that if i owned a share of the property, if the property increases in value, i might be able to make some profit on it (given that i hope my parents might live for another 30 years). If i simply lend them the money, and get it back when the eventually die, inflation likely to take a heavy toll (and i don't feel comfortable charging interest on a loan to my parents).

user1977

me107 said:

Keep_pedalling said:

Why not lend them the money and put a charge on the property. That would avoid the additional stamp duty. Which ever way you do it your share is safe from care costs.

If i simply lend them the money, and get it back when the eventually die, inflation likely to take a heavy toll (and i don't feel comfortable charging interest on a loan to my parents).

You could set it up so the amount they pay back is linked to any increase in value.

SDLT_Geek

Do not forget capital gains tax if you take a share in the property.  You will not get relief on your share as you are not living there.

Annisele

In general I think people should always consider death, divorce, debt (/bankruptcy) and disease (/illness) before they do anything like this. The first of those is inevitable for all of us, but even there I think it's worth thinking about what you'd want if, for example, you were to pre-decease your parents.

If you own a share of their house, there will be additional SDLT to pay. Then, when you eventually sell, it's very likely there will also be CGT (depending on the CGT rules then). Will your parents be paying you rent on your share? (Given that you don't want to charge them interest, I assume not - but that's not going to help you in your aim of retaining the real value of your capital.) Who will be responsible for maintenance costs, and in what proportion?

If you lend them the money secured on the house, then you'll need to be careful not to fall foul of the rules on regulated mortgage contracts. Any interest they pay you will be taxable as income, but I think there's unlikely to be a CGT issue.

However you do this, you'll also need to either be sure you can afford to tie the money up for, as you say, hopefully 30 years. What if you become unable to work, what if you get divorced etc? (You don't say if you're married, but even if you're not is still possible for you to meet somebody and then get divorced over that sort of timescale. Yes, I'm a pessimist.)

Also, what if your parents want to move house?