Joint home ownership - selling share to son

dottiec

This is further to previous posts as I continue to try and establish the best way forward.
I am 74 yrs old, in good health, and live with my eldest son.  We purchased our property in 2010 along with my youngest son - so one third each ownership.  Youngest son lives elsewhere.
I would like my eldest son to have more ownership and worry about the consequences of any action I might take now in relation to potential future care home fees and his ability to remain in our home.  My questions are:

1     Would it be better for him to purchase a percentage of my one third beneficiary share at this point - ie have property valued, deduct mortgage loan, divide by 3 and work out how much it would cost him (my eldest son has always paid the mortgage and some lump sums, so I owe him one third of this cost which presumably can also be deducted from his purchase price).  We don't really have the money to do this but feel it may be worth investigating this route which is why I am asking the question.
2      Would I put my son at risk if I used a Deed of Assignment to assign part of my share to him.  This would be so much easier but could this be regarded as Deprivation of Assets and therefore cause him a headache in the future.  
3      Would I be able to do both ie assign some and sell him some of my share, but keep a small percentage to retain some legal ownership.
4      If we do any of the above, is there a Trust (or something) to enableme to remain in the house until I die.  

I am literally going round in circles as I have found there are two aspects to this ie future care home assessment requirements and taxation issues and having used the half hour initial free consultation routes offered by some companies, it has become very apparent that neither covers the area of the other.  It would be so easy to make a mistake.

Thank you for any advice and help.


 

km1500

If you are in good health and do not this point need a care home or forsee a need for a care home in the immediate future, then you do not need to worry about deprivation of assets in any future assessment. Age UK have a good fact sheet online about this.

Anyway, you can gift any part of your share to your son by Deed. You need to update whatever documentation you have (Declaration of Trust?) showing the percentages owned by each. You can eg own 5%, your younger son 1/3 and the remainder your older son. All three of you would remain on the proprietor's register at the Land Registry

I assume this has been your main residence, in which case there are no CGT implications.

How much is the house worth (just thinking of IHT)?

In summary, the three of you are registered as owners at the Land Registry, but the LR does not record percentages - the default is 1/3 each. To vary this, a simple declaration of trust is needed and you can prepare one with whatever percentages you wish.

https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets/

dottiec

Thank you so much for this response.  The house is worth around £550,000 so divided by 3 there is no IHT to worry about.  If what you say is correct, and I say that with the greatest respect, then I am delighted. 

So, if I have understood correctly, it would appear to be OK to do a Deed of Assignment to assign part of my share of our property to my eldest son, but would also need a Declaration of Trust to outline the property ownership.  

Would the assignment of a part share be regarded as a gift and if so do I need to inform HMRC.   This is my eldest son's PPR so would he incur CGT on the share if he decides to sell the property in the future.  

I did try to phone Age Concern before posting on here but the wait time increased as I held the phone. I have read the leaflets but nothing seems to fit our situation.

Many thanks.

km1500

You can gift as much as you want to anyone you want without informing HMRC. There is no Gift Tax in the UK.

I would recommend a visit to a solicitor to draw up a new Declaration of Trust showing the new percentages - it would not be very expensive to do this.

There is no CGT on sale of PPR so your son would not incur any if he sold his PPR in the future

propertyrental

best to stick to one thread...

https://forums.moneysavingexpert.com/discussion/6426637/joint-owners-tenants-in-common#latest

 The house is worth around £550,000 so divided by 3 there is no IHT to worry about. 

IHT is based on value of the Estate, not value of the property.

Keep_pedalling

You would be very foolish to give your share away unless you have other major assets to fall back on should something go wrong with your living arrangements such as your son pre-deceasing you going bankrupt or simply a major falling out. 

dottiec

Keep_pedalling said:

You would be very foolish to give your share away unless you have other major assets to fall back on should something go wrong with your living arrangements such as your son pre-deceasing you going bankrupt or simply a major falling out. 

Thank you.   Unfortunately I have had some poor dealings with solicitors which is why I try to explore all options before seeing a specialist solicitor, who more than likely will not advise on any tax implications. 

You have given me more food for thought as I have not considered the situations you have outlined which shows how helpful these forums are - I am more preoccupied with my eldest son being able to remain in the property.  Something else to investigate.  

If I go ahead with the Deed of Assignment, I would like to be reassured by having some sort of agreement to say I can stay in the property (or my sons have to provide me with accommodation) until I die - is something like this available.  

In the end, as you say, I may decide it is better to leave things as they are but I need to satisfy myself that this is the right decision.

Many thanks

MobileSaver

dottiec said:

We purchased our property in 2010 along with my youngest son - so one third each ownership.  Youngest son lives elsewhere. ... I would like my eldest son to have more ownership 

Presumably you've already considered this but I mention it in case it's been missed as it seems the youngest son is getting a bit of a raw deal here.

The youngest has a significant amount of their money tied up in a property that they already can't access for maybe another 10 or 20 years when your time is up but now you're trying to ensure his brother can stay in the property after you meaning the youngest may never get to see that money again. On top of that you're also giving away what little assets you have so your eldest essentially gets their inheritance early while the youngest ends up with practically nothing.

No judgement here by the way, just an observation from the outside.

Keep_pedalling

dottiec said:

Keep_pedalling said:

You would be very foolish to give your share away unless you have other major assets to fall back on should something go wrong with your living arrangements such as your son pre-deceasing you going bankrupt or simply a major falling out. 

Thank you.   Unfortunately I have had some poor dealings with solicitors which is why I try to explore all options before seeing a specialist solicitor, who more than likely will not advise on any tax implications. 

You have given me more food for thought as I have not considered the situations you have outlined which shows how helpful these forums are - I am more preoccupied with my eldest son being able to remain in the property.  Something else to investigate.  

If I go ahead with the Deed of Assignment, I would like to be reassured by having some sort of agreement to say I can stay in the property (or my sons have to provide me with accommodation) until I die - is something like this available.  

In the end, as you say, I may decide it is better to leave things as they are but I need to satisfy myself that this is the right decision.

Many thanks

Why do you have a particular concern for him? It does not sound like he is financially dependant on you as you were talking about him buying a larger share. What will happen if at any point he wants to go his own way for any reason?

dottiec

Keep_pedalling said:

dottiec said:

Keep_pedalling said:

You would be very foolish to give your share away unless you have other major assets to fall back on should something go wrong with your living arrangements such as your son pre-deceasing you going bankrupt or simply a major falling out. 

Thank you.   Unfortunately I have had some poor dealings with solicitors which is why I try to explore all options before seeing a specialist solicitor, who more than likely will not advise on any tax implications. 

You have given me more food for thought as I have not considered the situations you have outlined which shows how helpful these forums are - I am more preoccupied with my eldest son being able to remain in the property.  Something else to investigate.  

If I go ahead with the Deed of Assignment, I would like to be reassured by having some sort of agreement to say I can stay in the property (or my sons have to provide me with accommodation) until I die - is something like this available.  

In the end, as you say, I may decide it is better to leave things as they are but I need to satisfy myself that this is the right decision.

Many thanks

Why do you have a particular concern for him? It does not sound like he is financially dependant on you as you were talking about him buying a larger share. What will happen if at any point he wants to go his own way for any reason?

My eldest son has a low paid job and we live very well, in harmony (each with our own space but together if you know what I mean).  My eldest son does require support and I am just trying to smooth the way for him when I've gone - it will still be very hard for him.  My youngest son has been taken care of financially so we have no worries there.

I am just trying to establish our options before making any decision.  I won't do anything unless I am assured a lifetime tenancy in my home - which is why I have asked whether anyone is aware of a way I can achieve this. I am not worried about my son's future intentions but if a third party enters the scene then I realise how vulnerable I might become. I understand how important this is and will do nothing without a legally binding assurance. Can anyone help with this?

I would probably be better leaving things as they are but am concerned that should I need residential care the Local Authority may require my son to sell our home.  Even if that's not the case now, who knows what might happen in the next few years.

Thank you again for taking the time to respond. 

Annisele

In theory it's possible to give away a house while retaining the ability to live there. But I think that's very rarely a sensible thing to do. (I'm wavering over saying that that's never a good idea, but I'm not quite that sure.)

For inheritance tax purposes, gifting a house while retaining the right to live there rent free counts as a "gift with reservation". There are a bunch of rules around that, but the point of those rules is that you don't save any tax - HMRC is wise to many kinds of plan.

For avoiding care home fees purposes, if you've made the gift on purpose to avoid care home fees then the council can in effect pretend you still own it (again, councils are wise to many kinds of plan). Age UK has a fact sheet with a whole bunch of detail on this. If your son still lives in the property at a time when you go into care, then I believe that under current rules the property would be ignored if he was over 60 or if he was "incapacitated" (with "incapacitated" just meaning eligible for certain benefits - it doesn't quite mean what it sounds like it means).

If a mortgage is going to be involved, then I suspect the issue of whether you can give away your house while retaining the right to live there will be a moot point. I can't imagine any lender being prepared to lend on a property in those circumstances - what would the lender do if the borrower didn't pay?