Parents 'gifting' house...

rnj

So my parents rough plan is to 'gift' their house (and still live in it) to myself and sibling as they wanted to mitigate any potential care fees.

* I want to make clear this is their rough plan and I have not had any say.
* The gift with reservation issue I feel is not relevant as there is no IHT consideration as their assets are below the married couple combined allowance and I dont think this will change in the next 5-10years.
* I know they will lose resident nil rate allowance but again, won't affect IHT in this situation due to size of estate.
* They are aware it will be nicer to be in a decent care home than a bargain council one.
* If need be I can and would financially suppport any care costs anyway and also happy to pay for a nicer place. 
* I/they are aware it could be seen as deprivation of assets but they are willing to take the chance having seen others do similar.
* We are a small and close family and don't see any issues with disputes.

They had also considered some kind of trust and spoke to an advisor but they didn't like the person/advice/cost and potential future complexity on settling the estate.

Any other considerations I should tell them? I personally don't see much point in doing anything as even if they gift the house they will still have savings they will be assessed on and as I said I'd rather pay for them to be in a nicer place anyway.

[Deleted User]

Have you considered that you will pay capital gains tax on any future profit if and when you eventually come to sell?

Jeremy535897

[Deleted User] said:

Have you considered that you will pay capital gains tax on any future profit if and when you eventually come to sell?

Yes. The children will acquire the house at their share of its market value at the date of the gift. Any future gain will be taxable.

It should not fall within the POAT regime because it is clearly a GWR.

The siblings will all have to contend with the rules on higher rate stamp duty in respect of future residential property transactions as they will presumably have an interest in more than one property. I am assuming this property is mortgage free so there will be no stamp duty on the gift.

Presumably no-one is in a position to benefit from any first time buyer advantages?

It is worth reading up on deprivation of assets:
https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf

There are other considerations. For example, just off the top of my head, one of the donees may get into a messy divorce and there is pressure to sell the house. A donee may die and leave everything to a charity or someone who just wants money. Key man insurance will be impossible.

Keep_pedalling

The plan is nuts you really should tell them to Google deliberate deprivation of assets which this is. They also need to consider what happens if you or your sibling, divorces, goes bankrupt or dies before them.

A better option to look at is providing a level of protection though a wills with an immediate post death trust clause included. This will protect half the house after the first death. None is required before that as the house would be disregarded while one spouse was still living in it.

Would they really want to risk ending up in Over my dead body grange just so you and your sibling could get a bigger inheritance?

Jeremy535897

Keep_pedalling said:

The plan is nuts you really should tell them to Google deliberate deprivation of assets which this is. They also need to consider what happens if you or your sibling, divorces, goes bankrupt or dies before them.

A better option to look at is providing a level of protection though a wills with an immediate post death trust clause included. This will protect half the house after the first death. None is required before that as the house would be disregarded while one spouse was still living in it.

Would they really want to risk ending up in Over my dead body grange just so you and your sibling could get a bigger inheritance?

Per the link in my earlier post, there may be no deprivation of assets within the rules if both parents are fit and healthy, and could not have foreseen a need for care and support at the date the gift is made.

theoretica

Do you and sibling own your own houses?  As well as the CGT, your ownership of this house might lead to stamp duty issues for you.

rnj

Keep_pedalling said:

The plan is nuts you really should tell them to Google deliberate deprivation of assets which this is. They also need to consider what happens if you or your sibling, divorces, goes bankrupt or dies before them.

A better option to look at is providing a level of protection though a wills with an immediate post death trust clause included. This will protect half the house after the first death. None is required before that as the house would be disregarded while one spouse was still living in it.

Would they really want to risk ending up in Over my dead body grange just so you and your sibling could get a bigger inheritance?

Thanks for the responses, I had forgot about CGT. I guess a lot of these could affect my sibling more as I am unmarried and not planning to move. Divorce & bankruptcy I think unlikely but you never know.

The trust idea I think they looked at. I was curious about the trust being difficult/costly to execute on death but I wasn't in on the meeting as the advisor didn't want me there so couldn't ask. I have executed an estate before and to be honest, it was quite easy but a trust may complicate things forcing me to use a solicitor to do it.

Seems you have to pay something in some form whatever but this is cutting tax forum right?

Yes who knows what goes through peoples minds when it comes to extremes of cutting tax - I personally wouldn't do anything but I will put this to them probably only to confuse them more

[Deleted User]

rnj said:

Keep_pedalling said:

The plan is nuts you really should tell them to Google deliberate deprivation of assets which this is. They also need to consider what happens if you or your sibling, divorces, goes bankrupt or dies before them.

A better option to look at is providing a level of protection though a wills with an immediate post death trust clause included. This will protect half the house after the first death. None is required before that as the house would be disregarded while one spouse was still living in it.

Would they really want to risk ending up in Over my dead body grange just so you and your sibling could get a bigger inheritance?

Thanks for the responses, I had forgot about CGT. I guess a lot of these could affect my sibling more as I am unmarried and not planning to move. Divorce & bankruptcy I think unlikely but you never know.

The trust idea I think they looked at. I was curious about the trust being difficult/costly to execute on death but I wasn't in on the meeting as the advisor didn't want me there so couldn't ask. I have executed an estate before and to be honest, it was quite easy but a trust may complicate things forcing me to use a solicitor to do it.

Seems you have to pay something in some form whatever but this is cutting tax forum right?

Yes who knows what goes through peoples minds when it comes to extremes of cutting tax - I personally wouldn't do anything but I will put this to them probably only to confuse them more

I am not an expert in inheritance tax but there is something in my fading memory cells regarding the gifting of property with reservation. I am fairly sure that the gift of the property will form part of the estate using the value at date of death, NOT the value at the time of the gift. If I am correct, that could prove important later on.

Have your parents considered downsizing?

Albermarle

The plan is nuts you really should tell them to Google deliberate deprivation of assets which this is. They also need to consider what happens if you or your sibling, divorces, goes bankrupt or dies before them.

The OP said * If need be I can and would financially suppport any care costs anyway and also happy to pay for a nicer place.

If the parents had care costs that were covered by their two adult children, then the local authority would not be interested in their financial affairs, so deprivation of assets would not be an issue.

However as you mention, unexpected life events could cause problems 

Albermarle

The trust idea I think they looked at. I was curious about the trust being difficult/costly to execute on death but I wasn't in on the meeting as the advisor didn't want me there so couldn't ask. I have executed an estate before and to be honest, it was quite easy but a trust may complicate things forcing me to use a solicitor to do it.

Trusts nearly always complicate these issues and often do not solve the problem. Often there are a lot of costs involved.

elsien

It may be if the local authority is funding and the children are just paying the top up fee for a nicer place.
Particularly as the only reason for doing this is to avoid care home fees, however healthy the parents are now.
A specialist nursing home in my area can be 1K plus a week.

I’d also thrown into the mix for anyone who doesn’t live into the property that it will affect their ability to claim any income related benefits should they lose their job or become too ill to work.