Joint mortgage with our daughter and inheritance tax

thegreenone

Could you sell for £600k, pay off the mortgage, buy something accessible/more suiting your current needs, for £350k and give your daughter £150k to buy her own property.  Your current thinking is to impose on your daughter a big house when she is on a low income.

You say in your original post that "we only have small private pensions".  £3k pm is not small.  You have a very comfortable private pension income now and when your state pensions kick in - Whoa!!!!!!

Mutabilisrose

bobster2 said:

Mutabilisrose said:

Joint private pension is £3000. Yes we can afford the £635 but all 3 of us are on the mortgage so she is contributing and as it is well in our minds her house now she pays half. Before this mess the original mortgage was £1400 and that plus all the other outgoings was what we couldn’t afford when hubby was made redundant. The plan was to work until 60/65 and pay off the mortgage which had 6 years left. But I got very sick and had to retire at 55. Hubby was made redundant around same time. 

Putting aside what's in your minds - as I asked earlier - did you add her to the deeds when she became a joint mortgage holder?

I don’t know. I need to check. Our mortgage advisor was very helpful and knew our intentions that the house was to be hers. I feel that he would have advised us accordingly.

bobster2

Mutabilisrose said:

bobster2 said:

Mutabilisrose said:

Joint private pension is £3000. Yes we can afford the £635 but all 3 of us are on the mortgage so she is contributing and as it is well in our minds her house now she pays half. Before this mess the original mortgage was £1400 and that plus all the other outgoings was what we couldn’t afford when hubby was made redundant. The plan was to work until 60/65 and pay off the mortgage which had 6 years left. But I got very sick and had to retire at 55. Hubby was made redundant around same time. 

Putting aside what's in your minds - as I asked earlier - did you add her to the deeds when she became a joint mortgage holder?

I don’t know. I need to check. Our mortgage advisor was very helpful and knew our intentions that the house was to be hers. I feel that he would have advised us accordingly.

You can search for the title deeds here and see who is named...

https://www.gov.uk/search-property-information-land-registry

If you only spoke to a mortgage advisor and not a solictor/conveyancer - than it is likely that you did not add her to the deeds. So she's contributing to a mortgage for a property that she doesn't share ownership of.

Keep_pedalling

Mutabilisrose said:

Keep_pedalling said:

I can’t see where inheritance tax fits in to this. You would have to have assets in excess of £1M for it to be of concern and it seems you are nowhere near being in that position. 

Having looked at your previous thread on this subject you would be foolish to give what is your only major asset away to your daughter and live in poverty for the rest of your lives. 

Oh I had read if your estate is worth more than £325000 it kicks in. The house is worth around £600,000. We wouldn’t be in poverty. We live in the North West property is cheaper to rent than in the south. It would only be a small place as we don’t need anything big. I guess I’m in the camp where my child means everything to me and I want her life to be easier if I can make it so. I do understand what you are saying though but I wouldn’t have done it this way if I thought we would struggle.

Has the value of your house really increased by 50% since your 2021 thread? Your daughter seems to be doing fine by her own efforts and although helping your children financially is fine, but risking your long term security when you are likely to have several decades ahead of you is (sorry to be blunt) a really stupid thing to do. 

You say rents are cheap where you live, I would think therefore selling a £600k house will provide ample funds to buy two smaller properties without the need to give your equity away. Your whole story about needing your daughter’s income to pay the mortgage makes no sense now you have told us how much income you and your husband have.

You should also look up the meaning of deliberate deprivation of assets.

Mutabilisrose

thegreenone said:

Could you sell for £600k, pay off the mortgage, buy something accessible/more suiting your current needs, for £350k and give your daughter £150k to buy her own property.  Your current thinking is to impose on your daughter a big house when she is on a low income.

You say in your original post that "we only have small private pensions".  £3k pm is not small.  You have a very comfortable private pension income now and when your state pensions kick in - Whoa!!!!!!

I was hoping to give her a house that we had to work our way up to. So we started in a small 2 bed terrace and by moving several times and a bit of luck making money each time we sold we got to a decent 4 bed house. I was trying to make her life easier by not having to do that climb. She still has a mortgage but it’s for £100,000. She was 100% involved and happy with this. If she did change her mind we can still do as you say. 

I am grateful we have our pensions and that we are in a very fortunate position compared to many people. I have just heard others say they thought it was small.

Mutabilisrose

Keep_pedalling said:

Mutabilisrose said:

Keep_pedalling said:

I can’t see where inheritance tax fits in to this. You would have to have assets in excess of £1M for it to be of concern and it seems you are nowhere near being in that position. 

Having looked at your previous thread on this subject you would be foolish to give what is your only major asset away to your daughter and live in poverty for the rest of your lives. 

Oh I had read if your estate is worth more than £325000 it kicks in. The house is worth around £600,000. We wouldn’t be in poverty. We live in the North West property is cheaper to rent than in the south. It would only be a small place as we don’t need anything big. I guess I’m in the camp where my child means everything to me and I want her life to be easier if I can make it so. I do understand what you are saying though but I wouldn’t have done it this way if I thought we would struggle.

Has the value of your house really increased by 50% since your 2021 thread? Your daughter seems to be doing fine by her own efforts and although helping your children financially is fine, but risking your long term security when you are likely to have several decades ahead of you is (sorry to be blunt) a really stupid thing to do. 

You say rents are cheap where you live, I would think therefore selling a £600k house will provide ample funds to buy two smaller properties without the need to give your equity away. Your whole story about needing your daughter’s income to pay the mortgage makes no sense now you have told us how much income you and your husband have.

You should also look up the meaning of deliberate deprivation of assets.

I underestimate the value of my property then. Yes she can manage on her own but we want her to have an "easier" life than ours. Had things worked out the way I hoped the house would have been paid off in the next few years. We would have retained pension lump sum and bought a second smaller property. 

I get what you are saying about the security but if I was worried about security I would never have moved from the 2 bed terrace I started in when I got married. If you never take any risk in life your life will remain the same. Which is great for some people but I wanted to have a bigger house so I moved twice. If not I could have been mortgage free many years ago.

We could buy 2 smaller properties and we discussed this option at the time but we were happy here at the time and still are. We are still open to do this if necessary. I  don’t need my daughters income to pay the mortgage but she did have to be on the mortgage at the time as they wouldnt remortgage just me and hubby at the time as I was on a pension and hubby was redundant. She is paying half of the mortgage because she wanted/agreed to. She had never paid us any rent until then and felt it was fair. 

As for deprivation of assets I think this is mainly if you have to go in a care home and you are deemed to be avoiding costs. At 58/56 I am hoping we won’t need a care home for many years. I don’t think there is a time frame anyway but we will just have to cross that bridge if/when it happens. They would probably argue the same even if we sold this and gave her money for a smaller property. Hopefully we won’t need one. 

bobster2

Mutabilisrose said:

As for deprivation of assets I think this is mainly if you have to go in a care home and you are deemed to be avoiding costs. At 58/56 I am hoping we won’t need a care home for many years. I don’t think there is a time frame anyway but we will just have to cross that bridge if/when it happens. They would probably argue the same even if we sold this and gave her money for a smaller property. Hopefully we won’t need one. 

You have said in other threads that you have needed to retire due to poor health - that you now have disabilities and that your husband is acting as your carer. I'm very sorry to hear this - but it does mean that you have clear care needs and a very foreseeable need for more care in future. Deprivation of assets is relevant for funded care at home - not just a move to a care home. 

But it is unclear what you actually want to get from this thread? As has been explained previously - if you leave this house to your daughter in a will - given the sums involved - IHT is not likely to be an issue (NRB + RNRB). So what exactly do you want to know?

RAS

bobster2's question is really important.

You've also not addressed the issue that if either of you need access to means tested funds, and with your health issues that's a realistic issue, you could be seen to have deprived yourself of assets.

And your daughter has already forfeited her first time buyer status if she ever wants to buy anything herself.

Alphatauri

You question was about IHT is as a married couple you each have an allowance of £325k plus if you leave part/all  of your estate to your daughter there is a further £175k each ( provided property is £350k+).. This is a joint threshold of £1 million. At the moment you are under this there is no issue.

WRT income in about that 10 years you should both be eligible for state pension which at todays rates is c£10k plus each. A priority is to make sure you will get the full state pension. https://www.gov.uk/check-state-pension

WRT the mortgage I appreciate £1400 out of an income of £3k was a stretch. However, if your daughter is contributing say £200 to the mortgage I recommend you try to over pay by raising monthly payments to £1000 or even £1200 a month (provided the mortgage allows). The latter would save you over £40k and see the mortgage paid off in less than 10 years. 

I would also recommend with ill health/disability looking to move to a smaller property e.g. flat/apartment that will require less maintenance and be suitable should sadly your health deteriorate. This doesn’t have to be now but over the next 5-10 years. Sadly the older we get the harder it is to move. 

Finally, your desire to help your daughter onto the housing ladder is commendable but as other posters have pointed out you are in deprivation of assets territory. 

Mutabilisrose

bobster2 said:

Mutabilisrose said:

As for deprivation of assets I think this is mainly if you have to go in a care home and you are deemed to be avoiding costs. At 58/56 I am hoping we won’t need a care home for many years. I don’t think there is a time frame anyway but we will just have to cross that bridge if/when it happens. They would probably argue the same even if we sold this and gave her money for a smaller property. Hopefully we won’t need one. 

You have said in other threads that you have needed to retire due to poor health - that you now have disabilities and that your husband is acting as your carer. I'm very sorry to hear this - but it does mean that you have clear care needs and a very foreseeable need for more care in future. Deprivation of assets is relevant for funded care at home - not just a move to a care home. 

But it is unclear what you actually want to get from this thread? As has been explained previously - if you leave this house to your daughter in a will - given the sums involved - IHT is not likely to be an issue (NRB + RNRB). So what exactly do you want to know?

I can only really talk about today and as of this moment there is nothing that makes me feel I will need funded care. But this is true of anyone. I am the type of person who works in the here and now as I can’t plan for something that may or may not happen. I’m not sure how it would help anyway as the local authority would lawfully take my assets previous or present and it’s morally wrong and impossible to avoid.

The thread is around inheritance tax. I didn’t understand it. I had looked it up after seeing a Martin Lewis programme. Then I got more confused so I was just really asking so it was clearer. I thought it was £325000 in total assets for me and my husband before the rest was taxed. I have no idea what NRB or RNRB is. But I have found out from this thread that it’s £650000 between us before tax is an issue at least I think I have this right. Maybe next time I should put less background so it’s clearer.