What next?

Helpmeouthere

Hi all, happy new year,

My mum's flat has been inherited by myself, sister in law (SIL) and two grand kids (2GK) split into thirds. GK's get sixth each. We all agree we want to keep the flat if possible rather than sell it and split the proceeds.

SIL wants to buy my third, live in the flat with the GK's having access when and if they need it but can't afford to buy the 2GK's share. How do we register the 2GK's financial interest in the flat so that their inheritance is secured what ever happens to SIL. Would a charge be appropriate?

G

elsien

How old are the grandkids and do they have properties? 

They need to consider all the implications because as they would be part owners of the flat, they will lose any first time buyer perks that they may need further down the line.
There doesn’t need to be a charge on the property because their name should be on the deeds for their share, presuming they are adults.
There would also need to be agreements around the ongoing cost of maintenance insurance et cetera, and who pays what.
and an agreement as to what happens if one of them changes their mind and does need to realise their share for any reason.
What does having access mean in practice?


 It has the potential for family conflict if the person living there can’t afford to buy them out, but refuses to sell. 

Keep_pedalling

Frankly you would be far better off selling and splitting the proceeds or for your SIL to buy out you and the grand children. The GC are going to get little benefit from this and if they don’t already own their own home then they will loose their first time buyer status and will have to pay an additional 3% SDLT when they do eventually buy for themselves as they would be buying a second property. 

Flugelhorn

possible that the GK can be tenants in common with a deed of trust indicating their share. Much depends on the GK's current housing status as has been pointed out - they may also want their share now

bobster2

Helpmeouthere said:

Hi all, happy new year,

My mum's flat has been inherited by myself, sister in law (SIL) and two grand kids (2GK) split into thirds. GK's get sixth each. We all agree we want to keep the flat if possible rather than sell it and split the proceeds.

SIL wants to buy my third, live in the flat with the GK's having access when and if they need it but can't afford to buy the 2GK's share. How do we register the 2GK's financial interest in the flat so that their inheritance is secured what ever happens to SIL. Would a charge be appropriate?

G

It a previous thread you indicated that your mum's flat estate consisted of property valued about £750,000 and £225,000. Did her will specify that the residual estates is split in the manner you have indicated? Or did it specifically state that the property specifically be split in that manner?

How old are the grand children? If they're adults - each having £125,000 locked up in a flat they can't really use or benefit from - while perhaps struggling to get a place themselves - and losing first time buyer status - could leave them feeling rather disgruntled.

If they are adults - they would need to be registered as part owners on the deeds. Not using a charge. But likely listed as tenants-in-common with their share of ownership specified.

RAS

If the GKs are not normally resident in the house once ownership is transferred from the estate, they will be liable for CGT on an increase in the value of the property at the date their share is liquidated. From next year there is no personal allowance.

Helpmeouthere

Thanks for the prompt replies, all points taken on board, in answer to your questions....

GK's are adults and renters, not property owners. They seem to have considered the fact that they are tying up their inheritance.

Will says "I give the reside of my estate." No specifics on property split.

FYI, Flat was RICS valued at £630,000.

doodling

Hi,

I don't see what is in this deal for the GKs.

They pay 40% capital gains tax on any gain in value of the property before it is sold, whenever that is.  That makes it dubious from an investment perspective compared to other investments.

They lose their first time buyer status.  If they want to buy a house of their own they pay extra SDLT.

In theory they could force a sale and take their money anytime they liked (give or take how long it takes to sell the property) but they would probably upset the rest of the family if they did.

If the GKs get in debt (or divorced) then their share of the house is up for grabs by the other party.

The GKs cease to be eligible for many means tested benefits.

It feels like they are making a long term loan to their family and getting nothing back in return.

Either the GKs are extremely altruistic or they don't fully understand the consequences of what is proposed.

Keep_pedalling

The GC would be ill advised be to do this they get zero benefit from their inheritance and it is locked up in an illiquid asset that, if things go pear shaped,  could cost them a fortune in legal fees to eventually get their money.

You on the other hand get cash, if you SIL can’t afford to buy everybody out then she should forget it.

RAS

CGT is currently 18-28%, I think. Still a sizeable loss, particularly if it's been sold to them as a way to accrue a sum for a deposit later.

And as doodling says, the GKs lose the right to many means-tested benefits. Whilst they might not be too upset at having to go and live with mum if they lose their job, it still leaves them liable to pay the rent on the tenancy until the end of the contract, with no support.

Flugelhorn

will yours sister be paying rent to  the GK for their share of the property?