Buying share of parents house

_Penny_Dreadful

arbshark said:

I'm also wondering about capital tax gain issues

If I bought a 5% share for £20k, then in 10 years the property is sold for twice it's current value I have made a £20k profit - would this be a taxable gain

If so, the loan agreement with a registered interest in the property might be the simpler and cheaper option

Yes, any capital gain you make as a beneficial owner of your parent's property would be subject to capital gains tax.  As their home is not your only or main residence you would not be entitled to Private Residence Relief.

How big is the house?  Could your parents downsize to buy a more modest house with lower running costs and bank the difference in equity?

chalky_white_2

A charge that seeks a % value of a property could be caught by SDLT. Taking a beneficial interest in property by tracking its value could easily be construed as a sham, by calling it a charge instead of a trust.

Where SDLT applies, do bear in mind any future payments you might make could be ‘linked’ so SDLT calculations can apply over the cumulative amount you pay over time.

Browntoa

There's the possibility of it being classified as "deprivation of assets" if either of your parents needed care after the other had died ( property is a mandatory disregard if both are alive and only one needed care and is not taken into consideration when evaluation of assets is made ) . 

chalky_white_2

Browntoa said:

There's the possibility of it being classified as "deprivation of assets" if either of your parents needed care after the other had died ( property is a mandatory disregard if both are alive and only one needed care and is not taken into consideration when evaluation of assets is made ) . 

That would only apply is they did not transfer for value. OP intends to pay a market value for any share obtained.

arbshark

Browntoa said:

There's the possibility of it being classified as "deprivation of assets" if either of your parents needed care after the other had died ( property is a mandatory disregard if both are alive and only one needed care and is not taken into consideration when evaluation of assets is made ) . 

Everything would be done at current full market value to avoid that issue

Sistergold

Since you are already into buy to lets how about they move into smaller cheaper place, let out their house to get rent and live off that? Just a thought. I KNOW YESSS THE DREADED TENANTS! You have also said you and your siblings have a bit of cash cushions if you should run into tenants issues. Of cause it’s all a risk. I am only suggesting it as you already have experience to make an informed decision, which could be a no but just a thought. 

They are in their 70s and if blessed with long life could still have many many years to go yet (my mom is 93) and so might need more money to come. 

Of cause they can downsize but again if they live long even that money gained will be eaten up. 

Yes you can loan them money to live off again this will constantly need topping up. 

My dad is now late but my mom is still going. Me and my siblings do give them money monthly even before my dad passed 🫣 I know. We also don’t count it as a loan, but I know it’s not possible for some to do this. I looked at what a parent spends to raise a child, thought of them spending that on us/me and felt it was the least I can do to give them some of it back while they are still alive, it was lucky my siblings all agreed to it. 

Mom now due to age lives with my older sister as also we did not want her to go into care home. We cover all expenses while she lives there, her pension is not enough. 

arbshark

Sistergold said:

Since you are already into buy to lets how about they move into smaller cheaper place, let out their house to get rent and live off that? Just a thought

All good suggestions, unfortunately I think there would be a lot of resistance to moving house/downsizing especially once the cost of moving and stamp duty and legal charges, etc

After reading further and taking into consideration from replies in this discussion I am looking at a loan agreement rather with a charge on the property to ensure any money lent is repaid on sale of the house in the future
Initially I was looking to link the repayment amount to the property value, but both myself and sibling are likely to be majority and equal inheritance beneficiaries (assumed but obviously can't be guaranteed as you can't accurately predict what the future holds) so any rise in the debt only eats into that inheritance with the total largely remaining the same.
An interest free loan seems to be the simplest option with less problems with CGT or income tax on the loan interest



A solicitor would be the best option to get advice and draw up any such loan agreement plus register the charge on the property but am wondering if we could do it ourselves using a standard template and register the charge via 'HM Land Registry' the other option would be perhaps a cheaper online only remote solicitor

Emily_Joy

Do they live far away from where you are? Wouldn't it be better for them to move closer and to downsize so that they have some £ and it will be easier for you to offer assistance when need be?