Joint Inheritance of a property

Bishop0709

My brother and I are to inherit my father's house, it's all paid off. 
Original intention was to sell and split proceeds. 
My brother is now asking if he could live in the house with his wife and pay agreed monthly amount to me in lieu of my half share. 

What are the wider implications? 

Would I then have to pay tax on his payments? And any other problems. 

Emmia

He'd be effectively renting part of it off you.  What would you do if he stopped paying? What about maintenance costs etc.

Personally I wouldn't entertain this, if he wants the whole property, he needs to pay you your share in full, getting a mortgage etc., to do this. If he can't afford that, then the property should be sold.

Brie

Quite agree with Emmia. 

Not just if there's probs with your brother but what if he divorces and your SiL refuses to leave the house after throwing him out?  (happens....)   Would this make you a landlord?  So paying tax on income from rent and needing to comply with all the LL stuff?  Who pays for the building insurance?  What if he wants to do major renovations?

At what rate is he paying you?  Based on currently valuation?  Without interest on the outstanding amount?  Without taking account of the increasing value of the property.

What about capital gains tax?  Does your portion of the house mean you're liable for council tax?  

Best thing is for him to get a mortgage to pay you off and it's all his and he pays his monthly amounts to the bank.

Keep_pedalling

Just say no, it could lead to major complications in the future. A better option would be for him to buy you out or if there are sufficient other assets in the estate to divide the assets differently. For instance if the house is worth £300k and there are £300k of other assets, he gets the house and you get the other assets.

If the house is worth £300k and there are £100k of other assets then he buys out your share of the house for £100k and you take the other assets.

If he can’t afford to do that I would have doubts that he can afford the rent, and yes you will pay tax on it. 

Bishop0709

Thanks for the advice. 

He says that he and I would jointly own the house and that as and when he either passes away or moves out, the house would be sold and split either with me and him or his wife (minus anything he's already paid to me.
Trouble is, he's over 50 and has quit a low paid job, although his wife works and earns more. He's currently renting and struggling to pay the increasing rent. His wife is Latvian and he's said basically if I don't agree, they'll have to go and live in Latvia. I really don't know what to do! 

Keep_pedalling

Sounds like emotional blackmail, do not give in to it. Unless you agree otherwise the house will have to be sold and the assets split. Who is administering the estate?

Emmia

Bishop0709 said:

Thanks for the advice. 

He says that he and I would jointly own the house and that as and when he either passes away or moves out, the house would be sold and split either with me and him or his wife (minus anything he's already paid to me.
Trouble is, he's over 50 and has quit a low paid job, although his wife works and earns more. He's currently renting and struggling to pay the increasing rent. His wife is Latvian and he's said basically if I don't agree, they'll have to go and live in Latvia. I really don't know what to do! 

Selling the house gives them capital that they can spend in Latvia, on a property or whatever. I don't see this as a barrier to selling the house, or why you should go along with this.

p00hsticks

Bishop0709 said:

Thanks for the advice. 

He says that he and I would jointly own the house and that as and when he either passes away or moves out, the house would be sold and split either with me and him or his wife (minus anything he's already paid to me.

So that would leave you with a potential Capital Gains Tax liability somewhere down the line, and also the loss of interest / investment opportunities compared with if you got your inheritance straight away.

How much are we talking about here ?
If the house is sold, then that would give him a lump sum to help pay his increasing rent... or is it he concerned that savings would stop means-tested benefits ?

Debbie9009

OP there are a few red flags here, the first being that you brother has quit his job, and by the sound of it doesn’t have another one lined up, which doesn’t show a very responsible attitude, so can you be sure he would always make the repayments to you.
You have said he is struggling to pay his rent, again I would be concerned about him making repayments to you, it’s much easier to ask a sibling to wait for payment than a landlord.
Saying he will have to move to Latvia is, as another poster has stated emotional blackmail, if you agree to his plan, I could see him using this to get out of paying you.

As another poster has commented there will eventually be CGT to pay as you will partially own a property you are not living in, and I would think you would need to meet all landlord obligations, such as gas checks etc.

what happens with maintenance and insurance, will your brother expect you to pay half of it because you own half of it, even though you are not living there so won’t benefit from it.

What if he doesn’t look after the house, and lets it get into a state devaluing it.

Are you happy to only get your inheritance in small amounts over many years.

The biggest thing for me is why should you have to wait for the inheritance your father left to you just because he hasn’t got himself sorted out, you have said he is in his 50’s and married so he should be able to look after himself without resorting to you helping him.  I think he is being very unfair to you.

Apologies if this all sounds a bit harsh OP, I just don’t see how this plan benefits you in any way.

RAS

Bishop0709

Do you currently, or are you likely to, claim any benefits? If so, part owning a property you do not live in will cause problems. There will be an expectation that you receive half the normal rental income, less tax, costs etc. And that loan repayment might be considered income.

Do you have any aspiration to own your house? You'll need to pay extra Land Tax.

Plus when the house is sold, Capital Gains Tax on any increase in value since mum died. That's likely to be nil or minimal now but £xx k in the future.

However much you may love your brother, it appears he is happy to abuse you financially and engage in emotional blackmail. He may kick off, he may go to Latvia. And he may well be back, tail between legs, expecting you to fund him because he's blown the lot.

Importantly, who is is the executor? 

Bishop0709

The whole situation is quite complicated!
I think I will suggest we go and see a solicitor /legal adviser together so that he can hear for himself all of the above mentioned problems/complications.
I would definitely want a legal contract drawn up anyway to protect myself. 

Thanks to all for your views, it has validated what I have been thinking.