Confusing family home ownership situation

albertlane

That sounds like a tricky situation. It's tough when family stuff gets complicated, especially with property. 

Herzlos

That seems like a lot of work to save some stamp duty. It's probably fine if you're viewing all of the houses as communal family assets which different paper-owners for tax purposes.

Wouldn't it be simpler to gift the current home to sibling 1 and then have the parents buy the new one. It becomes their main residence so the additional taxes wouldn't apply?

Or do they need the income from one of the other kids to be able to get the mortgage?

peachsun

Thanks for all the comments, I appreciate the opinions and advice!! I don’t have the full details as yet and a lot of this is beyond my understanding at the moment. My current setup is very simple (and normal lol). 

In regards to the CGT comments, the potential stamp duty saving is a lot more hence them suggesting this hairbrained arrangement. Really and truly they should just sell their home to buy the new one but they want to add another to the ‘portfolio’ so at the end of it all their kids get a nicer house. When I say kids I mean adults here 😂. New house would need some mortgaging hence the need for my husband and his sibling to be involved. 

We won’t be making any rash decisions without full details, we are very comfortable at the moment! 

RAS

I'm a bit lost on some elements of this plan but 

1. If the family want to raise mortgages on houses not occupied by the mortgagee or with loans from other family members, their mortgage provider has to agree in advance. A limited number of mortgage providers allow either of these. 
2. As a rule the owners and mortgagee have to the same.
2. Even if the CGT payable on the current investment sales is lower than the SDLT on the new properties, there will be future CGT to pay on any property in the portfolio which is not occupied by the owner for the duration of ownership.

_Penny_Dreadful

How exactly are you going to benefit from this convoluted arrangement? The new, larger property will legally be owned by sibling 1, your husband and possibly you. The property won’t belong to the parents so it’s not up to them what happens with it when they die. Sibling 1 will be living in the property so good luck realising any capital gains on that property unless sibling 1 voluntarily agrees to sell the property or buy you out. 

The parents won’t own your current home as that will be owned by sibling 2 and you, so again the parents have no say in what happens to that property when they die. 

The only property the parents have any legal say over is the current home. Who’s going to be living in that? 

If they somehow manage to pull this off with the mortgages, of which I have my doubts, then I can see sibling 2 owning your home whilst sibling 1 and your husband own the new, larger property, with you owning nothing. 

silvercar

_Penny_Dreadful said:

How exactly are you going to benefit from this convoluted arrangement? The new, larger property will legally be owned by sibling 1, your husband and possibly you. The property won’t belong to the parents so it’s not up to them what happens with it when they die. Sibling 1 will be living in the property so good luck realising any capital gains on that property unless sibling 1 voluntarily agrees to sell the property or buy you out. 

The parents won’t own your current home as that will be owned by sibling 2 and you, so again the parents have no say in what happens to that property when they die. 

The only property the parents have any legal say over is the current home. Who’s going to be living in that? 

If they somehow manage to pull this off with the mortgages, of which I have my doubts, then I can see sibling 2 owning your home whilst sibling 1 and your husband own the new, larger property, with you owning nothing. 

I’d be guessing their tax or legal advisors will be claiming legal ownership and beneficial ownership won’t necessarily be the same. 

I imagine there are family mortgages/ guarantor mortgages in play here. As someone commented previously this sort of situation generally works when there is family money or trust funds.possibly there were in previous generations and now the parents are trying to borrow to construct the same situation ie a few houses owned within the family, passed around as needed and the legal ownership is made in order to obtain the necessary borrowing.

newsgroupmonkey_

I hope to God the parents don't end up needing to be in a home.
Whilst people often say "I won't see my folks end up in a home", after seeing what my Grandma went through, there is absolutely no way anyone could have lived with her. She needed 24x7 specialist care. For 7 years. Clearly, her estate had absolutely nothing left at the end.

In the same way, one of the siblings could have a serious stroke or other illness that needs round-the-clock institutionalised care. The council will come after the property. If they live long enough, there will be absolutely nothing left.

elsien

newsgroupmonkey_ said:

I hope to God the parents don't end up needing to be in a home.
Whilst people often say "I won't see my folks end up in a home", after seeing what my Grandma went through, there is absolutely no way anyone could have lived with her. She needed 24x7 specialist care. For 7 years. Clearly, her estate had absolutely nothing left at the end.

In the same way, one of the siblings could have a serious stroke or other illness that needs round-the-clock institutionalised care. The council will come after the property. If they live long enough, there will be absolutely nothing left.

Technically there would be be £23,250 left.
Just saying. 

saajan_12

I could probably describe my culture / background similarly, with property almost thought of as community property among what was once a nuclear family, and has since grown. So far it has worked, and I would very happily cover whatever my siblings / parents needed. Of course that doesn't mean it'll always work, and I wouldn't encourage anyone to go by one data point.

However even before you get to the what ifs, there's a lot to consider even if all goes to plan. If people own the properties they don't live in, then
- any capital gains accruing will be taxable upon sale OR gift
- any money paid off your mortgage by the occupier is taxable as rent
- any sale & purchase when the occupiers want to move may be subject to higher rate stamp duty as its not covered by the exemption. 
- any transfer between the parties now for £consideration (whether cash, taking over a mortgage or in exchange for another property) is liable to SDLT 

All the above may well stack up to more than the stamp duty they are trying to avoid, as its possible they haven't thought about all of it. However need the exact plan (in the form Bookworm105 suggests) and the values to advise further.