Buying a house with Family?

tbkbt

We've been in our home for almost 10 years and now with 2 kids we are outgrowing it. We've been looking at places a little bigger and can just stretch to these prices Our home has risen in value but being ex council in an estate, it has a ceiling tbh.
Over xmas we were talking with my MIL, who recently lost her husband. She has property that she is looking to sell in the UK while she resides abroad most of the year. She talked about us getting a bigger place with somewhere she could base herself while in the UK, pretty much a granny annexe, a bedroom with ensuite and a living room. We could pretty much double the value of houses we are looking to buy if she helped. I'm just looking to see if anyone has done anything similar and how bills are split and repairs etc?
I'm just wary of how this is all listed in the will etc and a much bigger house would mean much more council tax. I'd feel it would be cheeky to accept the cash for the house and then ask her for council tax when in reality she will use it 1 month a year, but we'd probably be looking at double the council tax we currently pay as well as the bigger mortgage.
We're still very early on in the discussion stage so just looking for opinions.
Thanks

Keep_pedalling

Is she talking about gifting you the money or will this be a joint ownership? 

Emmia

Keep_pedalling said:

Is she talking about gifting you the money or will this be a joint ownership? 

Are there any other children who might benefit from her estate when the time comes? Investing in a property / gifting money towards a bigger property for one child is likely to create tension with any siblings.

What will you do (if she owns x%) if she needs care in the future? Either in the home you all own (she may come back to live in the UK permanently in due course), or in a separate nursing home. 

*I'd give serious thought as to whether you want to potentially live with your MIL 24/7.

*Edit: How does your spouse feel about living with their parent again?

tbkbt

There are no other kids to worry about.
We don't yet know if it would be a gift or shared ownership, very early stages of this discussion.
She wouldn't live in the house 24/7, likely just a month or so a year spread over a few different visits. the idea came about as she was looking at a storage unit and hotel stays and the costs were outrageous so it works for her to gift/invest with her family instead.
When the time comes for care she already has her home picked out 🤣. it's probably worth mentioning that although to us the price difference in houses is huge, it's just a drop in the ocean to her, various properties in the UK and abroad and large private pensions, just not much of it liquid at this moment in time.

gwynlas

As well as the council tax on a larger property wgich in fairness you could not ask her to contribute to you will also have corresponding larger utilities and maintenance costs.
It does sound like a good idea if she is asset rich as your partner will gain access to their inheritance early.
I would be cautios though as you also need to investigate what might happen were you to get divorced or your partner to die and you wish to remarry in time

Albermarle

It sounds on the surface at least a good idea. You get a bigger house and she gets a base. However as you seem to be aware you have to think carefully how to handle it. 

If the MIL is that well off as you say, then her estate would presumably be liable for inheritance tax, maybe quite a lot.
If she gifted you the money and lived for 7 years, then this money would be out of her estate for IHT purposes.

However from the MIL point of view, once she makes a gift, you can do what you want with it. You would have no legal obligation to actually spend it on a house. Or if you did and later got divorced and sold the house( as an example), she would have no legal right for her money back, as it was an outright gift.

If she makes a gift but with some legal document to say you have to provide accommodation for her etc then it would be a 'gift with reservation' .In which case it would still be counted into her estate when she died and be part of any IHT calculations.
As it would of course if she owned a share of the property.

user1977

Albermarle said:

If she makes a gift but with some legal document to say you have to provide accommodation for her etc then it would be a 'gift with reservation' .

Not sure it would actually need a "legal document" to make it a gift with reservation, unless someone really wants to argue that the simultaneous "gift" and the creation of the "granny flat" are merely a coincidence.

After all, I suspect most gifts with reservation involve the donor continuing to live in "their" home with no formal lease etc from the kids who have title.

Linton

Getting financially tied to a family member can certainly work well.  However if problems arise it could be a disaster leading to the break up of relationships.  I suggest you work through all the possible what-ifs to ensure the plan is well protected against any eventualities. eg divorce leading to splitting assets, death, MIL has serious health problems and expects to live in her granny annex etc etc

SDLT_Geek

tbkbt said:

We've been in our home for almost 10 years and now with 2 kids we are outgrowing it. We've been looking at places a little bigger and can just stretch to these prices Our home has risen in value but being ex council in an estate, it has a ceiling tbh.
Over xmas we were talking with my MIL, who recently lost her husband. She has property that she is looking to sell in the UK while she resides abroad most of the year. She talked about us getting a bigger place with somewhere she could base herself while in the UK, pretty much a granny annexe, a bedroom with ensuite and a living room. We could pretty much double the value of houses we are looking to buy if she helped. I'm just looking to see if anyone has done anything similar and how bills are split and repairs etc?
I'm just wary of how this is all listed in the will etc and a much bigger house would mean much more council tax. I'd feel it would be cheeky to accept the cash for the house and then ask her for council tax when in reality she will use it 1 month a year, but we'd probably be looking at double the council tax we currently pay as well as the bigger mortgage.
We're still very early on in the discussion stage so just looking for opinions.
Thanks

Here are some more thoughts to throw into the pot.

Would the property you buy be in England?  If so, you need to think about stamp duty land tax.  It seems that if you alone buy, SDLT will be due at the standard rates.  But if she takes a share in the new property the SDLT will be much more: an extra 5% because she owns other properties and another 2% because she counts as non-UK resident for SDLT (a 183+ day test).

If that is a concern then the idea of her gifting the money could be attractive, or perhaps she could lend it to you.  Or a combination.

Albermarle

user1977 said:

Albermarle said:

If she makes a gift but with some legal document to say you have to provide accommodation for her etc then it would be a 'gift with reservation' .

Not sure it would actually need a "legal document" to make it a gift with reservation, unless someone really wants to argue that the simultaneous "gift" and the creation of the "granny flat" are merely a coincidence.

After all, I suspect most gifts with reservation involve the donor continuing to live in "their" home with no formal lease etc from the kids who have title.

You are probably right. I was just thinking due to the intermittent appearances of the MIL, then it might need formalising more.

Albermarle

SDLT_Geek said:

tbkbt said:

We've been in our home for almost 10 years and now with 2 kids we are outgrowing it. We've been looking at places a little bigger and can just stretch to these prices Our home has risen in value but being ex council in an estate, it has a ceiling tbh.
Over xmas we were talking with my MIL, who recently lost her husband. She has property that she is looking to sell in the UK while she resides abroad most of the year. She talked about us getting a bigger place with somewhere she could base herself while in the UK, pretty much a granny annexe, a bedroom with ensuite and a living room. We could pretty much double the value of houses we are looking to buy if she helped. I'm just looking to see if anyone has done anything similar and how bills are split and repairs etc?
I'm just wary of how this is all listed in the will etc and a much bigger house would mean much more council tax. I'd feel it would be cheeky to accept the cash for the house and then ask her for council tax when in reality she will use it 1 month a year, but we'd probably be looking at double the council tax we currently pay as well as the bigger mortgage.
We're still very early on in the discussion stage so just looking for opinions.
Thanks

Here are some more thoughts to throw into the pot.

Would the property you buy be in England?  If so, you need to think about stamp duty land tax.  It seems that if you alone buy, SDLT will be due at the standard rates.  But if she takes a share in the new property the SDLT will be much more: an extra 5% because she owns other properties and another 2% because she counts as non-UK resident for SDLT (a 183+ day test).

If that is a concern then the idea of her gifting the money could be attractive, or perhaps she could lend it to you.  Or a combination.

However there is a difference between an outright gift and lending money in terms of IHT , if that is part of the equation/calculation.