LISA and inheritance - Any upcoming changes?

devslash0

Hello everyone,

I am an owner of a LISA who recently inherited a share in a foreign property which, under the current legislation surrounding LISA, discredited me from using the LISA to buy my first home.

...which is not ideal, so to speak, since my entire house deposit is locked in my LISA.

I am aware of the silly never-owned-before criterium which would require me to give up 25% of any withdrawals and result in a net loss of 6.25% of my deposits.

The criterium is silly, since you wouldn't call any inherited property your home (especially if it's in a different country) and penalising people for the death of their parent simply doesn't sound fair.

Having said the above, I would like to know if anyone on this forum is aware of any potential changes to the never-owned-before first-time buyer rule? Are there any plans to make it more sane? Are there any legal challenges potentially being brought forward against it or in progres?

Thank you

masonic

devslash0 said:

Hello everyone,

I am an owner of a LISA who recently inherited a share in a foreign property which, under the current legislation surrounding LISA, discredited me from using the LISA to buy my first home.

...which is not ideal, so to speak, since my entire house deposit is locked in my LISA.

I am aware of the silly never-owned-before criterium which would require me to give up 25% of any withdrawals and result in a net loss of 6.25% of my deposits.

The criterium is silly, since you wouldn't call any inherited property your home (especially if it's in a different country) and penalising people for the death of their parent simply doesn't sound fair.

Having said the above, I would like to know if anyone on this forum is aware of any potential changes to the never-owned-before first-time buyer rule? Are there any plans to make it more sane? Are there any legal challenges potentially being brought forward against it or in progres?

You are not being penalised for the death of a parent. The Government support (which really benefits those selling property) is targeted at those who do not already have a legal interest in residential property anywhere in the world. If you would have rather maintained your qualifying status, then you could have disclaimed the inheritance. Had the property been sold within the estate and proceeds distributed to the heirs, then this situation wouldn't have arisen.

The only situation where there is a possibility of the penalty being reduced to avoid the net 6.25% loss is where a qualifying individual purchases a property over the £450k limit, but even this seems unlikely to happen.

eskbanker

devslash0 said:

I am an owner of a LISA who recently inherited a share in a foreign property which, under the current legislation surrounding LISA, discredited me from using the LISA to buy my first home.

...which is not ideal, so to speak, since my entire house deposit is locked in my LISA.

Are any of your co-owners in the foreign property able and willing to buy you out of some or all of your share, in order to provide liquid funds towards your first UK property purchase?

Albermarle

You can keep the LISA until you are 60. At which point you can withdraw it with no penalty or tax.

A LISA has a dual purpose of help for first time buyers and as an alternative way to save for retirement, with a 25% bonus from the Govt.

Keep_pedalling

What is the plan with the property. I would be pushing for it to be sold and the proceeds distributed  so you never own any of it.

Alexland

eskbanker said:

devslash0 said:

I am an owner of a LISA who recently inherited a share in a foreign property which, under the current legislation surrounding LISA, discredited me from using the LISA to buy my first home.

...which is not ideal, so to speak, since my entire house deposit is locked in my LISA.

Are any of your co-owners in the foreign property able and willing to buy you out of some or all of your share, in order to provide liquid funds towards your first UK property purchase?

It depends how the will is drafted (and if it's under UK law) but I believe if the OP has been left a share of the property (rather than a share of the proceeds of sale of the property) then there would need to be a Deed Of Variation agreed in order to change the distribution of assets to avoid the OP ever receiving the property share. For example it may be agreed with the other beneficiaries that the OP receives some of the estate cash or a share of the proceeds of sale. I don't think someone later buying them out of the share would be sufficient to avoid brief property ownership.

The OP should give consideration to using the LISA to invest in S&S for age 60+. Or as a middle ground maybe a partial withdrawal from the LISA of most of the money such that the withdrawal penalty is no more than the overall bonus received and the remaining LISA balance can be used to invest in S&S for age 60+

masonic

I think eskbanker was suggesting use of the proceeds of the buy out as an alternative to the LISA, then the latter could be accessed at 60.

Keep_pedalling

Alexland said:

eskbanker said:

devslash0 said:

I am an owner of a LISA who recently inherited a share in a foreign property which, under the current legislation surrounding LISA, discredited me from using the LISA to buy my first home.

...which is not ideal, so to speak, since my entire house deposit is locked in my LISA.

Are any of your co-owners in the foreign property able and willing to buy you out of some or all of your share, in order to provide liquid funds towards your first UK property purchase?

It depends how the will is drafted (and if it's under UK law) but I believe if the OP has been left a share of the property (rather than a share of the proceeds of sale of the property) then there would need to be a Deed Of Variation agreed in order to change the distribution of assets to avoid the OP ever receiving the property share. For example it may be agreed with the other beneficiaries that the OP receives some of the estate cash or a share of the proceeds of sale. I don't think someone later buying them out of the share would be sufficient to avoid brief property ownership.

That is not how it works under English law. Where there are multiple beneficiaries that have been left a share in a property it is going to be a matter of all of them coming to consensus on what to do with that property and if that cannot be reached it is going to be down to the discretion of the executors or failing that going to court to force a sale.

Alexland

Keep_pedalling said:

That is not how it works under English law. Where there are multiple beneficiaries that have been left a share in a property it is going to be a matter of all of them coming to consensus on what to do with that property and if that cannot be reached it is going to be down to the discretion of the executors or failing that going to court to force a sale.

Here's one random solicitor offering to prepare a Deed of Variation to protect FTB status:

https://www.clarionsolicitors.com/articles/can-i-leave-a-property-to-a-first-time-buyer-in-my-will

"Up to two-years after someone has died a document called a Deed of Variation can be prepared. This document has the potential to enable the recipient of an inheritance to redirect their inheritance elsewhere, but it be treated (for tax purposes) as if they never received it. A Deed of Variation may be able to be used, after death, to try to protect the first-time buyer status. We would be happy to consider his with you."

if I was an executor I wouldn't be comfortable taking action based on a consensus of beneficiaries if it wasn't as the will described without ensuring a deed of variation was completed.

devslash0

eskbanker said:

devslash0 said:

I am an owner of a LISA who recently inherited a share in a foreign property which, under the current legislation surrounding LISA, discredited me from using the LISA to buy my first home.

...which is not ideal, so to speak, since my entire house deposit is locked in my LISA.

Are any of your co-owners in the foreign property able and willing to buy you out of some or all of your share, in order to provide liquid funds towards your first UK property purchase?

No, unfortunately they are not, and they won't be in a position to do it at any point until my other parent passes away.

devslash0

Albermarle said:

You can keep the LISA until you are 60. At which point you can withdraw it with no penalty or tax.

A LISA has a dual purpose of help for first time buyers and as an alternative way to save for retirement, with a 25% bonus from the Govt.

I understand that but my goal at this moment in time to buy my first house and if you re-read my post, you will see that my entire deposit is locked in the LISA.