Buying a house for a parent

kodak1

Hello,

I am one of 3 siblings, and we are in the difficult position where we’re having to plan long-term how to support mum as our dad is unfortunately very ill.  Realistically the family home is too big for our mum to cope with, and she’s trying to come to terms with having to potentially downsize, which is obviously quite traumatic on top of everything else.

We want to find a way to help her transition to a downsized property, but we’re trying to understand how it would work in terms of tax etc.  Ideally we need to make a plan now so that mum and dad can update their wills accordingly.

Our dad would like us to inherit money, which we as siblings are considering clubbing together to buy a property for mum (without mortgage).  Any move would be traumatic, and not realistic for a while, so we think that a gradual transition would be necessary.  We are considering buying a property and renting it out as an AirBnB so that mum is able to stay there for small chunks and gradually ease her in as her long-term home once she is happy.

An alternative is that we inherit the family house and somehow take control of the maintenance etc to make it more manageable for mum to continue to live in.

What would be the tax/financial/legal implications of such arrangements, e.g. would we all have to declare a second home for tax?  Are there any other implications we haven’t thought about?  And do you have any general tips/alternative suggestions for how to manage this kind of situation?

Thank you!

MeteredOut

I'm sorry to hear about your father - it must be a very stressful situation for everyone at present.

There could be tax implications if you go down the route of you and your siblings buying a house for your parents. eg, are you aware of the £500K IHT allowance that passes between spouses but does not if pass to children? Are you aware of possible Capital Gains Tax impacts? Are you aware of the potential increase to Stamp Duty should you move from your current home but part-own another home?

There could also be implications if your mother ever has to moving into social care and has disposed of the family home (look into deprivation of assets).

You may find it difficult for you and your siblings to get a mortgage for a house only your mother will live in.

Any reason why your mother could not just sell the current house and use the proceeds of that to downsize? That would be the simplest route. 

DE_612183

a three way air-bnb will have tax implications for all three of you - as well as stamp duty and CGT in the future.

the only way to "inherit" is if mum sold the house to you - but again you've got the CGT implications - and what will Mum do with all that money?

What sort of figures are we talking about in terms of house price and mortgage if any?

lincroft1710

The simplest way forward from a legal/taxation aspect is for your parents to just downsize. I know it may not seem the most practical regarding their health and trauma associated with moving, but buying a second property is now fraught with problems, especially the set up you have described 

saajan_12

Appreciate you're trying to brainstorm options, but I think the AirBnB plan is going to make things worse not better. 
* Does father have cash to leave you separate to the property asset? 
* Purchasing the property would incur higher rate SDLT for you, plus CGT when you eventually sell it as its a 2nd property for the kids. 
* Moving into a home that strangers are in and out of, potentially damaging or moving things around might be more stressful than somewhere that's just hers. Mum couldn't leave much personal belongings around. 
* Additional maintenance, cleaning, laundry, check ins and check outs for an additional property for you kids, on top of whatever regular support Mum needs in her home. It could be like running an extra 2 homes between you. 

How suitable is her current home for Mum - eg stairs, handrails, etc? If its more comfortable for her, then do whatever adaptations to let mum stay in her current home. Then employ a cleaner or make a rota for deep cleaning and maintenance by the 3 siblings, which will likely be less effort for you all than the AirBnB. 

If not too suitable in the long run, then just move to a smaller place. Might help to have one of the kids live with her in the smaller property for a transition period, or find somewhere with some assistance and community. It'll be difficult for a time, but less upheaval and frustration from strangers in the long run. 

ka7e

Probably the best way to support your parents is for you and your siblings to take over the downsizing process. Obviously in consultation with Mum, but you can help declutter and choose what needs to go to a new property, arrange for the house to be marketed and viewings for the new home. Become the designated contact for estate agents and solicitors. Help pack up the house.

My sister and I did this for my Mum, who still found it stressful, but literally only had to sign contracts and choose new flooring and curtains.

kodak1

Hi all,

Thank you so much for your responses, these are really helpful.

As some people have mentioned the ideal scenario would be to downsize from the current house direct into another one, but unfortunately we can’t see a way that we would be able to do this.  The situation is quite complex, but we ultimately don’t think there would be any scenario in which mum would be able to cope with a big upheaval in one go – we need to find a way to gradually move to a lovely new home, somewhere where we can decorate it to her needs/tastes over a couple of years and where she can gradually become familiar before making the big jump.

The current house is in a very isolated area (mum doesn’t drive) without any neighbours / amenities / local support network / public transport.  She isn’t in a situation where she is frail, so fortunately we’re not on a path to needing social care, but quite apart from the house being way too big for one person she is very socially isolated.  The logical ideal is to find a property closer to one of us that we could transition her to.

I’ve researched a little into things like IHT / capital gains / stamp duty implications, but I’m struggling to find any guidance on how much this would likely add up to – for instance if it ended up losing £10k in tax etc but we could make a bit back on it as an AirBnB then that would be a no-brainer, but if we ended up £100k out of pocket then that is a different scenario.  I just don’t know how we estimate what the possible cost will be (we will of course seek out proper financial advice).  I don’t know exact sums of money, but there will be sufficient amount to buy a house outright (under IHT threshold value) without needing to sell the existing house, which is why we’re considering this possibility.

Thanks!

lincroft1710

Council tax on a second home for 2 years or more, will be several thousand in total

Keep_pedalling

ka7e said:

Probably the best way to support your parents is for you and your siblings to take over the downsizing process. Obviously in consultation with Mum, but you can help declutter and choose what needs to go to a new property, arrange for the house to be marketed and viewings for the new home. Become the designated contact for estate agents and solicitors. Help pack up the house.

My sister and I did this for my Mum, who still found it stressful, but literally only had to sign contracts and choose new flooring and curtains.

I agree, your idea just adds complications that are not needed. If she has not put lasting powers of attorney in place then that should be a priority as that will allow you to act for her in any house purchase or other financial help she needs in the future.

As for your father’s will, the top priority should be your mother’s long term security, so it needs to provide for her to be financially secure for the rest of her life including the ability to be able to fund residential  care or live in care should she ever need it, only if that leaves an excess of assets should he be looking at children’s inheritances. 

Herzlos

I think you're much better off just downsizing, it sounds like being less isolated will be good for your mother too.

You can always start talking about the idea of moving and discussing needs/wants/options now so that by the time it happens it's not such a new experience, but I'm not convinced dragging it out will make it any easier especially if they've stayed in the family home for presumably decades. 

It's also the cleanest financially; there's no additional 2nd home, income or inheritance taxes to worry about, and presumably the downsize will result in freeing up a lot of money. 

If the money is available to overlap the 2 houses short term that'd make the transfer less pressured, but she's going to have to sort out all of the stuff at some point anyway. 

Cairnpapple

How old is your mother? Would there be any possibility of her renting instead of buying a downsized property, thus allowing for an overlap? Availability of e.g. sheltered housing seems to vary dramatically from area to area, and obviously renting at age 90 would be a different consideration to renting at age 60 in terms of cost effectiveness/cash flow.