Buying out a step parent.

MRS_NPB_12

My mum and step dad have separated. They are both retired and mortgage free, my mum wants to stay in the property and my step dad has said he’ll leave for £60k (House is probably worth £150).
my sister and I are trying to figure out a way to help our mum stay in the house and are looking into getting a mortgage (my sis has her own mortgage, I don’t have a mortgage) or get a loan. Then we’ll look into change of titles and we’ll own a share of the house (long term investment).
What are the implications of all this? Can we do this? Is it better off for her to sell? If she gets ill or needs care further down the road what would we do then? 

Tax purposes? CGT?
We are going to seek a solicitor etc but wondered if anyone had done this before?
Many thanks!

Bookworm225

implications have been explained many times in many previous posts 

she owns it,
- you give her the money. No tax implications for you or her
- as owner the property is exposed to being sold for her care home fees but then I'd assume as her children you would prefer she live in comfort in a nice home rather than in misery whilst you get her money. That said, it is exceptional as only 3.9% of the aged 65+ population end up in a care home.
- she can leave it to you tax free in her will when she does. 

you own it
- higher rate SDLT payable by you on purchase 9sis owns a property so higher rate applies to both her and you)
- CGT payable by you on eventual sale 
- you lost first time buyer concessions as you won't be one when buying a place to live in yourself (no FTB SDLT, no mortgage concessions, no LISA )
- mother has to rely on state funding if she needs to go in care home (very exceptional but rather unpleasant ) 

lr1277

The only thing that struck me about your post was that you would give your step dad the money and then sort out the ownership later. I would make the money conditional on your step-dad signing over his share of the property before he receives the money. Whether he hands it over to you or your mum is for you to decide, but it must be handed over before your step dad gets the money.

If it isn't done like that I can foresee a whole load of potential complications.

Keep_pedalling

Bookworm225 said:

implications have been explained many times in many previous posts 

she owns it,
- you give her the money. No tax implications for you or her
- as owner the property is exposed to being sold for her care home fees but then I'd assume as her children you would prefer she live in comfort in a nice home rather than in misery whilst you get her money. That said, it is exceptional as only 3.9% of the aged 65+ population end up in a care home.
- she can leave it to you tax free in her will when she does. 

Better still, she owns it and you lend her the money, with a charge on the property to protect the loan.

you own it
- higher rate SDLT payable by you on purchase 9sis owns a property so higher rate applies to both her and you)
- CGT payable by you on eventual sale 
- you lost first time buyer concessions as you won't be one when buying a place to live in yourself (no FTB SDLT, no mortgage concessions, no LISA )
- mother has to rely on state funding if she needs to go in care home (very exceptional but rather unpleasant ) 

The main problem either way is you don’t have the money and you will struggle to get mortgage as lenders don't like these types of set ups. She could look at a lifetime mortgage (a type of equity release) in order to buy him out.

sheramber

How much are you thinking of providing each.

If your share is less than £40k then the additional stamp duty will not apply. 

SDLT_Geek

sheramber said:

How much are you thinking of providing each.

If your share is less than £40k then the additional stamp duty will not apply. 

I am assuming the property is in England, so the relevant stamp duty is stamp duty land tax.

When it comes to looking at people buying together (OP and sister) one looks at the total they pay, not the amount each puts in, for the purpose of the "£40,000 or more" test.

(The scenario where one looks at the value of each share is where another property is owned and one is looking at the value of that interest for the other "£40,000 or more" test.)

saajan_12

Few options, but they come with their own restrictions - I've listed some of the implications below but before you even get to these, the question is whether any of these would even be possible.  

1. Mum and you/sister jointly own it
If getting a mortgage, she would need to be on it too, so the length would be limited by her age (how old is she)?You'd also have a smaller pool of lenders who even allow that setup where some owners live there and some don't. So unlikely to work, but if it does: 
a. SDLT at higher rate on the 60k paid, as its sister's second property.If you subsequently buy your main house then that would be subject to higher rate SDLT as it would be your second property (I'm assuming you don't have another mortgage free house?)
b. Your/sisters shares would be subject to CGT when it sells, but only if it appreciates. Mum's share is free from CGT. 
c. If mum needed care, her share of the house would eventually be taken into account, your share would be safe. 

2. Mum owns it outright, you lend / give mum money 
If you could find the money elsewhere eg sister increases her mortgage, and can give or lend it to Mum, then she could own it herself. Your loan could be secured against the property as a charge if you wanted. Entirely dependent of if you can find the money, but if so: 
a. No SDLT as 60k is under the threshold and its Mum's only property. 
b. No CGT as Mum lives there
c. If mum needed care, your share would be safe due to the loan (you'd have to demonstrate you actually bought that share and its not contrived). 

3. You own it outright, Mum gifts you her share
Will be tricky to get a mortgage with teh equity coming from a gift from someone still living there. The lender would be worried you won't evict mum, especially when half the capital has come from her. However if you can get it, then
a. Higher rate SDLT for the whole purchase price. Also if you subsequently buy your own main home then it may be at higher rate. 
b. CGT on the whole value, thought only if there's an appreciation
c. If mum needed care, her gift to you may be thought of as deprivation of capital, and they would expect it to be repaid (or that amount of care wouldn't be given). This is no worse than the other options. 

Albermarle

and my step dad has said he’ll leave for £60k (House is probably worth £150).

How was this figure of £60K arrived at ?
How is the house currently owned? Joint Tenants or Tenants in Common ( if this is it split 50:50) 
Are they married ?
Are there not any other assets to take into account?