Selling/gifting your main property to your adult children and you renting a room

UnsureAboutthis

Hello again -  This is a slightly different topic to the other thread I posted a few minutes ago, and I am posting this for the same reasons.
Your help is appreciated.


FYI: Again, as the other thread, I am aware of IHT/etc/etc and if the child you gifted to gets into fincially difficulties/e/tc/etc.


If you gift your main property, ie the one you live in to one of your children, they move in with you. 
You remain in the house and rent a room with the use of the kitchen and pay him/her market rate for 'rent a room' -  you do this before you beome frail and you still have another property of similar value ie still have money/assests to support you potential care needs for a few years via private route - would this be considered as 'deprivation of assests.' Yes, its a difficult question, many unknowns/etc/etc, but your opinions would help.

Secondly, if you sold your main residence at market value to your child and then lived with them rent-free, I'm guessing this could not be counted as deprivation of assets? Then as the months/years ticked by, you could have more holidays, expensive holidays and also gift decent amounts above the tax free yearly allowance without attracting the deprivation of assets clause in case you ended up in a care home.  Importantly, when you sold your main property, you still had a one or two BTL's of similar value.


I hope I am clear, but I am happy to clarify.  These questions are asked on the basis of lawful routes
to reduce tax burden, potential care home fees via legal, lawful routes ie not avoidance but seeking guidance.

Thanks you again.

Keep_pedalling

Not if you have significant other assets, but just paying rent for a room is not enough to avoid a gift with reservation. 

Does this child already own a home? If not doing this will lose there first time buyer status and cost him additional SDLT when he / she does buy something of their own choice.

UnsureAboutthis

Keep_pedalling said:

Not if you have significant other assets, but just paying rent for a room is not enough to avoid a gift with reservation. 

Does this child already own a home? If not doing this will lose there first time buyer status and cost him additional SDLT when he / she does buy something of their own choice.

Thank you.
The child has a house of much lesser value, which they would sell in order to move in if they were to buy or rent it out if they were to get the main property as a gift.
Yes, we are aware of SDLT implications.

Sorry, are you saying if the house was gifted or sold and the parents were to stay with the child via rent a room if gifted, and the parents had other assets of similar value remaining,would that be seen a deprivation of assets?

About the child buying the parents property and parents living rent-free oie sharing the bills etc - would that be seen negatively by the coucil as per reasons in my OP?

I don't want to confuse you, thanks for the help either way.



I

UnsureAboutthis

Keep_pedalling said:

Not if you have significant other assets, but just paying rent for a room is not enough to avoid a gift with reservation. 

Does this child already own a home? If not doing this will lose there first time buyer status and cost him additional SDLT when he / she does buy something of their own choice.

Please see my previous post.

Voyager2002

You might want to separate the two issues that concern you:
1. if you give away a house or other assets in order to make yourself eligible for a means-tested benefit (such as a care home), then 'deprivation of assets' becomes relevant: if it can be shown that the reason was for the gift was in order to qualify, then you are treated as if you still owned it. 

2. a separate property is that posed by inheritance tax: if you make a "gift with reservations", for example giving someone your home on the condition that you can still live in it, then that gift has not removed any liability for IHT. 

Better to work separately towards solution to these two problems.

UnsureAboutthis

Voyager2002 said:

You might want to separate the two issues that concern you:
1. if you give away a house or other assets in order to make yourself eligible for a means-tested benefit (such as a care home), then 'deprivation of assets' becomes relevant: if it can be shown that the reason was for the gift was in order to qualify, then you are treated as if you still owned it. 

2. a separate property is that posed by inheritance tax: if you make a "gift with reservations", for example giving someone your home on the condition that you can still live in it, then that gift has not removed any liability for IHT. 

Better to work separately towards solution to these two problems.

Thanks. The questions are not just for me, hence the multi options/scenarios.

What if the house was gifted (not forgetting the parents have at least one other property, if not more btl's paid off)
then they stay in it with their child that moves in, having sold their place and the parents pay market rent for rent a room and no written agreement which states the parents have a right to remain there until they decide to leave and this is supported by an AST agreement.  

I know of parents that sold and gave away their property a few years ago in their 70's in order to help their children buy a preprty and the parents live at, spend time between the two places EG, a week in one place and possibly two in another and would then stay in the property that was empty ie when their children go on hoildays or one goes away to work abroad for a few months at a time. They pay no rent but help with the bills.

Sorry, many scenarios/questions, However, all posts so far help in their own way.

Keep_pedalling

UnsureAboutthis said:

Keep_pedalling said:

Not if you have significant other assets, but just paying rent for a room is not enough to avoid a gift with reservation. 

Does this child already own a home? If not doing this will lose there first time buyer status and cost him additional SDLT when he / she does buy something of their own choice.

Thank you.
The child has a house of much lesser value, which they would sell in order to move in if they were to buy or rent it out if they were to get the main property as a gift.
Yes, we are aware of SDLT implications.

Sorry, are you saying if the house was gifted or sold and the parents were to stay with the child via rent a room if gifted, and the parents had other assets of similar value remaining,would that be seen a deprivation of assets?

About the child buying the parents property and parents living rent-free oie sharing the bills etc - would that be seen negatively by the coucil as per reasons in my OP?

I don't want to confuse you, thanks for the help either way.



I

No, a gift with reservation of benefit stops the gift falling out of your estate after 7 years. Only paying rent for one room is not going to avoid this.

Baldytyke88

UnsureAboutthis said:

Thanks. The questions are not just for me, hence the multi options/scenarios.

What if the house was gifted (not forgetting the parents have at least one other property, if not more btl's paid off) then they stay in it with their child that moves in, having sold their place and the parents pay market rent for rent a room and no written agreement which states the parents have a right to remain there until they decide to leave and this is supported by an AST agreement.  

I know of parents that sold and gave away their property a few years ago in their 70's in order to help their children buy a preprty and the parents live at, spend time between the two places EG, a week in one place and possibly two in another and would then stay in the property that was empty ie when their children go on hoildays or one goes away to work abroad for a few months at a time. They pay no rent but help with the bills.

Sorry, many scenarios/questions, However, all posts so far help in their own way.

If the person gifting is very old and frail, then it could be that the reason for doing so is to avoid care costs.

If the person gifting is in good health, then that cannot be the case.

msb1234

First of all, the number of people living in a care home in the UK is incredibly low - chance is you’ll likely never end up in one. Second, the ability to pay for your own care as opposed to the Local Authority paying for it means that you have far more choice. That’s not something to be dismissed outright. Thirdly, if someone has several properties that they’ve worked for over the years, surely the whole point of acquiring such wealth is to ensure a comfortable life - not just until you reach the point of needing care, but for the whole of your life? 

Any loopholes that might exist to allow deprivation of assets have huge drawbacks. 

bobster2

@UnsureAboutthis in recently times you've started a range of threads talking about putting properties into trust, transferring assets between spouses, gifting rental properties, the status of jointly owned assets, capital gains tax etc all in relation to strategies to reduce IHT. You've talked about having a multi-million pound estate - so I would strongly suggest you speak with a STEP qualified practitioner.

You've previously talked about having used a free online will service. Relying on this along with advice from random people on MSE forums is not sensible.

Keep_pedalling

As a random person on the forum I second the above. Having that much wealth and relying on free advice for doing something so important is madness.