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Inherited house and buying out

2

Comments

  • p00hsticks
    p00hsticks Posts: 12,779 Forumite
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    edited 13 October 2018 at 12:15PM
    kelloggs36 wrote: »
    It has to come from the property as there is not enough cash elsewhere to take it from.


    So where's the £50k cash that your mother gave her ? I think you are double counting it somehere.

    Would it be easier if you think of it this way.....

    She gives you half (25k) of the 50k cash she has already received (and presumably is sitting in her bank account somewhere), so you're all square cash-wise, as you both now have £25k cash.

    She then needs to buys your half of the £325k house from you.
    Half of £325k is £162,500.

    BUT she has £25k in cash left to use as a deposit (which the lender will want to see), meaning she only needs to get a mortgage of £137,500.

    She uses the £137,500 mortgage money and her £25k of cash to pay you the £162,500 for your half of the house. Sorted.
  • AdrianC
    AdrianC Posts: 42,189 Forumite
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    G_M wrote: »
    Hmmm.. Or

    Mum lent your sister £50,000.
    Your sister owes mum's Estate 50,000
    So the value of mum's Estate for Probate is 325,000 + 50,000 = 375,000
    (assuming no other assets).
    So you each inherit 375/2 = £187,500 once sister has repaid the £50,000 she owes.....
    ^ This.


    The £50k from your mother was a loan. It's an asset of the estate.

    Your sister does not need to physically repay it, it's simply for accounting purposes. Let's say she hands an IOU in...

    £325k + £50k IOU = £375k
    50% £375k = 187,500
    You get £187,500.
    Your sister gets £137,500 plus her £50k IOU back.

    So to buy the house from the estate, the estate signs the house to you, and you pay sister £137,500.

    Obviously, any other assets are distributed by the estate on top of that, 50/50. If there's another £50k in assets, you may wish to forego your £25k worth, and offset that against the payment you make to your sister, so you pay her £112,500 for her 50% of the property.
  • kelloggs36
    kelloggs36 Posts: 7,703 Forumite
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    No. She is keeping the 50k. Therefore she needs to access 25k to add to my half. So she borrows my half value of £162500 which ignores the 50k she has. She then borrows an extra 25k rather than ise the cash that she has. Therefore I get £187500 which is the same as her mortgage as the deposit is her half of the house of £167500.
  • AdrianC
    AdrianC Posts: 42,189 Forumite
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    Either the £50k was an unreserved gift - in which case, she doesn't need to "pay it back" to make your "inheritances level" - or it was a loan. It can't be both. Either way, because of the short timescale, it counts as part of the estate for IHT purposes - if it was longer, it'd tail off annually over 7 years, but <1yr counts as 100%.


    She doesn't need to physically pay it back, just to metaphorically put a £50k IOU in the pot.
  • kelloggs36
    kelloggs36 Posts: 7,703 Forumite
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    I declared ot on the probate forms and no inheritence tax to pay. I think we are in agreement as the figure of 187500 is what I calculated which includes 25k she has borrowed rather than pay it back.

    My question was more about the process than the amount and how, if at all, it differed from a normal purchase. Ie do we have to put it in our names first or not?
  • AdrianC
    AdrianC Posts: 42,189 Forumite
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    The executors simply transfer it all to one beneficiary, and the two beneficiaries settle the cash between themselves.
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    kelloggs36 wrote: »
    No. She is keeping the 50k. Therefore she needs to access 25k to add to my half. So she borrows my half value of £162500 which ignores the 50k she has. She then borrows an extra 25k rather than ise the cash that she has. Therefore I get £187500 which is the same as her mortgage as the deposit is her half of the house of £167500.


    I can't follow your logic. If she borrows £162.5K plus an extra £25k to pay you £187.5K she will be left with £50k in her pocket?
  • kelloggs36
    kelloggs36 Posts: 7,703 Forumite
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    edited 13 October 2018 at 3:23PM
    Yes and half the house plus she will have bought the other half. We both end up with a value of £187500. If we sold externally, from the proceeds of the sale I would get £187500 and she would keep her 50k and her share of the house making her share £187500. It is because she getting a mortgage and choosing to keep the 50k that she has to borrow an extra 25k to give to me.
  • kelloggs36
    kelloggs36 Posts: 7,703 Forumite
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    AdrianC wrote: »
    The executors simply transfer it all to one beneficiary, and the two beneficiaries settle the cash between themselves.

    Will the mortgage lender not want to do all the necessary searches like normal though as the money is secured against the house?
  • AdrianC
    AdrianC Posts: 42,189 Forumite
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    Think of it more as a remortgage - and, yes, they'll want to do all the usual checks they'd do on that.
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