My feed
Premium

Please
or
to access all these features

Mumsnet has not checked the qualifications of anyone posting here. If you have any legal concerns we suggest you consult a solicitor.

Legal matters

Is it legal to sell a house cheap.

27 replies

CaliforniaLeaving · 02/09/2012 17:56

Heres the situation Mum has a house, too big for her, she wants something smaller but in her 70's doesn't want to buy again.
She owns outright, wants to sell to Dh and I cheap, and then give money to my sibling the same value as our discount on the house (if that makes sense)
What can she do legally. If she passes away do we get to pay taxes on the full value and Bro on the money he got too?
What is she gets sick and needs a nursing home, will we have to sell to pay for it seeing we bought her house cheap?
I don't want her to do anything that will come back to bite her in the butt or put us out on the street.
Can you tell I have no clue about this stuff?

OP posts:
Report
expatinscotland · 02/09/2012 17:58

It sounds like she is doing this to get out of paying for her own care home fees if she needs them.

Report
FellatioNelson · 02/09/2012 18:00

I have a feeling that if she sells a bit below market value you will get away with it, but if she sells stupidly cheap it will be picked up by the taxman/solicitor/land registry as a cynical bid to avoid inheritance tax later down the line, or in fact, money laundering. I disagree with that stance but I do think there are ways of making it quite difficult for you to do the bastards. I would seek advice from an accountant.

Report
sleepyhead · 02/09/2012 18:00

Councils are pretty shit hot at catching you out on this sort of thing if you later want them to pay care home fees.

It's a gamble. They would make you sell the house to pay the fees if they felt your mother had intentionally divested herself of an asset to avoid it being taken into account.

There's probably a period after which it wouldn't matter but I don't know how long it would be. You'd need to talk to a solicitor.

Report
sittinginthesun · 02/09/2012 18:02

She needs proper legal advice. The sale at an undervalue will be treated as a gift (the undervalue bit), as will the gift to the sibling.

The Inheritance tax position depends on her financial situation. The residential care fees aspect is more complicated, as it often depends on the Local Authority. Usually, if she is deemed to gave given money away with the intention of reducing get assets, and avoiding care fees, the gift may be treated as still part of her assets.

I think she should have a word with a local lawyer.

Report
FellatioNelson · 02/09/2012 18:06

Does that mean that if a parent sold their house and moved in with thier children and their accumulated money/equity just dwindles and got spent, that councils could force the children to sell their home in order to pay care home fees? Shock

No wonder so many elderly people are reluctant to sell their large homes and continue to stay in big houses that are difficult to heat and that they cannot look after any longer.

Report
noddyholder · 02/09/2012 18:06

Where will she live now? You can do this but if price silly it will be investigated

Report
tutu100 · 02/09/2012 18:11

How much below market value is she thinking of selling it to you for? Also is she likely to need nursing home care in the next few years, or is that just a hypothetical what if?

We bought our house off DP's mum, she sold it to us below market value (but only slightly at 5k less as it helped us out and as it was a private sale she didn't have to pay solicitors fees and she got a quick sale), she wasn't trying to avoid paying taxes or anything, just wanted a quick sale and to help us out.

Report
CaliforniaLeaving · 02/09/2012 18:14

For now she wants to rent a small bunglow near by, she's fit and healthy, travels a lot. She doesn't want to be tied to us (yet)
Dh and I had discussed changing the downstairs bathroom to make it easily accessible (easily done with putting in a large shower instead of the tub) and then she could either have an upstairs bedroom, if able to use the stairs, or we would covert the living room for her and use the dining and family room for living space, easily done. I don't want her to go into a care home and we could look after her at home in theory should she ever need it. (I'm a nurse)

OP posts:
Report
MoreBeta · 02/09/2012 18:14

Also she cant 'give' the house to you and continue living it and hope to escape inheritance tax or care home fees. That would be a gift with reservation.

Frankly, it would just be simpler to sell her house on the open market and give away her money to you and your siblings and then hope she lives at least 7 years to escape inheritance tax. Not sure how long you have to leave it before going into a care home to escape those fees.

Report
CaliforniaLeaving · 02/09/2012 18:15

She's saying half price so that is a big discount, and not in an expensive area like London, but up North.

OP posts:
Report
CaliforniaLeaving · 02/09/2012 18:16

She won't sell, I suggested just selling outright. She's so attached it's the only house she has ever owned.

OP posts:
Report
sleepyhead · 02/09/2012 18:16

It depends fellatio. Generally there are no hard and fast rules but they are looking at intent.

Parents sell house and move in with children who care for them for years until they are no longer able and then parents move into care home. Can't it ever being questioned.

Extremely infirm parents sell house, give asset to children who kick them out into a care home 12 months later and expect the council to fund it... you can see why the council might question it.

Parent sells home to children at knock down rate and then rents for the next 10 years, eventually requiring council to fund a care home when she is very infirm. Probably ok.

Very infirm parent sells home to children at knock down rate, gives proceeds to other child and then expects to be housed by the council as has no assets - not so ok.

Basically, it is not ok to give your assets to your children (no matter how hard you worked for them) and then shortly afterwards (and I have no idea what time period would be considered "shortly) expect the state to fund your living expenses as you are penniless while your offspring enjoy the profits, however lovely and just that might feel.

Report
tutu100 · 02/09/2012 18:16

So atm she has no health problems that mean she may require nursing home care in the future. Tbh if you are planning on caring for her should she ever need it care home fees don't come into it as she wouldn't get them paid for her anyway..

Report
CaliforniaLeaving · 02/09/2012 18:19

Sadly our home has dropped 60% of it's value or we could have bought outright for cash and she could do as she wanted with the money, now we can afford half the house. Now fingers crossed we get an increase in house values here and we get a good price for ours.
Sorry if this is a drip feed it's my first ever question and I'm amazed how quickly people answer!

OP posts:
Report
FellatioNelson · 02/09/2012 18:21

I think you can gift money on chunks of up to £50k at a time, but only every so often (not sure of how often though) so in theory she could sell at market value and gift you and your sister all of her money over a period of time without any worries about breaking the rules. And I suppose, also in theory, if she gifted enough money over enough time, to the point where she had none left to pay her rent she could claim housing benefit on top of her pension. But for obvious reasons this is not easy, or encouraged. I really think she needs an appointment with an accountant and perhaps a probate lawyer.

Report
FellatioNelson · 02/09/2012 18:22

crossed posts sleepyhead!

Report
tutu100 · 02/09/2012 18:32

The amount of money you can gift is quite small so she would need to get that checked out to make sure she did that legally. Personally if I were in your situation I would go ahead with the sale as she wants to, but with the plan that if her situation changes in the next few years you may need to either pay inheritance tax or fund her care.

If your mum is lucky health wise she could have another 20 years in her and if she does, then in 20 years no one will be questioning a house sale 20 years ago.

Report
MoreBeta · 02/09/2012 18:35

Apart from the financial issues - do you really want to live in her old house?

Is there any likelihood this will come back to bite you with your Mum always feeling like it is 'her' house still.

To put it bluntly, will you always feel obliged to her?

Report
AnnoyingOrange · 02/09/2012 18:40
Report
CaliforniaLeaving · 02/09/2012 18:51

Actually Beta I think it's a lovely house, and the area and many neighbors are wonderful too, nothing fancy, smaller than we have now, but we only have one child left at home. She has better taste in decorating than me (expect one room that I told her looked awful as soon as she did it, and I told her I'd re paint in a heart beat) LOL.
I think all of us visiting the solicitor together to see what solution is best is the way to go. Make sure she doesn't gift over an allowed amount to Bro and make sure she isn't gifting us too much either. She has enough coming in in multiple pensions to not need (or be eligible) for Local authority help with rent, so she wouldn't burden anyone there, and I wonder if all her pensions are enough to fund most of her care home should she need it in the future. Somehow I see her being in her 90's and still living independently.
I'm sure I'll need more questions answered as all this gets closer.

OP posts:
Report
MrAnchovy · 02/09/2012 19:15

Why do people guess about these things? Most of the answers here are wrong and what your mother is proposing seems quite sensible. To be clear:

Yes there may be some inheritance tax to pay, but this will only be a factor if her estate (including the value of the gifts) is worth more than £325k, or if her husband died in the past few years more than up to £650k. But if your mother hung on to the house and the money she would have to pay IHT anyway, in fact if she survives at least 3 years or house prices go up her estate will have to pay MORE IHT if she hangs on to it.

In summary the 7 year Potentially Exempt Transfers rule should never be a reason not to make a gift as it doesn't trigger, increase or bring forward IHT.

As for the care costs, if your mother is currently in good health then there should be no concern. The relevant procedures are contained in CRAG (the Charging for Residential Accommodation Guide) which is updated annually and is slightly different in England, Wales and Scotland (not sure about NI) which contains the following: "It would be unreasonable to decide that a resident had disposed of an asset in order to reduce his charge for accommodation when the disposal took place at a time when he was fit and healthy and could not have foreseen the need for a move to residential accommodation."

Report
BonnieBumble · 02/09/2012 19:22

My friends mum is in this situation, she owns a house worth £400k and wants to sell it to my friend for £200k. My friend can't afford anymore than that. £200k will give her mum enough to buy a retirement flat and leave her with enough to enjoy a decent retirement.

Report

Don’t want to miss threads like this?

Weekly

Sign up to our weekly round up and get all the best threads sent straight to your inbox!

Log in to update your newsletter preferences.

You've subscribed!

MrAnchovy · 02/09/2012 20:05

BonnieBumble in that case if your Mum were to die before April 2013 (sorry to suggest this, but it gives the 'worst case' tax situation) this is how it would work:

I will assume the value of the house on transfer to your friend was fixed at £380k (it is important to get a realistic valuation not an estate agent's asking price) so the value of the Potentially Exempt Transfer is £180k, and that the new home is sold for £190k less 2% estate agent and £500 legal fees i.e. £185,700 and this is your Mum's only asset.

The estate would therefore be valued at £185,700 plus £180,000 i.e. £365,700. I will assume your Mum's estate will not have any unused IHT threshold from her spouse so that the threshold of £325k applies: IHT would be due at 40% on £40,700 i.e. £16,280. This would normally be paid from the proceeds of selling her new home.

Report
BonnieBumble · 02/09/2012 20:08

Thanks MrAnchovy. It's my friends mum not mine, there won't be any property coming my way.

Report
suburbandweller · 03/09/2012 12:21

Noone else on here seems to have mentioned stamp duty - a sale at an undervalue could be seen as an attempt to defraud the Revenue. Your friend should obtain proper legal advice on how to go about this given the various angles which need to be taken into account.

Report
Please create an account

To comment on this thread you need to create a Mumsnet account.