ILs “gifting” home

This is our set up. Family owned home. One partner has invested individually. Works fine as long as nobody has a track record for being a dickhead.

Exactly this.

You said SHE could buy a place, not both of them. But OK, do we know if he wants to do that? It won't help OP if they split, she'd still have nowhere to go and would only be entitled to half her own savings from this venture (if they haven't had kids).

I'm with your sister on this. The ILs are already controlling the situation wih their conditions. It's not up to them what she does with her money, they're already sticking their noses in suggesting what she does with it. Who knows what will come later.
It's true when they say, 'there's no such thing as a free lunch'. They'll be a price to pay at some point and her ILs will always have a controlling hand in her marriage and her life.
If they're so keen to buy their son a house, let them buy one for him to rent out for income. And she and her husband can buy their own family home. But something tells me they won't want to do that because of the lack of control it gives them.

What happens if the in laws divorce?

Why would they not be saving together?

Yes she can save all her money and use it to buy an investment property...that her husband can take half of in a divorce.

I would take the offer as she's not in a position to buy currently, then save a mortgage amount every month, invest it well. If it becomes a difficult situation at least it's allowed her to save for her own property

It's generous to their son, not OP's sister. The whole reason for putting it in their names is so that the spouses of their children don't own any of it.

What happens when home improvements or replacement of expensive items such as a boiler are needed? Why would OP's sister agree to joint money being used to improve an asset that she doesn't own?

It's different owning an investment property than owning your own home. She will either need to become a landlord which would be a pain in itself, or leave it empty, thereby attracting the Empty Homes double council tax.

OP's sister's PILs sound controlling rather than generous.

I don’t think they’re saying it would have to be with the husband, but the reality of the situation is they’ve apparently been “saving” for a decade and still can’t finance a home.

You can’t go through your whole marriage planning for divorce, it’s really corrosive.

This.

I get why it’s a quandary. So your sister could save up which would be a marital asset and split in the event of a divorce but the house would belong to his parents.

I’d probably still go for it but eyes open and I’d be unwilling to pay for upgrades so no new kitchen/ bathrooms. Save money, I think being a buy to let landlord comes with so much hassle. It’s not for me really,

What would happen if they decide to relocate for work and need to sell the house and buy another? As it is not the primary residence of the owners the increase in value would be subject to CGT. They would be liable for another lot of second home SDLT.

And given the likely impact of IHT , 40% of the market value of the house at that point would disappear in tax.

That’s a lot of tax to pay, to avoid housing your grandchildren in the event of divorce.

They are right in that she’s perfectly able to go and buy an investment property if she has the money

This is true, but I notice they'd expect an investment property to be half owned by their son too

That would usually be the norrmal thing to do with a married couple, but here they appear to want so much in "the family's" names and little in the sister's

No thanks

Why don’t they give their son a large deposit and then he and his wife can buy a house in agreed shares - then in the event of divorce they can sell the house and it’s clear who owns what proportion?

The proposed arrangement really skews the (financial) relationship between the husband and wife. She would be mad to put any money into the house beyond basic running costs because she could be turfed out at any point. You can’t go through your whole marriage planning for divorce, it’s really corrosive. Even if her husband pays for everything house-related, it’s still not fair because anything she saves from not paying rent/mortgage is potentially a marital asset and she’d lose some in the divorce (particularly as her husband would have fewer assets on paper because he’ll have ploughed his spare cash into the house but the house is not a marital asset).

Very unpleasant world view from the in laws that in the event of divorce they want to hang onto their money.

Why is it unpleasant that they would want to keep their money if their son and his wife divorce?

Practically it makes sense. They have the money, 50% of marriages end in divorce and they would rather not spend hundreds of thousands of pounds purchasing a home for their son which he could then get less than half the value of down the line.
They are right in that she’s perfectly able to go and buy an investment property if she has the money.
Essentially it’s an opportunity for her and her DH to live rent free which is surely a better position than what they are currently in?

I’d take it for the free accommodation and ability to save but it sure as hell wouldn’t be long term

I have a similar set up with rich in-laws. I wanted a nice family home for my children, and to be financially comfortable, so went along with it. My mother in law has now passed away and half the home is in DHs name. I do have to bite my tongue with them all sometimes.

this

Plus what is their relationship with the other couples they are providing homes for - interfering or let them get on with it? even if they are a bit interfering, 2-3 years of saving whatever they'd pay in rent to an external landlord will add up to a sizeable deposit.

I wouldn't want to accept anything this substantial, either. There are always strings - sometimes ropes - attached. I'm extremely independent and dislike being under obligation to anyone, particularly to this degree.

If sister's DH wants to accept a substantial gift from his parents then this is for him to negotiate, but he can't expect to do this on behalf of his wife as well. An investment - perhaps in the form of a second home - can be bestowed upon him alone, without involving his wife.

Were I in your sister's shoes I would not accept this arrangement.

I’m with your sister.

The whole dynamic will actually affect their marriage.

It may not be conscious, but a joint investment that they stand to lose helps put little disagreements into perspective in a marriage. The joint investment in a partnership keeps both sides engaged in protecting it.

If their marriage fails, so what, she’ll be out and her DH sitting pretty in his parents house. What does he have to lose?

She will feel beholden to the parents, instead of her and her DH feeling proud of what they have built together.

Disagreeing about this may have already sown long term seeds of resentment and discontent: if they decline, will her DH feel forever hold it against her that they have a mortgage to pay? Will it fracture the relationship with the ILs?

Suppose the ILs give her DH an amount that matches what she has saved as a deposit?

IF she accepts, in her shoes I would buy the investment property in my own name, with a contract with DH to say so.

It’s her life, her marriage, her money. She shouldn’t feel pressurised by everyone and made to feel she is in the wrong.

She wants a home that feels entirely hers ie she would feel a lodger with this set up

So would I

It's interesting that, with so many other options as to how "support" could be arrranged, the PILs have chosen the one which gives them most control, and while understanding the immediate appeal I wouldn't touch it with a bargeepole

Me I would care and wouldn’t touch it either. No way would I live in a house that isn’t mine that I wouldn’t have authority over and on the event of a divorce would have to leave. meaning my property was a buy to let

there maybe no mortgage but there is no equity build either

It wouldn't be for me. Aside from all the legal and financial considerations that people have mentioned, I just wouldn't want to feel indebted to them in any way or to be faced with "oh but we've been so generous to you....". I'd much prefer to stay in a small home that's mine than one owned by family with the potential they hold it over you.