ILs “gifting” home

So basically in-laws are protecting their money that SIL’s husband would inherit when in-laws die, therefore in-laws do not trust SIL to not divorce her DH.

I’m with your sister , she’ll not have the quiet enjoyment of her own home and always be knowing In-laws don’t trust her.

Your sister has her ducks in a row and has thought it through. There’s a lot more towards it and controlling in-laws would really step up if she went along with it IMO.

"...and I would get half of that in a divorce."

No you wouldn't. This is likely part of the reason the ILs are proposing this.

What the ILs are saying is that they will buy a house and will let the friend and her DH (their son) live there. It sounds like it may be something like a "licence to occupy" rather than a lease.

It sounds as though the house will be left to the son when the parents eventually pass away.

You cannot see past the pound signs.
That's very worrying
Thankfully your sister is right to be cautious.
Perhaps you could ask her ILs to buy you a house instead?

Tell me you have no legal or financial advice training without telling me you have no legal or financial advice training.

If the SIL goes for this and divorces, she has no claim to the family home or the costs she sinks into this in her lifetime. Any property or savings she sets up separately against her own future remains part of the marital assets and will be considered for splitting in the case of divorce.

The power imbalance in this is ripe for financial abuse, and setting her up to feel she can never leave.

"Potentially taxable vis no market rent"

Just a very small point. If you let your child and their spouse (or indeed, anybody) in the UK live in a property you own free of charge then that does not become taxable.

The only exception would be if they were employed by you directly (eg you ran a business as a sole trader and employed that person in your business) when it could be counted as a benefit in kind.

A previous poster mentioned this issue in Ireland. Ireland is a different country with different laws and in Ireland a child living rent free in a property would be counted as a gift that goes towards their tax-free limit of €400,000

If they have some say in which property and where, I would love this. Then I would use my own money to buy a little bolt hole in the south of France.

Well, there would be all the money that we had saved as a result of having a house paid for by PIL and I would get half of that in a divorce.

They want to keep the cash in the blood family - fine.

Agree about agreements on repairs.
Either parents or dh pays for big ticket items

I'm a pragmatist so I'd find something newly renovated to a high standard with enough space but not too much (running costs get crazy over 3000 square ft)

On our nice but not so fancy london home
Maintenance is about 5k or so per year.
Our mortgage is about 38k per year

Honestly she'd be crazy not to.

If she doesnt divorce... no issue
If she does divorce almost everyone sells the martial home anyway.
She could also ask parents to sell if she can afford it and wants it.

I'd also strongly recommend against buying a btl. I'd get decent advice from a good ifa, s&s isa vcts etc are going to be wayyyy more tax efficient.

It seems very controlling.

How about the in-laws buy an investment property. They can rent it out and send your sister and DH the rent to help pay their mortgage if they wish. The in-laws get to protect their investment in case of divorce, whilst helping out their son and his wife with property costs.

If she decides to go for it and buy a property of her own she needs that ring fenced legally as it would be a marital asset in divorce and he could claim half.

A friend of mine’s in laws put a chunk of money into her and her husbands home. Every time they visited they insisted on going over my friends & her husbands finances and what their plans were for the house. Their argument was that they were looking after their investment. My friend hated it, said it was far too controlling.

There is an opportunity for your friend and her husband to save for a few years to get a deposit for their own house, so the in laws house is a stepping stone. It really depends on what they both want to do.

DO NOT DO THIS. I was 19 and my IL did this for us. They were protecting their son and creating a situation where they could control us. I ended up constantly paying for repairs and upkeep and eventually in a situation of financial abuse. My ex husband than had affair and it was me and the kids who got turfed out. They had depleted my savings so I had to move counties to go into a hostel. We lost everything.

might be a bit different if you’re sister has back up but I don’t think these situations end well. If the in-laws cares about both of you they would help you out with a mortgage and let you make your own adult choices.

I think the sisters age is very relevant here, presumably if they are saving for a deposit they are just starting out, so no kids?

Fast forward 3 years and sister has diminished earning capacity and a baby, no saving happening there for potentially years if a couple of kids and nursery. Sister gets to having a ten year old and seven year old, still cannot work full time easily, husband decides he wants to look elsewhere, she’s out on her ear. Has to fund accommodation and all living expenses after not working properly for ten years.

This is a generous offer if it’s a gift. Anything else is just benefitting the husband long term and meaning he doesn’t build the nest he otherwise would that could be shared on divorce, whilst sister is in a very precarious position.

They could buy a rental, stick it in a discretionary trust and gift him the income. But they won’t want to do this as their son is all they care about, and they would support him not fulfilling financial obligations to the family he creates. Let’s be honest, this is what this is.

And the tax implications are huge, no one has cash reserves to cover 40% of five decent houses on their death. It would be better to gift the house and maybe lose 50% on divorce than pay 40% tax guaranteed!

It would be lovely if it went well and ILs were nice people but I think the proposed arrangement says something else. There are many other ways to do this where the son isn’t always in control.

I think she should try to have an open and honest discussion about all the difficulties.
In particular, about the potential for her and her children to be left homeless, whilst her assets would be shared 50/50.

Any gift ‘with strings’ is likely to cause a rift. Particularly when it’s family and sadly even if the original intentions of the gifter are good.

Couldn't the in laws just gift their child a substantial deposit which is legally ringfenced so protected if they split?

Then they choose their own home (, probably a nicer one than otherwise) and she has a stake it in. Will keep them at pace with any changes in the housing market.

She can’t save for her own investment property, because that would be a marital asset and he could come after in if they divorce, so he’d get his parents’ house they “gifted” to them and half of hers.

It’s a stupid, controlling idea. I’d also advise against any children until this is sorted out….

I’d do it but buy an investment property with my own money so if things went wrong I’d have somewhere to live.

I would personally take the offer of the house but still be saving for a deposit for my own property that I could rent out ir move into in case the marriage breaks down at any point. Also, ask for clarity as to what happens when ILs die?

Simple question: what happens if for either partner’s career they want to move away?

It depends on the circumstances. A friend had similar. When they sold the house their IL's paid the deposit on, they were offered the investment property free to live in.

It was dressed up as a lovely gesture, but was obviously about stopping them moving away (friend had been clear she 0wanted to). Her DH wouldn't budge once he had a free ride.

They spent all their 'mortgage' money on lifestyle, then eventually split & had very little to show for it. Friend is struggling as she now rents. I couldn't help but think if they'd kept their house they'd have walked away with enough for a generous deposit each on another property (it had doubled in value since being sold).

So it could work if your sister pumps the money they save into investments, but otherwise she could find herself out in the cold if they split.

I would do it and save for my own home and then ask to rent out their property and take the profit. I would outline this as my intention from the beginning to prevent any upset on the in-laws part. Your sister will be able to buy a much nicer home of her own with her in-laws' help.

Divorce rates are high. I can only see that the in-laws are protecting their assets.

Depends on two things.

How close is ds to bring able to afford to buy them selves?

How controlling/interfering are the in-laws?

If Ds and dbil are within a year or two of buying a decent property then it's a no.

If I laws have showed some controlling tendencies then it's a no.

However if their lives would be easier long term with a 2-3 years of rent free living and they can hack his parents for that time then I would go for it.

My conditions would be that the house has to be in really good condition so no changes to be made OR pil pay for major works and this is ties up legally. She shouldn't be spending any money on THEIR investment property beyond a pot of paint.

A few concerns would be...is dh motivated to save himself with his family history? If they buy an investment property, will it mostly be paid for with ds money? In which case that value needs to ring fenced as ds so (as above) DH can't claim it on divorce.

She needs to respond to them in the same way they are treating her. Putting legal protections in place, protecting her assets, like her marriage is a business transaction. If DH complains just say she is being as pragmatic as his parents are.

Free house? Yes please! Live in a house owned by my ILs? No thanks!

How close is your sister and her DH to having enough in savings for a deposit?

This is good 👍

I’m with your sister. This is not a gift. It undermines marriage if you start out like this. I would only do it as a temporary measure to save for a family house in our own name, then leave them to sell the property. Plus, when they die there will be an almighty mess with 40% of the value if these homes owed in IHT. They are overly controlling.