Relative putting their house into DH’s name

[TattiePants]

This isn’t happening immediately so we will get some proper advice before it happens. One of DH’s relations mentioned yesterday that they were going to put their house in DH’s name later this year. Relative is in their early 70s, very fit and healthy so hopefully any changes to this are a long time in the future. It will be done through a solicitor to protect relative and their partner (so for example we couldn’t evict them - not that we would!)

This got me wondering, could this affect us financially? For example, in the unlikely event that we both lost our jobs and needed to claim benefits, could this house be classed as our asset? What if in future years the relative was unable to maintain the house, would we be liable? Just general musings at the moment but would appreciate advice from anyone who has experience of this.

I'd be concerned that it could have implications if the relative need to go into a care home. I think the Council can check whether they have got rid of assets to avoid paying for care fees within a certain time period. You could possibly be liable for paying for their care.

Things can change rapidly at that age - heart attack, stroke etc could result in the relative needing care without any prior warnings.

That is one of the things we will be checking out however she does have a lot of liquid assets that would cover care home costs for a number of years.

If the intention is to save tax I don’t think this will work. If the relative is still living in the house and your DH has no rights to evict then as far as HMRC are concerned it’s still part of the estate even after the 7 years have gone by. Check out gift with reservation of benefit.

I suspect but not sure if legally you’d be relatives landlord and subject to those regulations like having a gas safe cert done every year.

Also, if you don’t own your own house then you’ll be liable for extra stamp duty if you do buy one.

You would have to declare the house as an asset if you claim benefits. The house you live in isn't counted, but this house would be. If you have assets over £16K then you can't claim means tested benefits.

I was told of a case where a mother put the house in her son's name (to avoid inheritance tax or care home fees or something) and he booted her out of the house once he was the legal owner.

Thanks thecapitalsunited it is purely to avoid IHT so I'll have a read up on the rules around GROB. My concern would be that we in effect become landlords and all the responsibilities that entails. We do own our own property already.

Relative also needs to consider what happens to house in the following situations: if you and DH divorce - you could be entitled to a share of her house as a marital asset; if DH is declared bankrupt- house could be sold to pay creditors; if DH predeceases relative. Does he have a will in place and if so who benefits? Would relative be happy with new owner? When DH comes to sell house he is likely to have capital gains tax to pay as the house was not his main residence. I also second all the previous advice re inheritance tax, care home fees and SDLT.

It will only work for IHT if she pays your DH a full market rent live there and lives for 7 years. A nominal rent will not be sufficient. DH will be subject to income tax on rent. Hopefully when she approaches a solicitor regarding the transfer she will be advised of this but many small high street solicitors will just do the conveyancing work without asking too many questions or offering advice.

What's in it for you? Is it an early inheritence, eg his parents home?

What if you want to move - if you own this other property in addition to your own, and you move house, I think the purchase will then be a second property, which attracts more stamp duty? Are they offering to cover this extra expense that they are imposing on you.

I assume that DH is able to refuse this kind offer? You can't force someone to accept what could be a millstone and to participate in tax avoidance? Who will be responsible for maintenace etc if your DH owns the property. If he's considering it, it's probably worth him getting advice from an independent solicitor.

Agree with posh - HMRC will expect them to pay full market monthly rent to your DH and would be all over it as a tax avoidance matter if they tried to pay less / none.

Thanks @poshfrock that's very helpful. Fortunately the solicitor she will use is my relative so I'm happy that she/we will get good advice when the time comes. She's a very generous person and she wants to do her best for DH but hasn't thought out the implications. I'm a Chartered Accountant but haven't looked at personal tax since my exams 20 years ago - it's bringing me out in a cold sweat just thinking about it!

I think you should employ your own solicitor to advise you on the implications of this. The other party's solicitor will be representing their interests and advising them how to maximise their benefit, not yours, relative of yours or not.

You’d be far better to consider setting up a trust with the elderly relative as life renter. That way there are no tax implications for you. This means that If the relative needs to downsize etc, they can still do it under the terms of the trust. If your duh own the house he’ll be subject to CGT at (I believe) 28%, and this is not the case with a trust

Barbara yes from DMIL's point of view it would be to avoid IHT on the sale of her property after her death. However as she hasn't had legal advice (yet) she hasn't considered the wider implications or that it may not be possible to avoid IHT as she's still living in the house. She would do anything for DH so absolutely wouldn't try to force him and certainly wouldn't do anything that would cause him financial hardship.