Buying house with new partner and inheritance

[lalahouseq]

Wondering if anyone can help. I'm planning to buy a house with my new partner, both have adult kids from previous relationships. Plan is to own as tenants in common and get solicitors to write a doc stating that whichever of us survives longer can stay in the house until death or we choose to sell.
Will obviously talk to solicitor but I'm wondering how this works from an inheritance tax perspective. If I die first, I don't want my partner to have to move. But if my kids have a 50% stake in the house, does this have any implications for them in terms of FTB status, tax relating to second homes, or anything like that? How would probate work to wind up the rest of the estate?

I think in essence it can be tricky. My nan did the same and left my dad and his sister her flat fully but with the proviso my step grandad could live there as long as he wanted.

He lasted another 18 years, moved his latest bit of stuff in before my nan's funeral and to cap it all off, my dad and aunt were liable for all the repairs ie a new roof (it was a flat in a larger victorian building).

So my advice is to get it set out as to who's responsibility it will be to maintain the house...Will your DP expect 50% of the costs from your kids?

Be aware, as unmarried tenants in common, there can be situations where, if your partner dies, his will can come into force, and his share in the property will automatically go to his next of kin... i.e his children, which would mean they then own and have an interest in your property. You'd have to then sell or raise enough funds to remove them from the land registry.

Thank you, this is helpful. I also wonder if they weren't FTBs, would they be subject to second home stamp duty rates if they sold their own existing house and bought another? or would that come under 'main residence' rules

thank you, these are all excellent points I need to consider and we will discuss.

Yes tenants in common is sensible, it's done to actually protect each of your dc inheritance. Make sure that he does the same thing to you in his will, to live in the house for free so neither of you have to pay rent to the other's dc . You both need to stipulate that you should each maintain and insure the property. Also make sure that if he ever remarries or cohabits that the trust is then wound up and your dc get their half. You don't want him remarrying a 25 year old down the line without that stipulation because your dc might not live to see a penny. Do you have money or other assets to leave your dc as well as the house if you do pass away?

I have just done my will in the same way, only difference is I’m remarried and own more than 50% of the property. My will stipulates my husband can continue to live in the house until he cohabits or remarries, and specifies that he is responsible for the upkeep of the house & any bills, insurances etc.

My will states 100% of my assets to go to my children (held in trust until they’re 21, with a few caveats). I have 2 life insurance policies too though - one will go to my husband, the other will go in trust to my kids. Remember that life insurance policies don’t form part of your estate, so aren’t covered in your will.

I believe the kids would no longer class as first-time buyers if they inherited part of a house.

my recent experience of the last 2-3 years

If you do it like that basically your kids will own 50 percent of the house when you die. Your death creates the trust .

This means that the deeds of the house will need to be changed when you die to reflect the ownership and to prevent your DH selling the property.
Cost us about 300 to get the solicitor to do this .

however by putting them on the deeds this could affect any state benefit they may claim or need to claim in the future as they have a interest in the property . So if they needed to claim HB they could take into account that they own 25 percent of a property even if they can’t physically access it or live in it at present .

Most trust will say that the lifetime Tennant is responsible for the upkeep and general wear and test of the property

When say for example you die with regards to probate the executors of your will have to register the Trust with HMRC.
This means that every year they will have to do a tax return for the estate and trust until your DH died and the house is sold

They will have 2 years from your death to register the trust
i had an account just do this years return as I forgot to register it .
luckily HMRC aren’t giving me any fines for the orginal late return and no taxes to be paid as my father continued to live in the property after my mum dies

but it will still cost several hundred quid to the accountant

mmy parents had this 50 -50 with a life time interest trust to the surviving spouse
so when my mum died in 2019 the trusts starts on her death and my sister and my son inherited her half of the house but my father had the right to continue living in the property

my sister & myself were executors
so we were both put on the deeds of the house along with my father as owners but we only owned it by virtue of the trust if that makes sense .

when my dad died two years later however
because my sister was a beneficiary and executor we couldn’t claim the six months exemption period of not paying council tax on a empty probate house as my sister was technically the owner on the deeds and the beneficiaries so that cost us over £1700 in paying council tax for the property even though it was empty

if it was only me on the deeds /executor because I wasn’t a beneficiary we would have been able to get the council tax exemption

You can put in a clause that should your DH remarry cohabit then the trust becomes ends and he had to sell and give your kids their half

you don’t want your kids having to wait here aNS years because he remarries or cohabits and they can’t access the property

most lifetime interest trust have it written that the Tennant ( your dh ) is responsible for the upkeep & maintaining and insuring the property and not the beneficiaries

most trust can also be used to downsize to a smaller property but I’m not sure how complicated that is

What happens if he moves out (could be into residential care, for example?).
The arrangement I've seen was that the survivor could stay unless they cohabied, married, moved out or (obviously) passed away.
That meant the kids didn't have to worry about the house going to rack and ruin while the survivor was in a home, or, having to turf out the survivor's old and frail girlfriend/boyfriend/spouse upon their death...

HOWEVER it's still tricky to enforce that the survivor maintains & insures the property - and there are other cases too - what if they covertly get a lodger? or move in a relative on an initially temporary basis that ends up longer term...?

A good STEP solicitor will talk all possible eventualities through with you and pull you away from any naiive assumptions that the kids or DP "would never do that...".

Well put.

Exactly what I was going to say.

Some posters need to brush up on their comprehension skills, let alone take a good look at their 'jumping to conclusions' issues.

Oh and with the first time buyer thing
if they are on the deeds of the property then yes they will lose FTB status
my sister as she was on the deeds & was a beneficiary lost her FTB status when trying to buy her council house last year .

my son because he was a beneficiary of the estate and not on the deeds as a beneficiary didn’t lose his according to his solicitors of the flat he is buying

I was on the deeds as the executor/ trustee and not a beneficiary

How very rude.

OP refusing to address the fact that her partner could live for decades after she dies…

They won't be FTB, but with all the other stuff the rules can change after your death, Any advice here is pointless, you need to consider the scenarios + outcome you want, then ask your solicitors how to achieve that, rather than the other way around.

Ideally the arrangement is for the surviving partner to stay there until they pass away - unless they choose to move/marry/cohabit. All expenses, maintenance etc - who is going to bear this?
And for your DC to not have the burdens of ownership, without associated benefit?

There is nothing wrong with buying a house with your current partner as Tenants in Common, married or not.

I do not read it as the OP using money that she has inherited. I read it as she and her partner contributing equally and her hoping to ring fence her adult children's inheritance for the future.

I think though, that the title has lead to misunderstandings and caused a few posters to go off on a tangent, especially the one apparently taking a "dim view" of the OP and her partner buying a property together as equal contributors (why?)!!!! Ask MNHQ to edit the title. You can do it by reporting your own post

There is nothing wrong with what you are doing, OP. We once bought a property in this way before we were married. Just ask the pertinent questions of your solicitor. Get deeds of trust set up etc.

I’ve had it written by a legal firm anyway - I wanted to get it done right! I’ve just checked and it says until my husband marries/civil partnership or starts living with somebody, ceases to use the property as his primary and principal home, or is medically unfit to remain in the property and has vacated.

Tbh the children will likely get more from insurance policies than from the house anyway, so I’m pretty comfortable that this strikes the best balance. Whilst I want my children to benefit the most, I don’t want my husband to suffer unduly. I’m a bit surprised that anybody (not necessarily you, but others on this thread) thinks that somebody should endure the death of their spouse and then be immediately turfed out of their home.

So what? She could live for decades after he dies. What business is it of anyone else?

This could happen in any relationship.

In a jointly owned property it is very normal to have the agreement that the surviving partner is allowed to live there until they die or for as long as they are able with 50% or more of it being held in trust for the beneficiaries (usually the children).

Of course that can mean that the beneficiaries may have to wait some time, maybe even years, for their inheritance. That is normal.

Surely nobody thinks that beneficiaries should just be able to turf the partner out of a house that they have paid equally towards because they don't want to wait for their money!!??

MN is becoming mental these days about home-ownership. Add on its usual mental-ness about second marriages/partners, and it's no wonder a thread like this goes spare within the first few posts.

On topic: somewhat differently from the advice you've already received here, I would go to your solicitor with a description of all the things you want to achieve for each other and your respective children and ask how to achieve that, rather than "we are going to be tenants in common". There will be other (better) ways to skin this cat than you think. It'll take longer and cost a little (not much) more, but you both want things to be tidy and secure. It will be worth it. You're paying the solicitor for advice and to draw up documents. Seek and take her/his advice. We did, and ended up in a totally different (and far superior) situation than we had envisaged.

I imagine your wish list will be something like: we don't want to get married; we both want the surviving spouse to have a roof over their head after the first passes and we don't want either's children to turf them out; we don't want any in-fighting; we want the split to be 50:50; we don't want any third partner who might appear, or any step-children who might appear to confuse things (don't rule this out, stranger things have happened); we want to minimize inheritance tax; we would like to help our children onto the housing ladder [perhaps]; we want this house to be used for care home fees for one or both of us; etc etc etc. Just tell the solicitor everything you want to achieve and let them advise you.

My mum and stepfather owned their house as tenants in common and whichever one outlived the other had the right to live in the house for the rest of their life if they wished. He died over 30 years ago, so my stepsisters had a very long wait to inherit their half share of the house, until my mum passed away last year. My mum could have moved at any time during the years but the money from the sale of the house would have been split between her and my late stepfathers estate at that time

When my mum died last year, the trustees of my late stepfather's estate were happy for me to arrange for the sale of the house on their behalf as executor of my mum's estate. The house was sold by me and the trustees as joint owners (once I'd obtained the grant of probate). For inheritance tax, the 50% value of the house thst passed to me was taken into account, not the full sale price of the house, together with my mums modest savings, and was below the inheritance tax threshold. I don't know my stepfathers financial position at the time he died or if the 50% from the sale of the house took his estate over the threshold. I think my stepsisters very much resented having to wait for so many years to receive their inheritance from their father.

https://www.gov.uk/inheritance-tax

This link explains more about inheritance tax.

Basically, it is 40% over and above the threshold of £325,000. In cases of a husband and wife, and I think maybe a civil partner (but check with your solicitor there) the two thresholds can be added together, so if the husband dies first and the wife inherits his half of the property then, when she dies there will be a joint threshold of £650,000 to be applied.

So if you don't want to get married then this is something to be considered. Maybe a civil partnership? As things stand currently it is possible that your children could be hit by much more of an inheritance tax bill than is necessary. Again, check this fully with your solicitor and/or a financial adviser.

How long have you been seeing your boyfriend? Do you already live together?

My parent has put a time limit on it, so the house must sold after 3 years, and its in a trust. There would be enough to buy a smaller property, which would be more appropriate for a single person. And no unfortunate situations like the remaining spouse moving their new partner in to the house your children half own.

Honestly, why are people getting hung up on the OP's relationship status?
She's not marrying her partner. They're putting an equal share in the house. It's not like a new partner marrying someone older with all the assets, then making a killing while disinheriting the deceased's children.

The children are all adults, so the size of property now is presumably what they want as a couple. Which won't be much different compared to a single person.
Might already be a 2 bed for all we know?