Very LONG term retirement planning

[Usedphone]

We went out with some friends this weekend and inheritance / end of life planning came into the conversation. (Coincidentally I had a similar conversation earlier that day with a different friend).

Anyway, our plan is that we'll downsize once retired and live from the estate pension and whatever we have from our private pension (potentially not a lot), and whatever interest we can get from the sale of the house (in current money we're looking at at least £700k).

The new downsized house will be in the name of all 4 DC, but we'll live in it.

Is the plan mad? One friend (who's closer to retirement age and has had professional advice) said it's fine. The other couple said it was impossible to trust DC.

If the new house is in the name if all four dc then they own it.

They could sell it and then where would you live?

Look at trusts.

but they would have to agree to it, wouldn't they? I refuse to think our children would be that heartless.

I've always owned both the family business and my DMs house, I've never even REMOTELY thought of selling it.

I believe this route leads to various issues, for example, even if your DC are 100% reliable should they have a marriage breakdown their estranged spouse will have an option to pursue part of the value of your (their) property in an agreed settlement.

It can cause issues should either if you need to go into care.

Depending on when it was done if the local authority consider it was intentionally trying to deprive yourself of assets that would otherwise pay for care they can refuse to fund care homes.

It can get pretty nasty in those cases.

lifetimelawyers.org.uk/Public/Public/Resources/Blog-Posts/If-you-gift-your-home-to-adult-children--will-the-Local-Authority-call-it-a-deprivation-of-assets.aspx

That could potentially happen, but I'm assuming the upheaval for everyone would be such, that we'd all have to chip in.

We don't envision the house to be with more than £250k (in current money). So in that case £30k divided by 5 seems like an ok deal to keep the peace.

They could also get a pre-nup but doesn't seem worthwhile

I think money makes people do desperate things that you wouldn't think them capable of so I'd be wary of this arrangement from that perspective.

We would do it when we're around 65, so bang on retirement age.

also unless you pay your kids market rent it is considered a gift with reservations, amd as someone said if there marriage breakdown the spouse would be entitled to a half share of their quarter would the others be definitely able to buy out an 1/8 th share. Also if they own their own house even with a mortgage or outright you can't claim any sort of means tested benefit if you own a or part of a second property. if they had a business that went bankrut your hour would be an asset

Just one of your children could force a sale

you need to consult a retirement inheritance tax planner

the best retirement plan is to make sure you have a decent pension, you need to be contributing at least 10% check work pensions, downsizing can free up money but not always as much as you think by the time movers and stamp duty paid in some places the difference between 4 bed detached and 2 bed bungalow is not that much, it just depends what you own now

there are numerous online calulators as what size pot you need, if you will both get full state pension how much extra do you want per year from 67/68
if you want to retire early you will need a much bigger fund on your private pension

We're talking downsizing from London zone 3 to rural Norfolk which is substantially cheaper in comparison. You can definitely get decent houses for £200k.

It all sounds so complicated, that maybe retiring to Mexico does sound like the simpler option. I'd get my Mexican state pension there too ;) which is completely negligible but something is something!

well say your London property is worth 800K and you buy at 200k you have after expenses etc say 560k invested this on its own would give you approximately 23000 annually as annuity if invested maybe more or as drawdown, I'm not sure why you can't own your 200k house yourselves as tenants in common so you both own half each, can't see an advantage in your kids owning house as 200k house is within your inheritance tax allowance as your allowance increases if you leave home to direct descendants meaning your allowance as a couple is 1 million, if you don't own a house your allowance as a couple will only be 650K
so any house with a value of less than 350K there is no benefit in it not being in your name

Wouldn't the benefit be that they can't force us to liquify assets?

Their spouses might be if they divorce. Their share in the property would be part of the marital pot then. Make sure you're aware of this risk.

if the house is in your own name no one could force you to liquify assets
so not sure what you mean? also if you do not own a property you potentialy lose 350K of the nil rate band for inheritance

Consider the quality of private vs state care provision too - round here what you get if you pay is significantly better than what you get if the council pays. And I’m not talking about care homes but care visits and the burden on your children of caring for you.

To further a point made by a PP above, if you downsize from £800k to £200k property then by gifting your house to your children you’re only “protecting” a small portion of your estate. Most of your estate will be cash. Why bother, given the risks?

Sounds a bit drastic to avoid care home fees as you’d have to spend all your savings/equity too.
Statistically two of your four DC will divorce if they get married so this plan could get very messy.

It may not be their choice,

If they get divorced, their spouse can come for your house. If they go bankrupt, insolvency practitioner ditto.

If they need benefits, the value of the property has to be declared. What will you do if it’s literally sell the house or starve / be homeless?

If this is aimed at inheritance tax, if you give them a house and live in it, that’s a gift with reservation of benefit so it will still be counted in your estate for inheritance tax purposes unless you pay them a full market rent.

Those are just the issues I can think of off the top of my head. There are significant issues with putting the house in trust, too by the way.

everyone has a 325k inheritance allowance there is no tax on anything left to a spouse, if you are married or in a civil partnership if your allowance is unused at death it transfers to spouse, in addition eahc party has 175K in addition for the main family home left to direct descendent
so if OP and her partner do not own a home they lose the 175K allowance each
if one party needs care while the other is still alive they can't be forced to liquify property assets as normally with tenants in common the OP would leave her share to her DC whilest giving her partner the right to live in it including downsizing until he died so if he needed care and the house was sold the DC would get OP's share ( ie 1/8theach) and OP's DH share would be used for care only when his savings and pension ran out
the 175K each can't be transferred to any other asset so having a 200k house in their name which maybe worth 350 in many many years time assuming law doesn't change is advantegeous

Various people can force you to liquify assets if the asset is owned by your children and they need to pay up (such as insolvency practitioners as others have said).

If your children own your house, any property they buy for themselves will be a second home and charged 5% additional stamp duty as a result which may be more than their share of your estate overall. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates.

You would do much better for yourself and your H to own the new house as tenants in common so each of you has a clearly defined share and a right to live in the whole building for life rather than as joint tenants with the whole ownership of the property passing to the survivor.

generally trusts are advantegeous if the toal assets are over 5-10 million for a pot of less than 1 million it is crazy as it costs to set up etc and a trust has to be maintained for the benefit of the benefactor not for the benefit of current residents

Yes, second home tax is the biggest issue with our plan.

Retiring abroad might be the most cost effective in the end.

If you're living in a house then you're reserving a benefit. So it would be in your estate for iht purposes and could be taken for your care.

Not a good idea to put your next home in your kids' names. It would cause more trouble than it would save.

Have a listen to the recent Moneybox programme on inheritance tax. It's available on BBC Sounds.

There was a thread on here last week. Same situation then adult son got divorced and his wife made a claim on the house as part of divorce settlement. Don't do it op

I refuse to think our children would be that heartless.

If you refuse to think straight, nobody can force you.

Children being "that heartless" happens so often it could shake your faith in human nature.

Why exactly would you want to put the house in your DCs names? It makes absolutely no sense to do so!