Rented house and inheritance (Is GF BU?)

[OatAndRaisinCookie]

This is about my grandfather. And he’s been asking if we think this is fair. GF is 85 if it helps.

GF owns his own home, mortgage free. Worth around £180k (3 beds with garage, decent sized garden and options to extend). Currently it’s rented out to a family and the money after money to the management company is used to pay for my GFs sheltered accommodation. He’s compus mentis, but has mobility issues so likes the security of the SA.

Technically on his death the house will be sold with proceeds split between his daughters. His worry is the family living in his house. They’ve been living there around 5 years now and have 2 children both under 10. The couple are good tenants, pay the rent and keep the house in order. Their children attend the local primary school. They have often stated to the management company that this is their home and they want to stay in it long term.

GF wants to put a clause in his will so that the family can stay living there until the youngest child leaves home with the proceeds of the rent being put into a savings account to be given to his great grandchild when the house sells. He knows they will never be able to buy.

But he doesn’t know whether this is fair? And also whether the family might be a bit offended that he made provisions for him in his will when he’s never met them. He knows having seen all of his children struggling with rented places when their children were young that having a secure home for your children is very important.

Is HIBU? Or not?

Why would the house need to be sold straightaway? When you're GF passes away then the house is passed to his dc (assuming that is what is stipulated in the will), it doesn't need to be sold before estate is finalised. The dc then own the house and are jointly liable for repairs etc and also would be best to receive the rental income as they would be liable for the tax on it, whether they receive it or not.

Would the dc be agreeable to letting the tenants stay in the property for a certain amount of time?

It is a fundamentally flawed scheme in that his DD’s would own the house but wouldn’t be getting the income from the rental.

The grandchild of one of them would be getting the rental.

So who pays when, over a 10 year period, it needs a new boiler or major repair?

I am not even sure you could leave an asset to someone, who then owns it, but dictate where the income from what is now their asset, goes?

Sorry I missed the bit about the great grand child getting the income. The owners of the house get the rent. Then the owners can decide to give the rent to whomsoever they wish bearing in mind the annual threshold of a monetary gift. But the owners all have to pay tax on the income first and run the property etc etc.

That’s a horrendous idea to subject all his other children to and potential ggdcs. Fine for him to do whilst alive. He’d be better off to just give the house to her. But that would disinherit everyone else.

Agree with moredoll that as pretty much all pp have said it is lovely that GF is thinking of the tenants but it is unfair on his own family to take that on. Requesting in his will that the tenants be given an extended notice period or that his beneficiaries give consideration to continuing to rent the property out would be a more practical idea.

Obviously unless I’ve missed something we don’t know about the financial situation of the people who would inherit or whether there is a stash of money somewhere that could be used for repairs etc

I'm the executor of my mum's estate. It's pretty straight-forward, her flat is to be sold and proceeds split between my 4 DC, just a couple of bank accounts and the usual utility bills etc. It really has been enough work at just doing that, I would caution against complicated arrangements. I think there's also potential Capital Gains tax liabilities that may apply in a situation where the property isn't sold for some time if the value has risen. Discretionary Trust funds attract fees, need tax returns completed and tax on interest paid, and there's usually also a charge when the trust ends. It's not something to go into without full information. And I'm dealing with it just by myself, so there's no one arguing and contesting it etc!

Your grandfather sounds like a lovely man, but he could well be leaving his loved-ones an administrative nightmare.

Couldn't he just specify that the house will be left to xx but cannot be sold for say 6 months after his death to allow the family to find somewhat suitable to live and tell them this whilst he is still alive.

I'm a lawyer in the US. Although obvs laws are different, this is a HORRIBLE plan and much could go wrong. He could direct house to be sold and leave them a small part of proceeds of house sale and/or allow them a longer time to vacate. He needs legal advice and to be nudged to a better plan. Plus, if this is their "long term" home, they are just delusional. Why should your GFs family have to support their delusion????

Vvv silly idea.

your GF sounds lovely but this plan is doomed to be an utter nightmare.

like pp say having a one-year notice period would be fine.

or he could stipulate in his will that the house is to be sold immediately to a buy-to-let landlord who is willing to take it on with sitting tenants.

or he could sell right now to a buy-to-let landlord who is willing to take it on with sitting tenants.

either of the last two options would obviously mean the price sold for would take a dramatic hit.

“think there's also potential Capital Gains tax liabilities that may apply in a situation where the property isn't sold for some time if the value has risen. “
Good point. It won’t have been the home of tne owners since they inherited it so they will be liable for capital gains tax on the sale.

The whole thing is moot anyway. If he needs a nursing / care home in tne future, how will that be paid for? His DD’s will have to pick up the bill unless the house is sold. Would he expect his DD’s to pick up that bill?

What an amazing thing to consider. I would suggest that he chooses the August after the youngest turns 18 rather than leaves home because it's a set date and can be written into the agreement (they could lie about leaving home). Of course your family could continue renting beyond that, it's just a minimum.

However another approach is asking this family if they may be interested in purchasing - a private sale avoids estate agent fees so you could discount the property by this amount, offering them a 1-2 year period to raise the money.

He shouldn’t do this. And I’m afraid you should not get involved as you lack perspective. (Any special bequest is unfair to the other gc who are not the parents of the ggc). And he shouldn’t be worrying about all this.

No

I think as long as he has told his children his wishes for the family then it is up to them to decide what to do with the house upon his death.

For this to be clause to be written formally in the will could make it a very difficult situation for his own children. Who knows what the future may hold for any of them. So keep it simple and traditional.

Moving rental houses is not an uncommon situation and one that many families deal with. The children won't suffer because of it.

Who's name will the bank account be in? It will put them in a difficult position to have money in their name that they can't access. For example, when applying for benefits and grants, money in your name will have to be declared and will affect entitlement.

And that money would have to be declared if whoever's name it's in wants to apply for a mortgage and the mortgage company may be unhappy it's just being sat on.

I always think its a big dodgy leaving money to a generation still growing.

So right now you have the only great grand child and that xhild gets all the money. But if you have another one a year after he dies they don't see a penny.

If he doesn't want his children to inherit then I think it would be better leaving any monies to you and your cousins and you guys therefore become responsible for the property in whichever way he words any trust set up to protect the current tenants.

I'd also put a time limit on it, so not age dependent but X time so they have plenty of time to look rather than a few months notice or another decade

And how would your cousins feel knowing that unless thry have children in time that all the money goes to your child?

Oh I just saw he was going to skip his own children and give to the great grandchild.

Very bad idea! What happens when there are new great grandchildren. Keep it simple and traditional and pass it onto his children with no special clauses for the tennants.
What complicate things?

Imagine this scenario op. The tenants know they are safe in this house for however long they want so long a the youngest still lives there. They stop paying rent or refuse rent increases. The roof of the property needs replacing. The daughters have to fix the roof but have no income (and will have had to find the tax on this). They won’t receive anything. Yet have to pay money out hand over fist.

If they are the trustees of the property which is what I think your dad is trying to suggest and and your child the only beneficiary this is a lot of problems for them (there’s a lot of work and pressure being a trustee).

As your child is the only one who will benefit its only fair that the property was transferred to you and you have all the headaches of being a trustee and landlord if he’s determined to follow through. But expect the daughters to be miffed! They have been disinherited after all! This is likely to cause splits and animosity in your GFs own family for the sake of some random other family who just so happened to choose his property to rent. Like PP have said, what happens if he goes into a nursing home and the house has to be sold anyway. If the Will is already altered the damage to his own family will already have been done!

I always think its a big dodgy leaving money to a generation still growing.

This is a good point. Fortunately my family is complete and my brother and his wife aren't having any children, as my mum's will named her GC and didn't make a provision for any future ones. The chances of a Deed of Variation for minors that will reduce their share being agreed are pretty much nil. I know there will be those that think it's just tough shit for any that didn't inherit, but I also know my mum wouldn't have wanted 1 to miss out, but she didn't make the provision for it.

The idea of the rental income going to one GGC is really bad. I think your grandfather should speak to a solicitor who is a member of STEP, as they will be the experts on trusts and all the implications. I think there's some rule that the interest on the income would be subject to tax, and it's the Trustee who would be liable. It's a lot more complicated than just putting it in trust and forgetting about it until the child is 18.

Though really I think with the house value of around £180,000, just going for a straight split between his DD's will really be the best option. Maybe your grandfather could put together a good reference for them (I know someone who had an issue when the LL died and there was no one to give a reference)

In theory it's a lovely idea, but they know that's the risk with renting and they can't expect to live in someone's house forever.

He needs to prioritise the family and let them have the option to sell if and when needed. The money could be needed at any given time and it's unfair to go potentially through hardship because u have a house you can't sell.

Still sounds like a lovely man though!

Lovely idea, but impractical in the long run i.e. after he has died.

Stupidly, it took me far too long to notice that the GF doesn't even know these tenants, which surely raises the question of why he's considering this at all ... maybe sycamore's post about the possibility of undue coercion's worth considering?