Giving house to step-daughter?

[IsMadl]

Hi all, I have one step-daughter, no biological children (could never have any). My step-daughter is 27, she got married last summer, and is expecting her first baby. Her dad and I got together when she was 10 (her mum passed away when she was 7), we married when she was 16 and have been together happily since.

Before her dad and I married I had a 3 bed semi, we live in the North but it recently got valued at £300,000. We have been renting it out since I moved in here 12 years ago. The money has funded mostly my pension and odds and ends here. I'm a primary teacher though so have a good pension as it is.

SD and her husband have been saving really hard for a house, they earn well, she in the civil service and he in finance, but they work in London and obviously it is expensive. She had about £150,000 from her mum (-uni costs, wedding costs etc.) and they are saving.
Currently the house I had is to be split between my niece and nephew when I die, the house I live in now will go to step-daughter when both dad and I pass.

To me my step-daughter is my own, I was never able to have children of my own and I think she is incredible, so smart, beautiful, funny and caring. I hate seeing her struggle to build the deposit for a nice house, in a nice area with a garden which is all she really wants. I've been thinking maybe it is time I sell the house and give her the profit, obviously it would up there deposit massively. I wouldn't do it if I didn't think she and her DH had earned it but they are lovely, kind, hardworking people.

I told my husband and he said that it would be a lovely thing to do but no pressure as it is mine. My mum and dad think it would be a horrendous idea.

AIBU to consider this?

I don’t think she’s a step daughter, really. It sounds like you’ve adopted her without all of the official paperwork. If you had legally adopted her, or any other children, would your parents take issue with giving them inheritance because they’re not blood relatives? I’m assuming when SD talks to people about you and DH, she calls you “my parents”? I’m assuming you were the Mother of the Bride at her wedding? I’m assuming you’ll be grandmother to her child? It’s not your parents’ decision. To be honest, I’m not sure why you told them about it and/or asked their opinion in the first place.

If you’re sure you won’t need it - is your pension really big enough? What if you and DH split up?

Then I would sell the property now, give £100k to your step daughter and £50k each to your niece and nephew. Keep a £50k emergency fund. That way you also avoid inheritance tax hopefully.

How old are you and your DH?

I'm not sure giving away 50% of your assets is a great idea but it does depend on your age. Whilst you say you have a teacher pension could you live on it if something happened to your DH?

If you want to sell it consider staged payments, £100k now would be a fantastic cash injection even for London.

She's more of a daughter to you than a step daughter. If I had a "spare" home I would give it to my children, absolutely. You are financially stable yourself and all we really want apart from that is financially stability for our children.

I agree, great idea but needs a little more though. I'd say the same if she wasn't your step daughter.

This is a good calculator for how much pension income you might need: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pension-calculator

It still doesn't account for what happens if you or your husband become unwell and unable to work or other things that might go wrong, but you should plumb in the figures and see what it says.

In general, I agree with the PPs who say this is a good idea but leave it to her in your will just in case you have need of that money yourself in later life.

I don't understand why others are saying that the nephews and nieces (niblings? - is that a word?) must be included, purely to "be kind". It's your money and you should do what makes you happiest with it.

"The money has funded mostly my pension and odds and ends here."

And this is precisely why you need to keep the house for now. To carry on funding your pension and the extra odds and ends that make life nice.

Also, once you do retire you'll be on a lot lower income and that extra money will definitely come in useful at that stage.

With regard to your SD and her husband, they already have a deposit of at least £150k (is that correct?). I have no idea how much they earn but the average salary in London is around £45k per year, so let's say that they both earn that amount.

Between that deposit and the mortgage they could likely get in that situation, then they could be looking at affording a place that was worth up to £550k.

There are no end of nice 2 (or even 3) bed flats in different parts of London that you can buy for that sort of money.

If you go a bit further out, maybe places like Hendon/Colindale or Walthamstow or Twickenham then you can even get 2 or 3 bed terraced houses for that sort of money (sometimes even semi-detached as well).

I would guess that they are saving up for something a bit better than that. Great, everyone should make their own decision on what home they want to buy. But, if they are currently in a position to buy a nice 2 or even 3 bed place in London then I would suggest that they don't really need more money at the moment.

So, I would say, keep the house and change your will leaving it to your SD.

Wouldn’t it be normal for your DH to inherit from each other and then passed on to SD anyway?

I actually think SD will be absolutely fine without this money - good job and partner in finance! It’s a choice to live in London (and a privilege now). We helped young relatives starting out there, and it turned out they were earning a lot more than us and now are far and away better off than us.

I would think about the niece and nephew’s situation - would they benefit more from this? What financial position are they and their parents in?

The only issue I have with your opening post @IsMadl is that you're discussing what you and your husband are planning on putting into your wills with your parents, who, now they know the path that you are planning on taking may decide to alter their wills and leave you out of them entirely. If they haven't taken to your SD by now, it's unlikely that they will and they may see any inheritance that would be going your way now as going her way too.
I'd recommend not telling them anything financial in the future and keep the conversations with them off the personal topics area.

OP, I think this is a lovely idea. Your niece and nephew will inherit from their parents and, no doubt, from your parents/their grandparents and all are unaware of what you had in your will until now.

Inheritance, whilst legally following a family line, is a gift not an entitlement. If your parents are concerned, you can offer that anything that they leave you will be ring-fenced for the niece/nephew, which observes their wishes that their inheritance remain in the bloodline, or used solely by you should you and DH ever divorce.

Otherwise, if you can manage without the income from your property, I think this would be a lovely gesture. I think when gifting you can protect the gift so that stays with you DSD upon a divorce, perhaps placing it in a trust of sorts for her children with her being a lifetime beneficiary? I speak to a solicitor to explore the best way to do this.

Why did you tell your parents?

OP explained she's used some if it 'university costs , wedding etc'

i think the thought it is lovely but you just sound really naive. I don’t know how old you are but I’m always surprised how little MNers are aware of the costs of old age. 300k is only 4 years in a care home/ of home care. What if you or DH get dementia, mobility issues, lose your sight etc? A teacher’s pension is nice but not overly generous.

If they divorce her DH will get half the value, if you divorce you will need it.

I would hold that thought, ring-fence the money for yourself while you’re alive, and leave it all to her when you pass.

Capital Gains Tax?

Why not gift your daughter the rental money?

You must have been so disappointed with your parents over the years and their lack of involvement with your DSD.

I just can’t understand their way of thinking.

You sound lovely OP and it’s a great thing to do, with the correct legal advice.

"...as it will be subject to capital gains tax at 40% (or even 44% as it’s a residential property)."

Where on earth are you getting those figures from? The current UK figures for a basic rate tax payer are 18% on any gain that would bring their income up to the higher rate tax threshold and then 24% on anything above that.

For higher or additional tax rate payers then it's a flat 24%.

Although, it is a fair point that this is another argument against selling the home now and leaving it to the SD in the OP's will. Any property like this which is passed to a beneficiary in a will is exempt from CGT (but of course there may be IHT to pay).

She doesn't need legal advice though for this the most simplest of cash gifts. Perhaps tax advice as its a potentially exempt transfer.

How sad that your parents don't see your (step)daughter as their grand daughter.

My ILS are like this with my son but my parents have fully embraced my step son as one of their 7 grandchildren and has been treated equally. I now have a step grandson of my own and do the same.

It's not as though she is newly om the scene. I wonder whether your parents have actually told you siblings or the nephew and niece that they will be OK as they are inheriting auntie's money!!

It is your property and your decision.

i would say your property your decision. It doesn't sound kind of your parents to not accept your stepdaughter in the same way that you do and your will is none of their business. Yes get some nuts and bolts advice if you feel you need it to make sure that the money goes where and how you want it to and also remember (sorry) that you have to survive for 7 years after the gift to avoid IHT if your estate would be liable.

This is lovely to see! The only thing I would be very cautious of is that you’re not just gifting the money to your SD but her husband too, which would get messy in the event of separation. I would ring fence the money with a solicitors input, see what options there are

Most people have a mother beyond the age of 7…..OP I think if you go forward with your plan you’ll also get a huge benefit from the knowledge that you’ve helped your daughter out when she can benefit rather than your niece and nephew (who will presumably inherit from parents?) in potentially 40 years time.

As others have said, look into ringfencing it for your daughter should the worst happen and they divorce

I would put your security first.

Think out in detail how you would manage if your DH died in the nearish future or further ahead: would you really manage retirement with a household to run on a single retirement income? New boiler? New roof?

Think out in detail how you would manage should you and your DH divorce (it does happen, no one is immune from the possibility and anyway ‘security’ means security should the ‘it will never happen’ not just the things you can envisage), in which case you would be worse off because you would presumably need to sell your current house and then manage all costs as a lone householder.

A chunk of the value of the house will disappear in CGT.

It is lovely that you want to help your DSD. What about giving her a year or two’s net income from your rented house, and then altering your will to leave it split equally between your niece, nephew and her?

And stop discussing things with your parents.. it isn’t their business, they obviously favour the interests of their grandchildren, and will potentially stir up trouble with your sibling over it.

Yeah I didn't mention whether she did have her Mum beyond 7, that's not what my comment was about.