ILs “gifting” home

[Zingtang]

So I’m writing this on behalf of my sister. Shes not a mumnsetter but I told her she would get great advice.

Sister’s ILs are well off. They have offered to buy a home for my sister and her husband. BUT they would want the property in their name in case of divorce. They would charge no rent. Sister has been saving for a house deposit for the best part of a decade. ILs suggest she buys an investment property with her husband if she wants to iwn property.

This is the set up for all the ILs kids who are married. They have had contracts drawn up so they are not turfed out if there was a falling out etc.

Sister is dead set against it. I say why the hell not! She wants a home that feels entirely hers ie she would feel a lodger with this set up.

This. She's should get all her questions answered and documented in writing, but it sounds like a good deal. I have a feeling my cousin has a similar set up, the house is in a trust. In the meantime they've lived in a free house in a nice area that they'd never be able to afford on their own.

I wouldn’t like this set up. I would feel beholden to in-laws.

OMG what an offer! Snap it up. It’s only bad if she doesn’t use the thousands saved sensibly. Get herself saving and setting up a good pension. Then if they split etc she trots off and buys somewhere of her own with the savings.

I read that you can sign a prenup so on divorce house goes to ex or in-laws.

In Ireland this would be considered a taxable benefit from her PIL as she is not paying market rent for the property. And then would have significant inheritance tax when the property is finally passed to them. Not a tax efficient set up.

I'm with your sister, here. The whole appeal of owning a home for me it's that it's mine. I hate owing money or anything to someone, so I'd be dead against this set up too.

It’s a no from me. Nothing is free in this world.
I’d be concerned about the power they may feel they have over the house & my family.
I’d be dreading the IHT bill when they die, hence it’s not really a forever home even if it feels that way. Also if they gift it now it crystallises the value, vs if they leave it to DS in the will then the tax will be due on the value and at the rate at death.
Also, given they’re talking about divorce, if the marriage breaks down DH will be left with nothing on paper, and so DH can go after half her savings. So she could have less than nothing. There’s no security in this model. It’s a no from me.

I wouldn't like this set up either, it would be a firm no from me and that would include an offer if it was my own parents.

Too many things can go wrong, what happens if the parents pass away and are in debt and the properties are used to pay off the debt before going into a inheritance pot, if there is one? You could become homeless.

Also even if they are not in debt and they have numerous properties dotted around, with everything paid in full. There could be inheritance tax implications which may not be affordable, forcing sale.

Much prefer to have the security of owning my own home, in my own name (with my partner) with our names on the deeds and not parents or in laws.

I also feel that it would give the ILs some kind of entitlement, and I'd fear them showing up whenever they want, or asking for "favours" your sister wouldn't feel she could refuse because of the "gift".

Quite apart from all the other issues, would happen if they had to go into care ? Given that the the property would still be in their names it would surely be up for grabs to be used for fees ?

If I had the money, this is what I'd do, rather than give it as a gift. Otherwise my child's spouse would be able to walk away with half the value, and might do pretty damn quick, because it's easy money.

But it wouldn't be my house in any day to day sense. It would be theirs to maintain and do with what they will, and I'd have no more right to visit or stay than I do now.

My mum 'gave' my DH his home by adding him to the deeds of her rental property when the tenants moved out and she offered it for him to live in. She was a difficult person in many many ways, but she never interfered in the house. It was DB's and his wife's in every day to day sense.

Tell her not to do this. The overload in terms of obligation going forward, expectations, lack of financial security....
It's a bonkers idea. Why on earth are you encouraging her? Look past the £££signs and seek the downside - surely it's onvious why this is wrong
Your sister sounds sensible, focussed and self-reliant. Those are excellent qualities.
Greediness and an easy life are not.

I wouldn't even consider this unless I was otherwise at risk of homelessness:

• Your sister essentially loses the protection of marriage with this setup - her husband can kick her out when he wants
• She will feel like an outsider and a temporary presence in her own home (or where she lives)
• Every time the in laws visited I would feel conscious of their opinions on the house and its upkeep

I'd honestly rather pay a mortgage than enter into this, especially with children involved.

The ILs should lend the cash to your sister and her husband and that loan should be secured against the property. This means that the ILs protect what they’ve parted with in the event of divorce but your sister owns the home and so gets any growth in value and any money she spends on it (e.g. new kitchen etc) isn’t money spent on someone else’s home.

I'd think carefully before doing this. Yes, it's great to have no mortgage, but she also has no security. She could put a good chunk of her earnings into savings, so that she has money to fall back on if they split, but those savings would be considered an asset of the marriage and her DH could take half. There are some benefits here, but it would leave your sister in a very vulnerable position if they split.

Isnt that what you do when you rent anyway? In the current housing climate if I didn’t have my own home I’d jump at the chance! I’d just insure there was a watertight contract drawn up by a solicitor. They’d be paying no mortgage/rent which they could continue to save and if it didn’t work out they’d be in an even better position to buy their own place. It’s an absolute no brainer!

Absolutely not for many of the reasons already noted.

IHT planning
Repairing or non repairing lease to occupy
The op's sister's future security
The balance of power / reductiveness of the relationship for SIL
Potentially taxable vis no market rent

It needs to be properly gifted or a Trust needs to be set up.

What a shame that despite their money, the IL's have brought up a son unable to provide for himself and his partner. How very emasculating. If he supports this notion, I'd advise your sister to run for the hills.

I'd be wary of it long-term or if you're wanting a house of your own. Parents often 'help out' in their adult children's houses by doing unasked for DIY or gardening or decoration with varying success. I'd worry if would be that much worse in this scenario.

However, if your sister and her DH treat it like a rental and are prepared to move out quickly if needed and just do it for a year or two, it could help them save a lot for their own property that they actually own.

I’m with your sister. This is not a gift. It undermines marriage if you start out like this. I would only do it as a temporary measure to save for a family house in our own name, then leave them to sell the property. Plus, when they die there will be an almighty mess with 40% of the value if these homes owed in IHT. They are overly controlling.

This is good 👍

Free house? Yes please! Live in a house owned by my ILs? No thanks!

How close is your sister and her DH to having enough in savings for a deposit?

Depends on two things.

How close is ds to bring able to afford to buy them selves?

How controlling/interfering are the in-laws?

If Ds and dbil are within a year or two of buying a decent property then it's a no.

If I laws have showed some controlling tendencies then it's a no.

However if their lives would be easier long term with a 2-3 years of rent free living and they can hack his parents for that time then I would go for it.

My conditions would be that the house has to be in really good condition so no changes to be made OR pil pay for major works and this is ties up legally. She shouldn't be spending any money on THEIR investment property beyond a pot of paint.

A few concerns would be...is dh motivated to save himself with his family history? If they buy an investment property, will it mostly be paid for with ds money? In which case that value needs to ring fenced as ds so (as above) DH can't claim it on divorce.

She needs to respond to them in the same way they are treating her. Putting legal protections in place, protecting her assets, like her marriage is a business transaction. If DH complains just say she is being as pragmatic as his parents are.

I would do it and save for my own home and then ask to rent out their property and take the profit. I would outline this as my intention from the beginning to prevent any upset on the in-laws part. Your sister will be able to buy a much nicer home of her own with her in-laws' help.

Divorce rates are high. I can only see that the in-laws are protecting their assets.

It depends on the circumstances. A friend had similar. When they sold the house their IL's paid the deposit on, they were offered the investment property free to live in.

It was dressed up as a lovely gesture, but was obviously about stopping them moving away (friend had been clear she 0wanted to). Her DH wouldn't budge once he had a free ride.

They spent all their 'mortgage' money on lifestyle, then eventually split & had very little to show for it. Friend is struggling as she now rents. I couldn't help but think if they'd kept their house they'd have walked away with enough for a generous deposit each on another property (it had doubled in value since being sold).

So it could work if your sister pumps the money they save into investments, but otherwise she could find herself out in the cold if they split.

Simple question: what happens if for either partner’s career they want to move away?

I would personally take the offer of the house but still be saving for a deposit for my own property that I could rent out ir move into in case the marriage breaks down at any point. Also, ask for clarity as to what happens when ILs die?