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.

I’d do it but buy an investment property with my own money so if things went wrong I’d have somewhere to live.

She can’t save for her own investment property, because that would be a marital asset and he could come after in if they divorce, so he’d get his parents’ house they “gifted” to them and half of hers.

It’s a stupid, controlling idea. I’d also advise against any children until this is sorted out….

Couldn't the in laws just gift their child a substantial deposit which is legally ringfenced so protected if they split?

Then they choose their own home (, probably a nicer one than otherwise) and she has a stake it in. Will keep them at pace with any changes in the housing market.

Any gift ‘with strings’ is likely to cause a rift. Particularly when it’s family and sadly even if the original intentions of the gifter are good.

I think she should try to have an open and honest discussion about all the difficulties.
In particular, about the potential for her and her children to be left homeless, whilst her assets would be shared 50/50.

I think the sisters age is very relevant here, presumably if they are saving for a deposit they are just starting out, so no kids?

Fast forward 3 years and sister has diminished earning capacity and a baby, no saving happening there for potentially years if a couple of kids and nursery. Sister gets to having a ten year old and seven year old, still cannot work full time easily, husband decides he wants to look elsewhere, she’s out on her ear. Has to fund accommodation and all living expenses after not working properly for ten years.

This is a generous offer if it’s a gift. Anything else is just benefitting the husband long term and meaning he doesn’t build the nest he otherwise would that could be shared on divorce, whilst sister is in a very precarious position.

They could buy a rental, stick it in a discretionary trust and gift him the income. But they won’t want to do this as their son is all they care about, and they would support him not fulfilling financial obligations to the family he creates. Let’s be honest, this is what this is.

And the tax implications are huge, no one has cash reserves to cover 40% of five decent houses on their death. It would be better to gift the house and maybe lose 50% on divorce than pay 40% tax guaranteed!

It would be lovely if it went well and ILs were nice people but I think the proposed arrangement says something else. There are many other ways to do this where the son isn’t always in control.

DO NOT DO THIS. I was 19 and my IL did this for us. They were protecting their son and creating a situation where they could control us. I ended up constantly paying for repairs and upkeep and eventually in a situation of financial abuse. My ex husband than had affair and it was me and the kids who got turfed out. They had depleted my savings so I had to move counties to go into a hostel. We lost everything.

might be a bit different if you’re sister has back up but I don’t think these situations end well. If the in-laws cares about both of you they would help you out with a mortgage and let you make your own adult choices.

If she decides to go for it and buy a property of her own she needs that ring fenced legally as it would be a marital asset in divorce and he could claim half.

A friend of mine’s in laws put a chunk of money into her and her husbands home. Every time they visited they insisted on going over my friends & her husbands finances and what their plans were for the house. Their argument was that they were looking after their investment. My friend hated it, said it was far too controlling.

There is an opportunity for your friend and her husband to save for a few years to get a deposit for their own house, so the in laws house is a stepping stone. It really depends on what they both want to do.

It seems very controlling.

How about the in-laws buy an investment property. They can rent it out and send your sister and DH the rent to help pay their mortgage if they wish. The in-laws get to protect their investment in case of divorce, whilst helping out their son and his wife with property costs.

They want to keep the cash in the blood family - fine.

Agree about agreements on repairs.
Either parents or dh pays for big ticket items

I'm a pragmatist so I'd find something newly renovated to a high standard with enough space but not too much (running costs get crazy over 3000 square ft)

On our nice but not so fancy london home
Maintenance is about 5k or so per year.
Our mortgage is about 38k per year

Honestly she'd be crazy not to.

If she doesnt divorce... no issue
If she does divorce almost everyone sells the martial home anyway.
She could also ask parents to sell if she can afford it and wants it.

I'd also strongly recommend against buying a btl. I'd get decent advice from a good ifa, s&s isa vcts etc are going to be wayyyy more tax efficient.

Well, there would be all the money that we had saved as a result of having a house paid for by PIL and I would get half of that in a divorce.

If they have some say in which property and where, I would love this. Then I would use my own money to buy a little bolt hole in the south of France.

"Potentially taxable vis no market rent"

Just a very small point. If you let your child and their spouse (or indeed, anybody) in the UK live in a property you own free of charge then that does not become taxable.

The only exception would be if they were employed by you directly (eg you ran a business as a sole trader and employed that person in your business) when it could be counted as a benefit in kind.

A previous poster mentioned this issue in Ireland. Ireland is a different country with different laws and in Ireland a child living rent free in a property would be counted as a gift that goes towards their tax-free limit of €400,000

Tell me you have no legal or financial advice training without telling me you have no legal or financial advice training.

If the SIL goes for this and divorces, she has no claim to the family home or the costs she sinks into this in her lifetime. Any property or savings she sets up separately against her own future remains part of the marital assets and will be considered for splitting in the case of divorce.

The power imbalance in this is ripe for financial abuse, and setting her up to feel she can never leave.

You cannot see past the pound signs.
That's very worrying
Thankfully your sister is right to be cautious.
Perhaps you could ask her ILs to buy you a house instead?

"...and I would get half of that in a divorce."

No you wouldn't. This is likely part of the reason the ILs are proposing this.

What the ILs are saying is that they will buy a house and will let the friend and her DH (their son) live there. It sounds like it may be something like a "licence to occupy" rather than a lease.

It sounds as though the house will be left to the son when the parents eventually pass away.

So basically in-laws are protecting their money that SIL’s husband would inherit when in-laws die, therefore in-laws do not trust SIL to not divorce her DH.

I’m with your sister , she’ll not have the quiet enjoyment of her own home and always be knowing In-laws don’t trust her.

Your sister has her ducks in a row and has thought it through. There’s a lot more towards it and controlling in-laws would really step up if she went along with it IMO.

Ask your friend if she'll be comfortable with her INs dropping in whenever they feel like it, letting themselves in with the 'emergency' key, because they will.

Your sister is absolutely right to refuse, this is not a real gift from the in laws. It's very controlling, gives her no security and puts her in a position of dependence. Plus all the complexities of maintenance/improvements to the house - would the in laws pay for it? Because your sister should not pay for a house she doesn't own. Then what happens if the in laws divorce? If they die, there is an inheritance tax nightmare and no security for your sister either.

It would never feel like her own home and is a vote of no confidence in their marriage.

@Anotherparkingthread nothing in life is free.

Agree..live in it. Save save save...buy own property. Inlaws are controlling so I'd use the situation

Nothing in life is free, the “cost” woukd be way too high.

…the ILs would always remind them they are owed

…you accept being treated as an outsider who cannot be trusted

… they have no faith in their son’s choice of partner

…they treat their adult children as people who cannot be trusted to make sensible deciyabout who they marry and how they organise their lives

…they do not respect and probably even like your sister, so it all feels unpleasant

it’s a terrible set up. Who pays for maintenance and repairs? Will the DIL (your sister) be expected to show eternal gratitude? It’s like saying: I don’t trust you. It’s about controlling their kids and in-laws.

i’d tell them no thanks. Awful “gift”

I think this is a way to get around inheritance tax for the IL whilst still keeping the wealth in the family, My parents have just bought my brother and his wife a house, knowing full well when if they divorce she will get the house.

I would engage a solicitor to tell her what would happen if they get a house, I bet in divorce law a decision like this would
even stand.

Yes indeed. That's why the word potentially was used. Because we don't know if the son is employed by the family and they may well be.

Agree. So controlling dressed up as generosity. She should trust her instincts.