Inherited house owned by myself, renting and sending money to financially irresponsible father

[Miffymeowy]

My Grandfather recently passed away and has left his estate to my brother and I. His final wishes in the will are that we keep it available for my father to live in until he passes, and that any other funds from the estate (bank, car sale, etc) are to be kept for future maintenance/repairs to the house. His reasoning for this is that my father is very unstable financially and would quickly burn through all the money and be back to asking for money again, so it is a way of protecting my father and us.

My father has a wife in Thailand and would like to move out there this year, meaning this scenario would not help him. He is on disability currently but will be retired by this time. We would like to rent the house out and send him any profits from this monthly as a way to ensure that he has a reliable monthly income no matter what he does and that the house is available to him if he wishes to return at any point.

I have looked on the internet but it seems very unclear on how we would be taxed for this, or if we can even do it as we will not transfer ownership of the house to my father. My brother and I are already individually in the 40% tax bracket (but rent from this on top of that should not push either of us up to the 45% bracket.

Would we need to get the income 50/50 to ourselves and then send on to him in Thailand, or is there another way of doing this? Also if we do need to do it that way, will we get taxed again for sending him money? The house value is about £480k I would estimate.

Thank you for any advice

To be absolutely honest I would honour the what your grandfather has asked and rent the house out, maintain it, keep it nice and available so if your father comes back from Thailand he can live there but I wouldn't get into sending your father money regularly - put any profit from the house rental into an account to save for repairs to it, but if your dad is only just about to retire you could be responsible for it for 30 years and thats a lot money to be liable for when it doesn't sound like he would ever save himself.

It's not his to make an income from. It belongs to you and your brother.

What about holding back enough rent to cover the tax, maintenance (including for renovations over the coming decades, potential for modifications if he returns later in old age) and send him what's left?

Do not get into the rental market (I say that as a landlord!). You will get a far better return if you sold the property and invested in well managed low/medium risk funds. This may also be more tax beneficial to you and your brother.

I wouldn't get into the rental market either - we're about to sell our rental property. I've found it too stressful despite only ever having good tenants and frankly it doesn't make enough money. You would certainly get a better return on the money with investments.

I can understand why you want to honour your grandfather's wishes as written, but it doesn't seem practical. If your father returns from Thailand, would the house necessarily be suitable for him, for example?

If you do want to rent it out, it would introduce a whole other level of complexity to have the money paid directly to your father as there are additional tax rules around overseas landlords (not that I think you could just declare him the landlord of a property he doesn't own anyway).

You would both do a self-assessment tax return each year and declare this as property income, the form itself is not too complicated. Then you will be taxed based on your overall income.

You will need to retain a good portion of the rent to pay for management fees, renewal fees, repairs and to cover costs during periods when the property isn't rented out, e.g. Council tax, utilities. You will of course need excellent landlord insurance as well.

Your grandfather sounds like a lovely man, trying to care for your father from beyond the grave while also looking out for you and dbro aswell.

However - he has inadvertantly made you two the parents in a way.

If df is so bad with money it is very likely that you will have care costs at some point.

I think @VanCleefArpels is smart. Sell it, invest the funds and tell df that they are locked for 10/20/30 years.

If df is set to retire then his pension will go a long way in Thailand.

If your dad is very flaky I wouldn’t be surprised to see him bounce back from Thailand as quickly as he went out there.

I agree with a PP that “keep the house available to him” does not equate to “give him any money you generate from it”.

In your situation I’d wait quietly to see if his new life abroad transpires, and if so I’d rent it out and keep the income somewhere safe for his future needs.

I’d also worry that a hefty monthly income would potentially make him more of a target abroad.

You and your brother are liable to pay income tax on the rental income. You would also be liable for cgt should you decide to sell the property in future. What you do with the rent is up to you.

The more you give your dad the less likely he is to behave as an adult. I agree with PPs that your grandad was passing the baton of parenthood onto you and your brother. It's very likely your dad will need to go into a care home at some point so I wouldn't pass on money, just keep the house going (if that's what you decide to do) and invest any rent.

Difficult to know without seeing the exact wording of the will, but I suspect it may have created a life interest trust for your father, with you and your brother as trustees and "remaindermen". I think you should check this with a solicitor. If it is a trust its income belongs to your father not you, and would ultimately be taxable on him.

You should get some legal advice. If your father has the right to remain in the house, then there should be protections set out, likely in a trust. You should be able to have rental income go to him and be taxable for him, not you. You really need legal advice so you can ensure you're not taxed on the rental income (but your dad instead).

I think you shouldn't send him any money while he is in Thailand or give any money for care homes if he returns

Does his DW want to come to the UK? If so, will you be made responsible for her too if he dies or goes into a care home. Does she go back to Thailand or remain in the house?

I would see a solicitor and get them to dissect the will from a legal standpoint

If he leaves the house to go to Thailand, will you be allowed to sell the house with the wording of the WILL? As this would be abandonment of the property wouldn't it? So he doesn't want or need to live there any longer so he gives up his claim on it from my understanding of the will

If you would be allowed to sell then I would sell it and invest the money along with your brother

I am not sure of the rules with council tax if you leave it without renting it out, if there isn't anyone living in it then they aren't using services like dustbins or street lighting etc but don't know

Do either of you live nearby to the house?