Parents giving house to me and sister - is this legal?

[Zorgothslugofdoom]

Just after a bit of advice really - although I will definitely be going to see a solicitor as things move forwards!

Me and my sister don't get on (whole different thread!). She lives close to my parents and does do a lot for them (takes them to doctors appointments, etc). I live 6 hours away and have a young family, so don't get to see them in person very often, but we talk at least once a week and have a good relationship (I think!).She is also in a bit of a mess money-wise. Our parents are both getting on, and will require some help in the near future. My parents have always said that the house, etc will be split 50:50 between me and my sister when they die.

Due to a number of reasons, my sister has persuaded my parents that it might be a good idea for them to give us the house now, and for her to move in and be there to help them if they need it. Her plan is that they will give the house to both of us, and she will then get a mortgage to buy me out of my 50%, so she can then have the house herself and invest in doing it up (it needs a lot of work). She plans to get 3 valuations from different estate agents so we get a good idea of the houses value. This will help her out of her financial problems and will help my parents as they will have someone there to help them if needed.

I don't have a problem with any of this - my parents can give their house to whoever they want, and they are being fair in splitting it 50:50. My question is, is this legal? I've read about inheritance tax, so know that one of my parents would need to survive for 7 years to avoid it, but don't know if there's anything else to worry about (I do know my grandmothers house had to be sold to pay nursing home fees, so don't know how this would work if they gave the house to us?).

As I said, I don't get on with my sister, and even though my parents said they wouldn't do anything unless everyone agreed, realistically she will get what she wants, so I might as well agree!

Would love someone to offer any advice they may have, before we see a solicitor.

It could cause problems if they later need to go into a care home and don’t have the money to pay for it themselves, it could be seen as deliberate deprivation of assets and you and your sister could be required to pay for the care from the proceeds of the property

I believe that if your parents continue to live in the house they gift you and your sister they will have to pay the going rate in rent.

If it was a legal we'd all be doing the same thing!

If they're likely to have care needs and possibly care home placements then this could be treated as deprivation of assets. Not a good idea.

It’s not illegal per se. But they need to be VERY VERY careful.

Depending on the value it might breach inheritance tax limits.
Also where are the planning to live after they have given it away. With your sister ?? Do they know that as soon as they’ve signed the transfer they get no rights whatsoever ever and she could throw them out.

Also if they try to claim benefits they might be liable for intentional deprivation of capital.

If they need care then depending on the situation the transfer could be set aside.

Also you have said your sister has money problems - will she get a mortgage and will she pay it- if she doesn’t she and they will lose their home.

My mum and dad gave me and my sibling 1/4 share each and they retained 1/4 each.
As as result no one owns a majority share and they can carry on living there. But they took advice from a solicitor before they did anything and I strongly suggest they do the same.

How much is the house worth? The inheritance tax threshold is currently £900k for a couple (if it includes a family home, as here). So you may not need to worry about that.

www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf

You may find this useful, OP. It discusses deprivation of assets - the term they use for passing on assets in order to avoid paying for care. Totally understand your dilemma, but I did notice on the Age UK website that they say every case is unique, so I'm not sure you'll find it's straightforward or universal... Good luck!

Berthatdyfil Do your parents have to pay you rent? Or because you all have an equal share there is no obligation for them to do so?

Where is your sister living currently? Presumably she is paying rent/mortgage? So if she moved in with your parents she would save that money and could put it towards improving the house, with a written agreement that her contribution would be reflected in her share of the inheritance.

If your parents don’t pay market rate rent the gift of the house will be taxable under lifetime inheritance tax rules if I remember correctly (I’ve done the exams but a while ago). There may also be capital gains tax to pay on the transfer of value. This is unlikely to be worth the hassle!

As bionic has said, this would almost certainly be considered as deliberate deprivation of assets by the Local Authority if one of your parents requires residential care in the future. Particularly as you admit yourself that it's likely they are going to require help reasonably soon.

What most people don't understand is that providing a spouse remains in the property when their partner goes into residential care the property is generally disregarded from the financial assessment any way. So unless you expect both parents to go into residential care (and statistically the odds are favourable that this won't happen) then the capital in the house is actually safest remaining in the house until one of the couple either passes away or enters residential care.

hatgirl what a very useful post.

Do you actually think she would get that mortgage? Is her credit score good? Does her salary allow her to borrow 50%

Hatgirl that did sound sincere, didn't it? There are so many snarks on MN these days, I keep reading what I've posted and thinking "can that be misinterpreted?" I do mean, it was really useful! Thank you!

Bionic is right. Also Is iht even an issue? If your parents are married their estate needs to be over £650k rising to £1m if they go afte 2020 and leave their house to you and your sister to be liable for iht.

It leaves them very vulnerable. Once your sister owns the house she can throw them out. If she married and divorced they lose their home.

It is legal, but as people have pointed out:

a) Your sister could kick them out and they'd have no redress.

b) If they need social care they may not get state funding because they have voluntarily deprived themselves of an asset.

Your parents need a trust setting up. It’s very complicated. Just gifting the house is not illegal but can cause problems later. I work in property law, as someone up post said if it was simple everyone would do it. A basic trust gives the property to you and your sister but your parents would retain a right to live there rent free. With all due respect you won’t get the advice you need on this thread. You, your sister and your parents need to go together to a solicitor who specialises in trusts. It will be expensive to set up and they become a nightmare if both parents die before the 7 year rule kicks in due to tax implications and benefits under any wills. If your parents do have a will you should consult with the solicitor which drew it.

From a local authority point of view (I have worked in care home funding for many years) it has to be quite clear cut for us to prove deprivation of assets. If no care is needed at the time of the transfer (people tend to set up a trust with the parents having life long right to live in the property so they can't get turfed out!) then there's not a lot that can be done. We did have a case recently where a trust was set up after someone had started to receive care in the home from the council and the house was still treated as an asset under deprivation rules.
Definitely something to be done with caution and through a solicitor.

To OP

Placing the property in a Trust may be another option to consider. My parents did it years ago. I take ownership only after both have passed on. Hence they do not have to pay me rent as I do not own the property.

They got the idea from their next door neighbour who did the same. They ended up in care home, but local council could not take house due to the terms of the Trust. And didn't it piss off the local council.

As people say above it is perfectly legal to make the gift. My father gave us our mother's half of his house when she died. Most people don't go into a care home by the way so the care home rules could be utterly irrelevant and if the sister lives in she could care for them until they die. (My own parents both died in their house, no care home etc). It is just the lottery issue - will you be one of hte ones needing to go into a care home. Even if they do or one of them does the family may well be more than happy to pay for a care home if the upside has been you have had the benefit of 50% of the house value now when you need it most not in 10 or 20 years' time when they die.

Always take advice from a solicitor as rules change all the time. it is probably your sister who will be left with the problems not you if you get your inheritance now so for you the question is whether you want the money now or want to wait in the hope house prices might go up so much you might get a lot more later. (or a lot less if prices drop) You wuold be taking the money now with a slight risk of inheritance tax later if the house is very valuable and if the parents die in 7 years - quite a lot of ifs.

www.gov.uk/inheritance-tax/passing-on-home

Forgiveness thanks for posting the link. I share my home with my 30 something single daughter and am worried that when I die (I am 70) the property forms part of my estate which I want to leave to her and her married sister. So this interested me:

'You do not have to pay rent to the new owners if both the following apply: you only give away part of your property, the new owners also live at the property.'

ATM she pays me rent (half the going rate) but I really want her to have security of a home as she suffers from some mental health issues.

Be very cautious indeed about entering i to a trust. Many professional advisors have come a cropper getting involved in such schemes as they seldom have the effect people are lead to believe.

The last professional course I went on the barrister speaker feared the selling of trusts to clients at vast expense could be the next misselling scandal

Thank you everyone for all of your advice. I will be speaking to a solicitor for some qualified advice, but the replies have helped to clarify what I think I want to do. Many thanks!

Your parents can give the house to you and your sister as long as they don’t need care for 7 years after the gift. Then your sister can immediately move in and get a mortgage to buy your share. Technically she has her parents living with her in her house so no rent has to be paid.

However as others have said, your parents could lose their home if your sister fails to pay the mortgage, and she could kick them out at any time. And if they need care within 7 years the local authority could claim back the house, and could demand your share back even if you’ve already spent it. And you’d lose out if the house value increases before your parents die (but you’re also better off if the house value decreases).

Another route could be to ensure your parents own the house as tenants in common (ie they both own all of it rather than owning half each). So if one needs care the local authority can’t seize the house if the other is still living in it. You could also consider a trust that means you own while your parents occupy, but it’s a well known fiddle and I’ve never heard of it being successful.