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.

Oh, and make sure that your parents leave their half of the house to YOU, not to each other. Because once that half is inherited by you, if the other parent needs care the local authority can only take that parent’s half, not the half that you own.

Not sure local authorities are limited to 7 years to trace back properties divested to avoid care fees - that's the lifetime gift for iht purposes time limit.

It's not enough to just own as tenants in common they need wills leaving each other a life interest in the others share then they retain their iht spousal exemption. Which you lose if you gift direct to children.

It's a technical area you need proper advice

I'm not sure why she can't just move in with them without owning half the house? And she can get a mortgage on both their demise and buy out your half then.

@ KERALA1 that is a very interesting point my stbex with a declaration of trust set up by a barrister his share of the house and deeds in his name solely as a gift to his mother to avoid myself getting any thing from it in a divorce settlement . Maybe this will be like misold ppi?

You can make gifts generally. Plenty of people give money away without it being illegal or wrong. I have given my children money lawfully for housing and education. However if someone gives it away to their mother conveniently the week before divorce they might well find it regarded as still their property they can control, i have known families where all the sons are paid minimum wage and the rich parents provide homes, private education for grandchildren so that if there is a divorce their son has very low income and no assets in their name and that is hard to challenge.

K is right that they can go back as long as they like for care home costs BUT most of us won't need a care home, some will have family who will pay the care home costs anyway or we will fund them ourselves or we will live with family who provide the care services so I would not use concern over that rule not to give money away. Eg I gave some away in my 40s on divorce - that cannot be got back byt he local authority. I also funded children at university - that cannot be retrieved. I gave children cash for some of their housing and I hope if I need a care home that gift will be about 25 or 30 years before I need a care home so probably pretty difficult to claw back that far and no one reaches 80 in my family so I am not at all likely to need much old age care - we just die off quite young.

The 7 year rule applies to inheritance tax and not financial assessment by the LA if applying for financial assistance with care costs. The LA use discretion with regard to what could be seen as deliberate deprivation of assets and there is no time cut-off. Legal advice is needed.

Last course I was on on the topic we were told only 8% of people were in care homes longer than a year. Certainly bourne out in my own family.

Often in trying to solve one perceived future problem you end up triggering other problems (tax consequences etc).

Wakeup that is shocking - barristers / solicitors are agents of the court and hiding marital assets like that in a divorce is not permitted.

@ KERALA1 I can assure you this is the case, I was totally shocked this was allowed in the mist of a divorce! We have been trying to divorce since March 2013 . The declaration of trust was done in 2015 whilst divorce was ongoing . Can the judge at final hearing reverse this declaration of trust order ?

I'm not a matrimonial solicitor so can't advise sorry but that is very wrong did you tell your own solicitor?

BigBlueBubble
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. This is incorrect. You are confusing IHT and potential exempt transfers with deprivation of capital rules regarding care home fees.

Also if parents continue to live in a property and gift it to a third party it is not a gift without reservation and IHT will remain payable. CGT may also kick in too, and the parents may well be considerably worse off than if they had done nothing.

Your information regarding joint tenants and tenants in common is also incorrect. You have got things the wrong way round. Also as a point of fact, the home will not be expected to be sold if the spouse is living in it in order to pay for care home fees, but the local authority will put a charge on the share of property held by the person needing care and once the spouse has died or sells the charge will have to be paid out of the proceeds of sale. Whether the property is held as joint, or tenants in common, is irrelevant unless it is held as tenants in common with unequal shares.

Please don't post incorrect stuff on legal matters because people rely on the info and it's very misleading. Always obtain a solicitors advice or a tax accountant specialising in this area of law. They have insurance.

Yes I have and they say its a grey area . Not really sure what to make of it themselves both barrister and solicitor - so really not much help to me at all if they do not know themselves.

1. The gift is not illegal.
2. Joe is right and others - the 7 years is just inheritance tax (which the majority of estates are too small to fall under by the way so again not always relevant just as care home fees are often not relevant as so many people never use one). If you make a gift and live 7 years it falls outside inheritance tax (if you are one of the very few estates that will be liable to inheritance tax in the first place).
3. If a parent lives with an adult child and a share of the house is in their name then you need to take legal advice as the rules are more generous than if the parents gave the house to the adult child who does not live there.
4. Best always to speak to a solicitor who is given all the facts.

If parents give their home away and hope their child will let them live there they run the risk of falling out with the child later and being homeless and secondly that their adult child divorced and half the child's share of the house or even more goes to the child's spouse.

the home will not be expected to be sold if the spouse is living in it in order to pay for care home fees, but the local authority will put a charge on the share of property held by the person needing care and once the spouse has died or sells the charge will have to be paid out of the proceeds of sale
This is incorrect. My parents owned their house as joint tenants when my Dad went into care. Mum still lived in the house so they couldn’t touch it. When Dad died he left me his share. Mum still lives in the house and we own it jointly. There is no charge against the property to be paid in the future.

I agree with BigBlueBubble.

I work in this area (local authority funding) and can confirm we do not do this! (Put charges on houses which are disregarded).
Back in the day we used to place a caution, but not now.

It’s not a deliberate deprivation of assets your parents can do what they like with the property. They can Gift it to you or your sister. There is a sliding scale if one parent doesn’t survive for 7 years after Gifting.

There is no '7 year rule' with care home funding assessments.

I suspect Joe just got confused as there are some circumstances where a charge can be put against a property, but not when there is a living spouse (or in some cases a vulnerable dependant) still living in the house.

For example it's quite common if the family are unable to sell the property until either the person dies or the family receive deputyship from the court of protection to manage the finances of someone who has lost capacity.

It's also used where families have become entangled in dodgy schemes in an attempt or to deprive assets.

Yes, it's perfectly legal but needs to be done a min of 7 years before they'd need care.
My parents did it for us and we are doing it for our kids.

What you will have to be careful of is the sitting tenant your dsis will become if she moves in.
You could end up losing your share if it isn't protected.
I'd make an appointment for your parents to see a solicitor, they need to know where they stand.
Perhaps ask if they'd make you a financial POA and your sister a welfare POA.

FFS

How many people on how many threads have to say the 7 year thing has absolutely nothing to do with care funding before people stop saying it!?

Even if you hadn't seen it elsewhere anywhere else in the world/on the Internet, several people have already said it on this thread.

[despairs]

Romany just because it is legal doesn't mean it will actually work.

It's also used where families have become entangled in dodgy schemes in an attempt or to deprive assets.

Sounds about right . It is all very devious,sneaky and very underhand to do this whilst in a divorce INMO

There is a 7 year rule for inheritance tax.
There is a no number of years rules - can go back as far as they like - for deliberate deprivation of assets for council care home funding issues.

In both cases it is not however illegal to make the gifts proposed on the thread although legal advice should be taken as it could work badly (or very well) for all 4 people involved.

I think I'm right in saying that they won't claim deprivation of assets as long as there is an adult living in the property - which presumably your sister will be?

You need legal advice - your parents need a Trust giving them lifetime residency rights (but in legalise!)

Sound very very messy op.

ajandjjmum the adult would normally have to be either a spouse or a dependant (often a u18 or a vulnerable adult).

Any random adult won't do, otherwise everyone would take in a lodger or move in their adult children temporarily.