Fil signing over property, impact first time buyers

[Changeychangee]

We are hoping to buy in the next year or so. Purchase has been massively delayed by half a decade due to DH debt/furlough period.

FIL has decided to sign over his property, value circa 100k, to DH/SIL in life while remaining in residence.

This would mean that we go from being first time buyers to second time purchasers.

I am worried about

a) losing h2b isa bonuses 6k if buy under 250k and stamp duty costs if buy over 250k.

b) increased interest rate on our mortgage.

c) capital gains tax on second property when eventually sold.

c) SIL in the process of divorce from BIL who has money issues - FIL may end up out of home if sale forced by BIL.

d) claw back via deprivation of assets if FIL goes into a home.

I feel I have a valid concern about the potential costs to us over mortgage term substantially reducing the benefit of anything DH gets.

How would you handle this, am I blowing this out of proportion? What ways around this would you suggest??
I’ve already thought FIL could sign over to our DC instead or I could purchase a smaller property on my own rather than go in with DH.

I am already due to provide 85% of a six figure deposit and pay half the mortgage. I feel this is potentially another financial hit from DH side and I feel pinched enough as it is.

IANAL. I think you are right to be concerned. Has your FIL taken legal advice?

Can your FIL not wait to do this until after you've bought your first property and after your SIL's divorce is finalised? What's his rush?

How old is your FIL?
I think the deprivation of assets penalty is time limited. Seven years?
Or has this now changed? It used to be 7 years.

Never mind your position, this has to wait till sil divorce is through! Surely he can see that?

It’s time limited for IHT purposes, but not for deprivation of assets, there’s no definitive time limit on this. The basic premise is that if the person signing over their house / giving away substantial money had a good reason to believe they may be in need of care, then it can be treated as DOA. Eg, it can be assumed that someone with early diagnosis of dementia will eventually need to pay for some form of care.

What would be the point if him doing this? The only benefit of changing property ownership is usually inheritance tax reduction and at £100k it falls under that threshold anyway.

The only point is to save spending nearly 80 grand on care! If he's a hale and hearty 65 you can probably get past that ok. If he's 85 I'd expect more likelihood of challenge. But in any case sil's issue remains

Long term this could cause issues in terms of capital gains etc. if we sell it, or your sell and move again. Take proper legal and financial advice

FIL is late 70s.

Add to previous that I’ve just realised this may impact income too 😩

We currently receive tax credits about 200 a month as one of Dc is disabled….

Know that change to UC is upcoming, but wasn’t worried as we will have moved and deposited savings into house by then…

But now I am as they will see additional property as asset won’t they, even though FIL still in it! And won’t give us any rent.

Feel overwhelmed.

All I know is there is due to be a legal appointment where DH and SIL are required to be present to sign. And that other funds (could be just a few grand) are to be distributed in life.

DH inheriting doesn’t bother me. But having increased costs and loss of income when things are already very difficult for me worries me.

At that age, there is no benefit to you as DOA would be a likely outcome should FiL need care. In addition to all the financial drawbacks you enumerate, your DH / SiL would be liable for buildings insurance and potentially costly repairs etc. Value is well below inheritance tax thresholds so no benefit there either.

You dh needs to just say no

I have exactly this problem and have a recent thread about it.

I hope you are securing your deposit legally so you get it returned should you split in the future.

Or being Tenants in Common with you as a higher percentage of the assets

Why is he doing this?

Point C needs to be strongly expressed to everyone. My XH threatened to go after my Mum's house if l didn't give him what he wanted.

He only backed off and agreed for it not to be used in the divorce settlement as his parents gave him a talking too.

Me owning part of my Mum's house has caused me hassle due to divorce and tax credits/universal credits.

This is what I was thinking of doing. And having post nup to protect me - as even though not binding, the courts will look favourably on it.

There is a lot more that has gone on. DH is hostile to me at the moment as I am “interfering”.

Whereas I see it as potentially tens of thousands extra costs, and I don’t know if I can absorb it. Or if DH will be able to either. Surely providing a home for offspring should be more important than appeasing misguided FIL?!

Do not sign for fils house until you have bought your own home.

simples

if he does need care they will absolutely look back to see if he has purposefully transferred his home to you. They can easily prove he did it intentionally as he had no other reason to do it

it’s only 50k each so I wouldn’t break the law over that

@toomuchlaundry

I think he is worried about potential fights with the two siblings or one (the more dominant one) taking more than due as this happened with himself and his own sibling.

In short - to get everything sorted out while he’s still here to see it done to his satisfaction, to help his two kids who both have been through shit last few years, to avoid care costs (probably too late), to be eligible for more financial support so he can even semi retire - he’s still working full time at nearly 80.

It's crazy to do this while your sil has a divorce on her hands, and a bad idea all round.

There is literally no advantage to anyone in this situation. Why does he want to do it?

In light of DH being unpleasant currently, l think you would be wise to speak to a solicitor to ring-fence your deposit. There are ways of doing that which are legally binding unlike a pre-nup.

A will would do exactly the same. And for a fraction of the cost too.

You are right to be voicing your concern as this will impact you negatively.

@Changeychangee you have listed all the main drawbacks. Plus if FIL doesn’t pay rent when he dies the house may still form part of his estate for IHT purposes.

I would definitely be protecting your deposit - deed of trust. Get your own legal advice.

If FIL is concerned about inheritance then a well written will is the best option.
Use SILs divorce to suggest to FIL gets legal advice, it’s the easiest to play e.g. you don’t want BIL getting your money. If you, DH and FIL get a joint appointment you can then raise other issues e.g. 2nd home, cgi, deprivation of assets etc. Don’t use this to discuss protecting your deposit you need to do that on your own.

@Princessglittery thank you, very good advice. Unfortunately I have been cut out of attending any legal appointment and all discussion on the matter - even though it impacts me. The appointment is to be FIL, SIL and DH.

I genuinely see no benefit of what he is doing. Along with all the downsides you have mentioned, there is no IHT benefit anyway if he continues living there. Assuming his estate is less than 500k (inc house), IHT should not even be a consideration.

Deprivation of assets is real and the council will smell a rat if he's given away his house but is still living there without paying any rent/treats it as his own. So won't even cover care costs.

You will lose all FTB benefits, plus get his with the additional SDLT charge.

As you say, the share of the house SIL owns could fall within the marital pot and could affect the house. If she had to take less from other family assets to protect the house, she will lose out in real terms.

This is just a massively bad idea all around. You need to have a frank conversation with your DH that this is NOT A GREAT IDEA.