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Original poster

Dad selling house and giving us money, any ramifications for us?.

33 replies

Healingthehurt · 06/09/2023 04:54

Hello,
I wander If someone could advise us please.
My father ia currently selling his house and we expect it to go for about £160000
He wants to give us the money so that we can apply for a mortgage on a house which has living accommodation for him.
He is registered disabled and struggling to get by on his own after the death of my mum a couple of years ago.
The money would serve as our early inheritance.

This has all been his idea from the outset and is what he wants to ensure that he is looked after as his health gets worse (we personally are not bothered about the money but obviously care about him a great deal and would like to look after him and make sure he is ok)
My question is this.
We are not ready to buy a property just yet. We currently live in rented and can just about make it work for a little bit as we have a downstairs bedroom and bathroom for dad.
So the plan is to pop the money away for a year or 2 and then look at buying.
I am totally clueless when it comes to investing that amount of money. Is there anything I should know about the legality of dad just giving us the money, any tax issues. Basically anything at all I should take into consideration before this goes ahead. Would it be better to keep it in a bank account in his own name until we want to buy? And then if he is giving us that as a deposit for a house is there anything else to consider.

I want to make sure I am doing everything in a legal manner and be sure of all the facts before we proceed. Many thanks.

I should say we don't recieve benefits and have a joint salary of about £70000 a year. Dad is on pip.
Thank you

OP posts:
MidnightOnceMore · 06/09/2023 04:59

You need legal advice. You need to think about implications for inheritance tax, capital gains tax and also possibly deprivation of assets if your father is in receipt of benefits.

You are right to be cautious, there's a lot to think about.

SlipSlidinAway · 06/09/2023 05:11

If your df needs to go into a care home at any point in the future, you/he will need tp pay for it. Giving you the money will be considered deprivation of assets and councils can go a long way back when looking at this. With the best will in the world people can develop conditions which makes it impossible for them to be looked after by family at home.
Do you have any siblings who might also expect to benefit from the sale - or might on your df's death want you to sell any property you might have bought so they can also inherit?
Does your df need to sell at the moment? (if you're in the UK it's not a great time to be selling if you're not also buying). Could his property be rented out until you're ready to buy?
In terms of investment you're best off speaking to a financial adviser on how to get the best return in the money.

@MidnightOnceMore - Inheritance tax isn't an issue as £160k is well below the threshold. Not sure how CGT is relevant?

MidnightOnceMore · 06/09/2023 05:16

SlipSlidinAway · 06/09/2023 05:11

If your df needs to go into a care home at any point in the future, you/he will need tp pay for it. Giving you the money will be considered deprivation of assets and councils can go a long way back when looking at this. With the best will in the world people can develop conditions which makes it impossible for them to be looked after by family at home.
Do you have any siblings who might also expect to benefit from the sale - or might on your df's death want you to sell any property you might have bought so they can also inherit?
Does your df need to sell at the moment? (if you're in the UK it's not a great time to be selling if you're not also buying). Could his property be rented out until you're ready to buy?
In terms of investment you're best off speaking to a financial adviser on how to get the best return in the money.

@MidnightOnceMore - Inheritance tax isn't an issue as £160k is well below the threshold. Not sure how CGT is relevant?

I'm not giving financial advice, just explaining what areas need to be considered.

I thought if you get given money from a property sale, where the property was not your own, that CGT needs to be considered.

My point is they need proper financial/legal advice.

MaybeanothertimeNotReally · 06/09/2023 05:22

You need legal advice because of the issue surrounding deprivation of assets and future care for your dad.

If your dad let his house out through a rental agency, he could keep his house & leave it to you in his will. Any rental income could be used to top up his pension or give to you as a cash gift. By keeping the house, he has an asset he can use for care if he needs it. You then won't be made liable to pay for his social care then.

Speak to a solicitor first before selling the house.

Autieangel · 06/09/2023 05:25

Your main concern is if he need to go into a home . We were told they go back 7 years in terms of looking at finances but I don't know if that's just our local authority or across the board.

If he needed to go into a home then that money would be required to pay for it. (I think they leave you with approximately 20k)

But I would get legal advice as it's a lot of money you need to be careful.

No inheritance tax tho.

Toooldtoworry · 06/09/2023 05:26

Financial Adviser here.

If your Dad dies within 7 years of you receiving that gift you may be liable to IHT, and the gift will need to be taken into account for his estate value. If you are in England then your Mums IHT allowance will have passed to your Dad and his allowance will be 650k for his estate. So if the total value of his estate is less than that you'll be ok.

The only other issue you may come across is the 'deprivation of assets' scenario whereby if he needs care will the state deem his gift to you as doing so, which could leave you having to remortgage to pay for care fees. Personally I might be tempted to keep a years worth of care fees aside at least to be safe (52k ish).

Re: investment it's short term. You could speak with an adviser but you're probably best finding the best fixed rate bond/ISA or similar to leave the money in for that period.

Toooldtoworry · 06/09/2023 05:30

@MidnightOnceMore no you've got that confused. If you inherited/was gifted a property and sold it for a higher price you may be subject to CGT dependent on the 'profit'. Does that make sense?

SlipSlidinAway · 06/09/2023 05:30

I thought if you get given money from a property sale, where the property was not your own, that CGT needs to be considered.

CGT is a tax an individual pays on profit they've made on a capital asset they own when they come to sell it. People don't pay it when they sell their primary home.

Someoneonlyyouknow · 06/09/2023 05:36

If your father gives you money towards your deposit he would be expected to sign a declaration that the money was a gift and he has no legal interest in the property you buy. Also, you need to consider that a time may come when you are not able to look after him at home, despite you all wanting to. His health (or yours) may change dramatically. Hopefully you can all live comfortably together for a long time

SlipSlidinAway · 06/09/2023 05:42

Just to add op, we did similar and didn't encounter any pitfalls. But we did recognise that we would have to find the money for care home costs should the need arise (it didn't).

TodayInahurry · 06/09/2023 05:55

£160,000 is below the level of IHT. Houses people live in are not subject to capital gains

PosterBoy · 06/09/2023 05:57

If you are married, half that money would be your husband's if you divorce (and remember, plenty of women didn't think they would ever get divorced!)

Difficult if it was supposed to help house your dad!

MidnightOnceMore · 06/09/2023 06:08

I see what people are saying re. CGT.

My overall point is though that you need personalised advice when doing something like this.

MidnightOnceMore · 06/09/2023 06:08

The divorce point is worth considering.

Dianalouise · 06/09/2023 06:15

Can you buy the property jointly with your dad so his name is on the deeds and you pay the mortgage? Then when he dies he wills it to you. I think if the need to go into a care home scenario arises then they can’t make him sell a house he jointly owns and there are dependents living there? This is total guesswork by the way…I’m in no way qualified but maybe worth exploring?

namethisbird · 06/09/2023 06:33

What you really should be considering is if you divorce or don’t ring fence the money with a legal document, then your current partner will have a claim on it.

GP78 · 06/09/2023 06:43

We did this, we're 2 years in and love living together. We understand if DF went into care in the first 7 years there's a chance it could be taken into consideration for care home fees but as long as you know that going in 🤷‍♀️ hopefully he'll be able to stay with us 💐

Twiglets1 · 06/09/2023 06:48

Someoneonlyyouknow · 06/09/2023 05:36

If your father gives you money towards your deposit he would be expected to sign a declaration that the money was a gift and he has no legal interest in the property you buy. Also, you need to consider that a time may come when you are not able to look after him at home, despite you all wanting to. His health (or yours) may change dramatically. Hopefully you can all live comfortably together for a long time

This.
I gifted my daughter 200k last year to help purchase a property. She didn’t have to pay any tax on it, neither did I and it was all done legally through a solicitor. I had to sign a declaration to say it was a gift and I had no legal interest in the property she was buying.
The only issue with OPs situation could be the one around deprivation of assets IF he has to go into a care home in the next few years. So I would research into that.

kweeble · 06/09/2023 07:05

Is your Dad on any benefits related to disability? You need to check if this means his income / entitlement goes down because effectively his money has been converted from capital to revenue. He’s choosing to give it away but that does look dodgy from a benefits and card point of view.

Toooldtoworry · 06/09/2023 07:37

This can be resolved by purchasing the property as tenants in common with a lifetime interest via deed of trust for OP and her husband (wills required).

The issue is definitely going to be around deprivation of assets and benefits. Potentially IHT if Dad died within 7 years dependent on estate value.

BorgQueen · 06/09/2023 09:07

Why do people KEEP mentioning 7 years when it comes to Deprivation of assets? STOP IT, it’s wrong and puts people at risk.
It’s 7 years for IHT purposes ONLY, which is irrelevant here as the estate doesn’t come near the threshold.
The LA will go back 20+ years to try and claw back cash for care fees, they have a dept. dedicated to doing this. £160k is 3 years care fees and they will trawl bank statements and potentially put a charge on OP’s house or even force a sale if he needs care and has no assets because they will treat him as if he still has that cash.
If you think he may need care in later life, you will be stuck providing that care to avoid the shit storm of being investigated.

What if OP gets divorced or becomes ill herself?
Even if he becomes joint owner of a subsequent house and needs care, they will put a charge on his half.

Babyroobs · 06/09/2023 09:30

He has health conditions, so could need care at some point. You need to think of the implications of him giving away large sums of money when he may need to pay for care whether in the home or care home.

Babyroobs · 06/09/2023 09:33

GP78 · 06/09/2023 06:43

We did this, we're 2 years in and love living together. We understand if DF went into care in the first 7 years there's a chance it could be taken into consideration for care home fees but as long as you know that going in 🤷‍♀️ hopefully he'll be able to stay with us 💐

There is no 7 year rule. the local authority can go back as far as they want to look at where money has gone.

determinedtomakethiswork · 06/09/2023 09:38

Quite frankly, this is a stupid thing for your dad to do. What if you and your partner split up? That's half his house gone. What if your dad needs the money from the house?