My inheritance situation - is one of us going to get screwed over?

[Wholeboxoftissues]

My dad has just changed his will and it sounds reasonable on the surface but I'm worried there might be pitfalls...
My dad owns two houses - my childhood home which he lives in with my mum, and another house which he inherited and my sister lives in it for a low rate of rent. The two houses are roughly equal value. I don't think my mum's name is on either house.
Years ago his will said that both houses would be left to me and my sister equally, and if my sister wanted to continue living in that house then she would have to pay me rent for my half or she would have to buy me out.
He has now changed the will to simplify things, as my sister has lived there so many years it is very much her home now. The house my sister lives in will now be inherited by her alone, and my childhood home will be inherited by me alone.
The arrangement with my mum is that if my dad dies first then I have to allow her to continue living in the house, she herself doesn't inherit it.
I don't know anything about inheritance tax or the rules about selling your home to pay for care. Is there anything about this arrangement that is dodgy and is going to bite either me or my sister in the arse years down the line?

My head is spinning now. I'll have to talk to my dad and get more of the actual details. Thanks everyone!

Do you already own a house?
if you have a house that you can’t live in it could make it harder for you to buy as you will not be a 1st time buyer. Also any extra charges for second homes

I'm just going to throw this out there in case your DF is a total arsehole OP.

Friend of mine, married, owned savings but no other assets at all, at the time of marriage. Only the basic state pension.

All money was in joint account after marriage. H spent her savings then ran up debts in their joint names, before dying after she she nursed him through a long illness.

He owned a huge house outright, bought prior to marriage. Friend was left a lifetime interest in the house, with conditions attached:
She wasn't allowed to live elsewhere for more than 6 months of the year.
Or to have anyone else living in the house.
If she did either of these things, she automatically forfeited the lifetime interest and the house went to the inheritor (his relative).

She couldn't afford the basic running costs of the house. Meaning he'd effectively left her homeless and in debt with nothing but the state pension to live on.

I'd be very concerned that he's planning to give two properties to two distant cousins and not his wife.
I'd also be concerned that he's diving the estate by properties and not by percentages.
I also think it's unfair on you the way he has divided it, but I think your mum needs to be made more secure first.

If your dad had to go into a care home they could ask for the second home ( where your sister lives) to be sold to pay for care. Does he have significant savings also to cover care costs should this situation arise?

I agree with this. My main concern would be whether the two properties have a combined value in excess of £500,000 (the IHT threshold). The value of your childhood home, should on his death be valued at less than market value because your mother will presumably have a tenancy for life. This is my field of work and I think your father has probably been well-advised.

If your father wills the properties to you and your sister then your mother will not inherit. The properties will belong to each of you outright after his death. You will not be required to sell the house to cover care for your mother as it is not hers to sell. Your father is assuming that he will die first which is the most common scenario.

My only concern with this arrangement would be to ensure the surviving spouse was left with sufficient funds from other sources to survive.

No if the house is in his sole name he can leave it to who he wants. If he left to his wife probably no or little IT depending what else is in his estate but if his wife needed care home house would be sold to cover care fees.

I reckon that in a bid to save money, he’s gone to one of these cheap Will writers who’s done an online course, rather than to a proper solicitor who would have explained the pitfalls.

And honestly, what a way to treat his partner, the mother of his children ! Leaving properties to cousins strikes me as showing off tbh.

I have a weird update to this.

I wrote down a bunch of questions to ask my dad. But before I spoke to him I spoke to my mum. It turns out she didn't even know that she doesn't own the house! She assumed she owned it jointly with my dad and was surprised to find out he owns it. But she wasn't concerned, it was like a "oh I don't know, he deals with everything" sort of attitude. Then my dad said that actually his will says that he's leaving the house to my mum, with some kind of assumption (?) that she'll leave it to me, as the other house is going to my sister. But my mum's will currently just leaves everything equally to me and my sister. My dad seems to think everything is fine but promised to speak to his financial advisor. My mum was happy just to leave it all in my dad's hands again and forget about it but I just said to her, for the love of god please make sure you understand your position with your own finances. And I said to my dad please for the love of god make sure mum understands her position with the finances. What a bloody mess.

Thanks for the update, OP. What a mess indeed, hope you all consult a lawyer, preferably together, to avoid any mixed messages, and sort out the way forward that's fair for everyone

You are screwed. Your sister will get a house, and you won’t get anything, as the house earmarked for you, Will actually go to your mother, then to care home fees and if anything is left, half to your sister and you.

So nothing for you.

Meanwhile your sister currently has subsidised rent and getting a house (minus IHT) which if you father transfers now, she may not even have to pay, or she has notice to save up for.

I’d be pretty angry with my Dad. Not because he can’t leave anything to whom he wishes too, but because as it stands he is going around saying “it’s equal” when it is absolutely not. I’d call him on it, and say no, you are dramatically favouring sister, so don’t you dare think or say it’s equal to people, as it is not.

Is there any provision for income for your Mum, from a pension or savings?

Very difficult OP. What a mess indeed! “Calling out” your dad over this might not go over well, depends on what he’s like obviously. He might understand your point of view, or he might think you’re just being greedy and refuse to engage.

It doesn't seem fair to me your mum wants to leave one of the two houses to you and your sister when your sister will already have a house of her own by that point.

I'm amazed your mum didn't know she doesn't jointly own the house she lives in with her husband. The average cost of care for one person in the UK is about £70K per year so as a PP says you're potentially going to be majorly disadvantaged compared to your sister, even more than what you are now.

Assuming your parents are married doesn’t your mother own half the house even if her name isn’t on the deeds so you dad can’t leave you all the house

the same is probably true of the house your sister is living in

Could get very messy if your mother outlives dad and needs care

That’s what my first thought is.

but equally the sister could get a massive IHT bill and you nothing (if you argue that she should pay the IHT rather than the estate)

If you can, I would advise getting the 4 of you together with a solicitor and working this all out.