Can I buy my mum's house?

[Ellsiedodah]

For financial reasons, my mum is being forced to sell her home. She is reconciled to the fact whatever value it's accrued she'll only be able to afford a small place. Her only comfort is the potential we may end up living nearby to eachother, because circumstances have left my OH and I in a similar situation and we're being forced out of London - so we're also moving. It's got me and my OH wondering whether we could somehow take over ownership because we can afford to pay off her mortgage; she would live with us and in 5 years the plan would be to build her an annexe to live in. She runs a business out of it currently and she'd still be able to run a smaller version of it, thereby enabling her to keep earning a living - as well as enjoying a higher living standard property-wise than the one she's currently facing. Does anyone know whether we could do this if she was up for it (which I think she would v seriously consider)? I've read something about buying it from her for under market value then she gifts us the rest of its market value - and that way we'd take over possession. Does anyone know what the tax law and other considerations are for this kind of transaction? Thank you very much

It’d be a second Property for you so you’d need to pay additional stamp duty. The gifted part should be ok.

You’d also need to see if you’d be allowed to build an annexe and consider the financial implications of that - who’d pay for the work and what would she contribute for living there? That was stumbling block with my MIL - she didn’t want to contribute to building the annexe in case she wanted to move out or we wanted to sell the property etc that made the whole arrangement impossible as I didn’t want to have to pay for the privilege of my MIL around and giving space up...

Get some proper advice on this. You could run into all sorts - but also a financial advisor may think of even better solutions

Are you an only child? If not, what do your siblings think of this?
If your mum is elderly and may need care within 7 years she could be deemed to have disposed of assets by selling it below market value and gifting proceeds to you. Make sure you get proper legal advice, and that your mum does too, independent of your advisor.

Jojosm2 why would it be a second property? It'd be our only home. Financing the annexe would be raised through remortgaging the asset in our name (since we'd be the owners) and that essentially would be our mortgage payments every month. We'd owe it to my mum for having paid her under market value so that's not a worry. She's also a v young 64 but I wondered about the tax issues around gifting... only brother is wealthy and is v up for the idea, so we'd agree on it. Thank you all.

@Ellsiedodah

There wouldn't be additional stamp duty if you only have the one house

If you lay less for the house than market value then yes it is a gift. That's fine but it will form part of her estate for IHT purposes but that may not be a. Issue. It will fall out of her estate after 7 years.

Re her needing care. 7 years in relation to when she disposed of assets is rubbish. The LA would look to establish if she intentionally disposed of assets to deprive the LA of her paying for care home fees. That could be less or more of a period than 7 years but clearly the longer the time the less likely hold there is that they could attack the arrangement legally.

There are though a whole other host if issues to consider. If the house is in yours and DH name, she has gifted some of it to you. What happens if you and DH divorced. Some of that gift could become part of a divorce settlement?

You could do with seeing an IFA to discuss with estate planning.

Sorry, I’d thought you’d buy her house an additional property. If you’re selling yours to buy hers, then there wouldn’t be any extra stamp duty.

www.google.co.uk/amp/s/www.moneyadviceservice.org.uk/en/articles/gifts-and-exemptions-from-inheritance-tax/amp

Those are the rules for gifting things to children. With the potential care home fees, I presume your mum would have the proceeds of the sale in cash/investments to cover those?
In terms of inheritance tax should anything happen to your mum soon, it would depend on the value of the gift as the threshold is 325k.

Marieg10 and jojosm2 thanks so much for your detailed responses which are very helpful. I hadn't thought about care - it has been a long standing commitment of mine that I would never let her end up in a carehome owing to the fairly horrendous things life has thrown at her over the years. But no, she'd have few savings after the sale - but my brother is intending to give her an income to top up the income she will continue to earn through her established business. So she should be able to save. Definitely need to speak to an IFA but am grateful to hear your thoughts and to hear that there aren't necessarily any major issues to contend with among this lot. Divorce - we'd obviously have to draw up a contract around that kind of possibility and yes actually that does complicate things. Definitely a lot to think about. Thank you all

I'm 64 and we have just gifted £1/4 million to DD. I have no intention of dying or going in a home just yet. Your mum can gift to you what she wants at this age. She is a long way off needing care and is still working. There is no tax to pay and your DM will have this money out of the tax calculations for Inheritance tax after 7 years (if she had to pay any). It sounds a reasonable idea in the circumstances. You do not really need any financial advice because it is straighforward. Your DM just sells her house and gives you the money. It is that simple.

You say that, but none of us knows what the future holds. The OP reads as though the house is mortgaged? Well worth getting advice and planning properly. A money gift is not the same as the gift of an interest in property, especially not one you are all going to live in together.

Hi, you also need to consider if you were to die, the house would then be your husbands and he could then sell the house or make your mum homeless. Just food for thought, it's more complex than what you think. You need proper legal advice and to consider every possibility.

I need to caution you on one thing here - I think PPs are wrong about it falling outside her estate after 7 years for IHT purposes. This is because it would be a gift with reservation of benefit, not a straight gift (like a PP kindly gave her Dd which is absolutely fine and usual 7 year rule applies). This would therefore be classed as still sitting within her estate (even though it wouldn't be in her name) when she died. This would apply to any of the 'gift' bit (that you were given below market value) unless she paid you market value rent when you moved in together.

And where these situations often go wrong in reality is when the couple who end up owning the house get divorced - no-one wants to think it'll happen to them, but do think through the implications of this. Your mum could be left in a tricky situation when the house and annex are being forceably sold due to financial settlement...

@BubblesBuddy pretty crass thing to say there, my mum had no intention of dying in her early 60s either. Cancer gave her no choice though. Also there is no time limit on care provision, so if you need care ever Your child may have to return your money.

Interesting case.
The law is so complicated, re gifting, even the 7 year bit is not clear!

I was just responding to the OP! Not anyone else. I’m sorry your mum died but I’m the same age and it’s not remotely crass to respond to the op in those terms. Perhaps you should not read things into posts that were never implied.

I do think legal advice is required here. The mortgage could be surrendered and a new mortgage taken out by the op for example.