Parents selling property and giving us the proceeds

[SendHelp30]

Hi all, never posted before but really need some advice. Hoping someone has the answer!
DH, I and our 2 DC live in a house owned by my parents. We’ve lived here 5 years and the intention has been to transfer the property into mine and DHs name but for various reasons we’ve never gotten round to it.
DH and I have seen a wonderful house in the area we want for school catchment and after doing a mortgage in principle we know we can afford it.
I’m aware that we wouldn’t be able to sel for 6 months after the house is changed into my name so I’m wondering whether my parents can sell the house and give me the money (preferably on the same day) for us to use towards the new house. There’s no mortgage on the house if that helps.

1. Is this a legal transaction?
2. Could the money be transferred straight into my account without going into my parents first? (This was their suggestion)

They did email a solicitor today but have been told could be waiting until next week for a response so I just wanted to see if anyone could advise so we know whether it’s worth booking a viewing or not.

If it helps, 2 houses on the same road as us sold last week after 2 and 4 days on the market. I’m fairly confident ours would sell quickly too.

I think they could but if they died within 7 years you would have to pay 40% inheritance tax on the money.

Sorry should probably add, we don’t live here due to money concerns for anything like that. My parents bought me and my 2 siblings houses from a large inhearitance they received about 7 years ago.

Thank you @ejecoms that’s all I can find online about it too. Hoping this to be the case!

Definitely legal and possible as long as your parents are in agreement and explain to the solicitor what you have all agreed to do.

The easiest option would be for your parents to use the same solicitor for the sale as you use for your purchase. Then on completion day that solicitor will receive your parents' sale proceeds and can (near enough) immediately use the funds for your purchase, so it doesn't have to be paid into your account and back out to the solicitor, because you'd probably struggle for time to do that all in 1 day.

PP is correct about the 7 year rule on gifts. I know nothing about capital gains tax but that might need to be looked into too? Not sure!

if they died within 7 years you would have to pay 40% inheritance tax on the money
It is a tapering amount for gifts given 3-7 years before death.

Think there's a form they'd also need to complete about money laundering - we had to do that when we gave a relative some money for a house purchase. Solicitor will def be able to advise

Yes, worth checking with your bank about money laundering checks. A friend had their account frozen in a similar situation because the cash deposit triggered a suspicious activity check. It was all fine but it delayed things and was stressful.

Brilliant advice, thank you all so much for your help. Will definitely go ahead with using the same solicitor. Thanks again!

Yes your parents will need to consider capital gains tax on the sale - the solicitor should advise on that too!

If either of them need funded care in the next 6 years then the LA may investigate their finances and make a decision if they think this was a deliberate avoidance of paying for care.

@Lockdownseperation there is no time limit on deprivation of assets.

Why do you think that you cannot sell for 6 months after the house is transferred into your name though?

I thought the 6 months transfer was usually a stipulation by the mortgage lender which obviously isn’t an issue in this case.

However, I can’t see any real benefit in transferring to you prior to the sale, I would imagine it can be done all on the same day and be considered a gifted deposit.

Solicitor will know best though!

@SeasonFinale when my parents transferred my sisters house into her name this is what she was told. The estate agent she used to move also told her this. Apparently new owners wouldn’t be able to get a mortgage on it until 6 months had passed if I remember correctly?

Parents still fairly young so hopefully won’t be going into care in the foreseeable but thank you for the advise.
Will capital gains apply for an additional property being sold? I thought it was just if it was being gifted.

Your parents would have to pay tax on selling the property as it isn't their main home. (Can be up to 40% of the amount it has gone up by since they bought it or inherited it).
This might reduce your deposit depending on how much it is.
And others are right - if they gifted you the money and died within 7 years you'd still have to pay inheritance tax on it. (If over the threshold - which is might not be.)
Can you buy the house off them and then sell?
You really need to get some financial advice on this.

Right ok thank you @Arrowcat hopefully the solicitor will get back to them soon.

@bestbefore

Think there's a form they'd also need to complete about money laundering - we had to do that when we gave a relative some money for a house purchase. Solicitor will def be able to advise

You'd also have to take into account 'deprivation of assets' if they are of an age where they might need a care home. Past disposal of assets can also be taken into account.

There was an article this week about a mortgage lender (Nationwide I think) needing you to prove you had saved for the deposit yourself rather than just receiving it from the Bank of Mum and Dad. As for deprivation of assets, the onus would be on the local authority to demonstrate they had deliberately tried to avoid paying for care. If they're relatively young and fit at the time of transfer then it's reasonable that they couldn't be expecting to need care in the near future. HTH.

@Tempusfudgeit thank you ill have a look for that article. They’re both in their 50s and in good health so hopefully the deprivation of assets wouldn’t be applicable in this case.

@SendHelp30 the local authority would also be expected to look at any patterns of giving. So if your parents had done similar for other children etc. Keep meticulous records of decision making so there’s evidence of them buying you the house you currently live in etc

Capital gains taxis 28% if a higher rate tax payer or 18% if not.

There are also capital allowances ie. an amount of gain that remains tax free and other allowances that may reduce the amount of gain.

Tax is paid on disposal of the property. The disposal would cover both a gift or a sale.

@SeasonFinale that’s teally helpful thank you.
Just seen the allowance is £12,300 per person so £24,600.
The difference in value is £95,000 less the £24,600 so 18% to pay on £70,400?

It sounds as if the parents have a house of their own with no money worries, so 'deprivation of assets' would not be a problem if they have their own property , pensions and savings with which to pay for care.

It only becomes an issue when or if there are no assets to pay for care, and it looks as if the house that they live in has been put in their children's names as a way to preserve their inheritance.

Yes @InTheWings they live in their own home and used a large inheritance they received years ago to buy a house for my, my sister and my brother. Both have pensions too.