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Original poster

Downsize to give money to daughter

73 replies

LadyOgilvie · 26/12/2022 16:21

Has anyone here had experience of downsizing in order to give their child/children an early inheritance?

My parents are keen to do this. They are both around 70, and I’m their only child.

They currently live in a house which was meant to be their forever home, but it’s probably too big for two of them. It’s a 3/4 bed house in a desirable location. They are thinking to downsize to a 2 bed flat. They would then give the difference in cost (roughly £600k) to me so that I can put a big deposit down on a nice place to live.

I would obviously benefit massively from an early inheritance, but I feel guilty. They can afford the running costs of their home, and it’s a lovely lovely house. It’s the kind of place that comes to the market once every 40 years.

I am interested in hearing if anyone has been through this, and did it work for both parties?

OP posts:
Whatifthegrassisblue · 27/12/2022 06:29

I think if they actually want to move, then I don't see anything wrong with it. I guess I'd still keep a large portion of their money though as you may need it for them as they age. 70 is still quite young

ClarathecrosseyedLioness · 27/12/2022 06:32

OP, you need to take advice from an accountant. There might be an issue with Capital Gains Tax.

RedHelenB · 27/12/2022 07:37

alittleadvicepls · 26/12/2022 19:17

I also received an early inheritance. We signed a private loan agreement so the money can’t be taxed as technically it’s not a gift, just a loan.

Surely you would have to pay that back to the estate though, if your parents died?

C4tastrophe · 27/12/2022 08:26

RedHelenB · 27/12/2022 07:37

Surely you would have to pay that back to the estate though, if your parents died?

Show quote history

This is similar to the scheme the self employed/footballers/actors had where they take a loan instead of wages, thus avoiding tax and NI. Hardly ethical.
HMRC closed this and back dated the outstanding amounts as they proved the loans were tax evasion.

With regards to 7 years, that’s only for IHT. For deprivation of assets ( avoiding care home fees ) there is no time limit.

CarmenOHara · 27/12/2022 08:31

Do be aware that deprivation of assets is only an issue if avoiding paying for care is a significant reason for making the gift. If your parents are fit and well with no imminent prospect of needing care and plenty of assets of their own, it’s very unlikely to be an issue. I think people here sometimes talk as if any gift can be clawed back and that is not the case.

www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets/

nancydroo · 27/12/2022 08:44

Deprivation of assets. So you would be liable for care costs at the point where they are no longer self-funding. That's if they need care but it's pretty likely.

Aren't your parents going to miss their garden?

It's weird to put £600k down as a deposit. Why don't you just become mortgage free by buying a £600k house.

I think you should let them downsize but keep their money and you can get it when they both pass

noworklifebalance · 27/12/2022 09:12

“It's weird to put £600k down as a deposit. Why don't you just become mortgage free by buying a £600k house“

Not sure why it’s weird - surely you realise that the cost of property depends on many factors, including location, number of bedrooms etc?

Lozzybear · 27/12/2022 10:09

@nancydroo well that’s not very good tax planning. If the parents pass it over now and survive for seven years, there is no IHT to pay but if they keep all of it, it’s likely IHT will
be payable.

Angeldelight81 · 27/12/2022 10:56

The legalities aside. Yes, I absolutely do plan to do this with my children. I cannot see what could possibly go wrong to be deadly honest with you.

DisforDarkChocolate · 27/12/2022 10:59

I just couldn't accept this amount of help, it's just far too much in the circumstances you describe.

Lozzybear · 27/12/2022 11:05

@DisforDarkChocolate no, it’s just sensible tax planning. Far better than 40% IHT being paid on this amount.

Tryingtokeepgoing · 27/12/2022 11:08

olivehater · 26/12/2022 16:48

I was going to say. I don’t think you can just hand someone that kind of money. It will be heavily taxed.

No it won’t, unless the OPs parents dies within 7 years in which it’s likely to attract IHT on a sliding scale. But that would also have been the case if the OP had simply inherited it, minus the sliding scale.

Tryingtokeepgoing · 27/12/2022 11:12

nancydroo · 27/12/2022 08:44

Deprivation of assets. So you would be liable for care costs at the point where they are no longer self-funding. That's if they need care but it's pretty likely.

Aren't your parents going to miss their garden?

It's weird to put £600k down as a deposit. Why don't you just become mortgage free by buying a £600k house.

I think you should let them downsize but keep their money and you can get it when they both pass

Well firstly it’s not that likely as less than 5% of those over 65 end up in care, and only 15% of those over 85. And if they do, given even after downsizing the OPs parents plan on buying a house/flat costing 7 figures, deprivation of assets is vanishingly unlikely to be an issue. It’s far more tax efficient to distribute money well before death if you can afford to do so - in the OPs case it could save almost quarter of a million in tax.

Angeldelight81 · 27/12/2022 11:14

DisforDarkChocolate · 27/12/2022 10:59

I just couldn't accept this amount of help, it's just far too much in the circumstances you describe.

Are you serious? I’m sorry, but that’s exactly the kind of comment that comes from somebody who will never receive that kind of help and just can’t comprehend the others would.

mynameiscalypso · 27/12/2022 11:16

MN is so weird about flats and people in their 70s. My parents in their 70s live in a flat in central London. It's perfect for them. They're both very fit and active so love walking to museums, theatres, museums etc. They have a terrace with a garden (although neither of them really gardens) and plenty of space. Yes, it's smaller than the house we lived in when I was growing up but they don't need so many bedrooms anymore and much prefer a more modern open plan lifestyle. It's also future proofed for when they do get older and less mobile.

Candleabra · 27/12/2022 11:21

it sounds sensible in theory.
£1m is a big budget for a flat (London I assume?)
id be more concerned that it wouldn’t be suitable for future care needs, I think the onward property purchase needs to be considered carefully.
but it’s a nice thing for them to do, and they’ll be able to see you settled (which they wouldn’t if it was an inheritance)

OhIdoLike2bBesideTheSeaside · 27/12/2022 11:45

My great aunt downsized into a smaller place and gave both her kids a hefty deposit for a house but she did it as soon as she retired (that was about 15 years ago now) as at the time her solicitor advised about the 7 year rule.
She has savings too and where she lives is perfect for her and the plan is fund any care with her pensions and renting the bungalow out and topping it up with savings

I think it's a good idea if these things are thought thru

We're buying a house and my auntie on the other side of the family has taken a different approach she is paying for some work on the house rather than gifting money so new kitchen and a conservatory and some furniture so no funds are changing hands.

NoSquirrels · 27/12/2022 11:56

I think you should stop feeling guilty, OP.

I assume you didn’t propose this plan, but that they came to you with the idea. You said they are keen to do it. Therefore, they presumably have thought through living in a smaller place etc and I’m sure have IHT planning in mind too. They sound switched on. If they want to do it, you don’t need to feel guilty.

Personally I’d be delighted to live in a £1m flat in my early 70s.

Do you live near them? Can you buy the house off them and live in it? You sound a bit attached to it.

OhIdoLike2bBesideTheSeaside · 27/12/2022 11:59

As a side note £600K would buy 2 or 3 very small places round here!

MellowFever · 27/12/2022 12:03

This reply has been deleted

This has been deleted by MNHQ as it's the work of a previously banned poster.

nancydroo · 27/12/2022 12:25

I'm not just talking about residential care but needing care in the home. Do they have enough money to pay for the own care needs? In the UK it is definitely not true that such a small % of over 65 year olds require care. So it's a discussion worth having. Ask if you need £600k for a deposit you can't afford the property imo. So if I were you I'd be measuring my expectations on what I could afford not leaving my parents in a worse off position so I could afford a nice big property. YABU put your parents first above yourself.

MellowFever · 27/12/2022 12:51

This reply has been deleted

This has been deleted by MNHQ as it's the work of a previously banned poster.

Hugasauras · 27/12/2022 12:58

DisforDarkChocolate · 27/12/2022 10:59

I just couldn't accept this amount of help, it's just far too much in the circumstances you describe.

Either OP gets it or HMRC does 🤷‍♀️

Kennykenkencat · 27/12/2022 13:00

If you do get £600,000 towards a house then make sure if you are married (no matter how happy or unhappy you are at the time) or get married or if you move someone in that the percentage of the value of the house you buy with any money you put into the house from yourself or your parents is ring-fenced incase you get divorced or you have someone living with you who could go after 1/2 the house if you split.

Hugasauras · 27/12/2022 13:03

Well firstly it’s not that likely as less than 5% of those over 65 end up in care, and only 15% of those over 85. And if they do, given even after downsizing the OPs parents plan on buying a house/flat costing 7 figures, deprivation of assets is vanishingly unlikely to be an issue. It’s far more tax efficient to distribute money well before death if you can afford to do so - in the OPs case it could save almost quarter of a million in tax.

Exactly this. With a £1m home and presumably pensions there is basically no way this would be deprivation of assets. Everyone who has assets over the IHT threshold should be speaking to a financial adviser about how to reduce IHT liability if they want their money to go to their children instead of the tax man. Where possible, if you can afford to do so, distributing money in advance of your death is a good idea.

And downsizing when you are still young enough to manage it is a good idea. My gran is stuck in a huge second floor flat and can no longer navigate the stairs and has empty rooms gathering dust but has left it too late to ever move. We saw her yesterday and she said she should have moved 10+ years ago, but she can't handle it now.

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