Owning a second home - what problems/costs will arise?

[Kesio]

I live with DH and kids. Me and DH both have our names on the deeds.

My sister is the same with her house.

My DM and her DP lived together and he died at the end of last year. They owned their house as tenants in common and so each of their 50% ownership goes however their wills say. They'd been together forever, he had no kids so his 50% was left to me and my sister. (Our actual father isn't in the picture.) My mum still owns her 50% and she now lives alone.

As far as we can determine, we think that we will just add our names to DM's house deeds, in order to execute her DP's will. DM will just continue to live there and then when she passes, me and Dsis would sell the house.

I am worried about becoming a second home owner. At the moment, DM gets single person's council tax rates and although she would still be living alone, I worry that if the three of us were owning the house, that the council might take this away from DM (she can only just pay the bills, so this would be difficult).

Will I face additional charges on my own home, eg council tax, if I own part of DM's as well?

No money will be changing hands so I don't think I would pay stamp duty to put mine and Dsis names on DM's deeds. I know there is quite a hefty extra price for stamp duty on 2nd homes. Although it wouldn't exactly be a second home, it's just DM's home with her in it - it's not a holiday/rental etc.

Any help/advice appreciated.
Thank you

You need to ask council about ownership but I think council tax is based on who lives there. Not who owns it. You aren’t presumably renting it out as a landlord but what arrangement will you have regarding maintenance? You should get an agreement signed and be clear with DM about her will and ongoing costs for the property. Could you or Dsis borrow against it? Could you force DM to leave? What protection are you giving her?

What about your possible bankruptcy and divorce? Could happen - hopefully not - but this house would be part of your financial settlement. What about IHT for you? What about if you die? Who gets your share and what will they want?

You might also have to pay CGT when your share is sold. You are a second home owner in this case I believe. Others will know more I suspect.

Thanks - things in there I hadn't even considered.

It's not enough for me to have to pay Inheritance tax, but I think I'll definitely have to pay capital gains tax, which will be OK because if we get to the stage where the property is sold, that will give us money to pay it with.

On a second home, or rental property, you pay it after you sell. Obviously you don’t pay IHT until you die but it counts in the value of the estate. So with a valuable house, it’s still a lot of money. So I would talk this through with a solicitor so you understand all the implications. Many would say it’s not a good idea to have your DM living in a house partially owned by others.

You could look into giving her your shares. Ask about that if it makes sense but then there could be care home fees so all of it might go. Or she could sell up and move elsewhere so you get your share. Does DM have a life interest in the 50% not owned by her? What if anything was agreed?

It was all on trust, so no she has no life interest in the 50%.

Everyone is happy with her staying there, and she is ill, so I think it should be OK.

Thanks very much for your help.

I have same situation and my mother gets single person discount as she lives alone - it doesn’t matter who owns the house and it has had zero impact on me financially. We had to get a solicitor to change the house ownership but that was straight forward and like you my brother and I own 25% each

You will have to pay inheritance tax on the house of your mum passes away within 7 years of you being given the house. You also could be persued for deprivation is assets if she needs to go into a care home and see doesnt have enough money for the fees.

She is ill with stage 4 cancer so long term care home fees shouldn’t be an issue. But nobody is depriving her of her own assets - if she did need long term care, the house would be sold and her half used to pay.

It’s all too little for IHT anyway so that doesn’t matter.

Sorry that she is so ill. That must be really difficult. Apologies if I came across as uncaring
I was just speed replying and wanted to make sure you were aware of iht and the care home fees thing so you weren't caught unawares.

I would draw up a legal agreement though. Look at what I talked about and agree a way forward. I am very sorry she's ill. I know that's so difficult,

Capital gains tax when you sell. Other than that this is straightforward - she pays her bills and continues to live there. No SDLT on inheriting it (assuming there is no mortgage). While it is good to have a written agreement etc when owning with family, if she is very ill I would simply let her be. Don't get caught up in any unnecessary details here.

If ownership is a relatively small period of time, the house might not appreciate much for CGT to be chargeable. It's not an expensive house either. So that might not be much money.