Gifting a house - Freeing up cash - Whats best?

[matts4]

My parents are now 75 years of age.
They have a house worth around £350k
They have reasonable pension arrangements but could enjoy life even more if they had some extra disposable cash.

So, a few questions. (I will be seeking professional advice with them, but always good to have a basic grasp before hand)

Parents are keen to avoid me paying much (if any) Capital Gains Tax, so could possibly gift me the house and if they survive the next 7 years, then the tax is exempt.
However, to do that, I understand they'll have to pay rent to me, at a market rate. (or I live there, but as I have a house, I wont be doing that)

If I had the house, I could potentially re-mortgage it, say £50k and give this to my parents at say the £3k pa allowance of tax free capital. Would this be per adult? So £6k per year for 8 years = £48k

Basically, I'm wanting to ensure my parents use as much of the benefit of their working lives as possible. To go on nice holidays, 4 or 5 times per year, not to have to worry about any issues etc

Whilst inheriting a house will make me very financially stable, I'd rather they enjoy their hard earned cash as much as possible, and as long as I have enough to cover their funerals, I'd be happy.

Is there a better way to free up cash for them?
I don't want to use a equity release plan as I've heard bad things about them, but maybe they've changed?

Thanks for any input.

[anonymous-user]

Depends how many more assets/cash your parents might be passing on to you other than the house.

If it's basically just the house then remember that IHT is only payable on estates valued at over £325,000 and then is only payable on the amount above this so if the house is the only major asset (and assuming that the £350,000 valuation is a realistic one) then you'd only pay 40% of £25,000 in IHT. Certainly not enough money to risk trying anything "clever" to get around paying it.

You can find all your answers here:

http://www.hmrc.gov.uk/inheritancetax/pass-money-p...

If your parents want a simple way to release some cash so they can have a better retirement would they consider downsizing to a smaller property and then using the excess cash to go on holidays etc? Obviously this would mean you'd inherit less (perhaps a slightly mercenary view I appreciate), but would remove any issues with IHT.

[matts4]

Thanks for the reply.
Ordinarily I'd have agreed with that being the best solution, however my sister passed away suddenly and unexpectedly last month which means her young daughter ( their grand daughter) is now living with them, so ideally they need the additional space their property affords them currently.

Maybe they can secure a loan against the property with me as guarantor.

Complicated!

[Lawrence5]

Also if the assets are husband and wife then yu get nil band for both..... e.g. £325k for you Dad's assets and your Mum's assets

http://www.hmrc.gov.uk/inheritancetax/intro/transf...

[Lynch91]

Just an idea but if you want to give them the money so they can go on 6 holidays a year could you just pay for their holidays directly?

[icetea]

Inkyfingers said:

Depends how many more assets/cash your parents might be passing on to you other than the house.

If it's basically just the house then remember that IHT is only payable on estates valued at over £325,000 and then is only payable on the amount above this so if the house is the only major asset (and assuming that the £350,000 valuation is a realistic one) then you'd only pay 40% of £25,000 in IHT. Certainly not enough money to risk trying anything "clever" to get around paying it.

At a guess he's not worried about IHT, but trying to shield assets from potential care home bills?

[DSLiverpool]

If you want a better life for them I suggest you buy them holidays and house improvements once your happy with the will.

If your worried about care home fees here was my dilemma, (not a dilemma but a no choice) mum needed to go into a dementia home, she could have been placed in one but I was unimpressed and after looking at over 7 we decided on a Bupa home with dementia wing, mum had about £450k assets inc house - council / NHS didn't want to know and my none choice was spending mums money on mum at £900 a week. It was money well spent. We couldn't do anything to get funding from anyone and it is time sensitive fr mum not the council.

5 years on we are trying to reclaim some of her fees (solicitor takes 25%!) and think we will win but it's a crappy system.

[wattsm666]

Cannot you not loan your parents some money, say £50k and then put a charge against the house. If they spend the money then come the point of death the estate is now worth £50k less, since you are a debt on the estate.

[TwigtheWonderkid]

matts4 said:

Basically, I'm wanting to ensure my parents use as much of the benefit of their working lives as possible. To go on nice holidays, 4 or 5 times per year, not to have to worry about any issues etc

Whilst inheriting a house will make me very financially stable, I'd rather they enjoy their hard earned cash as much as possible, and as long as I have enough to cover their funerals, I'd be happy.

Wouldn't the world be a nicer place if all kids thought like this, and all elderly parents put more effort into enjoying themselves and worried less about leaving something for their grown up kids.

[matts4]

wattsm666 said:

Cannot you not loan your parents some money, say £50k and then put a charge against the house. If they spend the money then come the point of death the estate is now worth £50k less, since you are a debt on the estate.

Some really helpful replies have been given to my question, many thanks.

The above seems a potential option.

It's a crap task looking Into this sort of stuff, it's all very morbid.

The one thing I've told myself I will do is write my own funeral arrangements/music for my own event, over the next 3 or 4 months. Sorting this stuff for my 44yr old sister has been one of the hardest parts of the process of dealing with her passing.

[matts4]

TwigtheWonderkid said:

Wouldn't the world be a nicer place if all kids thought like this, and all elderly parents put more effort into enjoying themselves and worried less about leaving something for their grown up kids.

Thank you.
My parents worked bloody hard to provide for myself and my sister. They've earned it,they should enjoy it.

I've got to ( and do) do the same, I guess that's just my work ethic.