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'Parents-in-law' buying our flat but leaving in our name

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  • 'Parents-in-law' buying our flat but leaving in our name

    Hi everyone,

    Basically my parents in law (although I'm not married but have a been with my partner a long time) have offered to buy our flat so that we can move house. Our flat has been on the market for nearly a year.

    The thing is they want to keep it in our names, and are buying to let. That means that all the rental money would be coming to us and we would pay it on. Basically they want to invest and help us out at the same time, but I also see it as a tax dodge, and I'm not comfortable with it at all. I have always been upfront about my concenrs but they say that there is nothing to worry about. My primary concern is how it will affect us in the future, and also liabilities. It is causing quite a bit of stress with my partner as she is really keen to do it. I have said that if they want it they should buy it outright.

    Any advice is much appreciated.

    James

  • #2
    Re: 'Parents-in-law' buying our flat but leaving in our name

    The next house we buy I would like to put in our children's names, if possible. Even though we would be paying the outgoings, psychologically I wouldn't be responsible for it as I am with our present house, since my husband's illness and subsequent brain damage. We trust our kids implicitely so would have no worries they would sell it above our heads, but obviously we wouldn't want them taxed as if it was a second property. It might be possible just to put it in the name of the daughter who doesn't own a house, as a tied 'cottage' (vicarage) comes with her calling.

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    • #3
      Re: 'Parents-in-law' buying our flat but leaving in our name

      Hi James,

      I would simply declare this intent to the solicitors when 'selling' the property... Your solicitors will be best placed to give you the right advice.

      As for my understanding of Tax rules, this would constitute a 'Gift'.

      One way to manage Inheritance Tax (which I am guessing is the Tax in question?) can be reduced is by declaring something as a gift.

      If you receive a gift from someone and that person lives for 5+ years after the gift was given, then the gift is not considered to be part of the estate (so no inheritance tax is due). If the person dies within 5 year, the Tax is pro-rata of from full (year 0) and none (year 5ish).

      Because you seem to take this tax dodge issue very seriously, I would in your shoes simply declare the intent. Your Solicitors have to then by law declare this information to all interested parties (like the mortgage company, Tax authorities), but also they will give you advice on how to stay within the law.

      To me the arraignment offered does not sound unethical or sound like its braking any tax rules. All they are doing is helping you move.

      Kind Regards,
      Randeep
      Last edited by Randeep; 18-02-2012, 06:09 PM. Reason: amended last sentence
      Randeep Mann

      Want to Rent or Sell quickly? I can help.
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      • #4
        Re: 'Parents-in-law' buying our flat but leaving in our name

        Hi Randeep,

        Thanks for your reply, great advice, I have thought about it quite a lot.

        I'm sure they do just want to help us move too, just a big old decision.

        Thanks again,

        James

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        • #5
          Re: 'Parents-in-law' buying our flat but leaving in our name

          I wish you all the best! Any questions, feel free to ask.

          (Though I am no substitute for Solicitors :P)
          Randeep Mann

          Want to Rent or Sell quickly? I can help.
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          • #6
            Re: 'Parents-in-law' buying our flat but leaving in our name

            Hi
            Apologies for diving in but I would take advice on a number of levels, both tax and legal struture.

            On tax there are implications for income tax, if the rent is paid to you then it will be added to your annual income and taxed at your highest rate.

            When the property is sold at a later date and assuming it makes a profit, it is classed as an investment property (as it is not the main residence of you or parents in law)and you will therefore be liable to capital gains tax.

            In addition IHT does have a gift allowance, but the gift giver needs to live for 7 years, not 5 before the gift is exempt totally, so their are a lot of implications dependent on yours, your parent in laws taxable income and age.

            Also if they are intending to pay cash, for the house, as it won't be in their name so they can not secure a mortgage on it... have you considered the implications if they need this cash at a later date....

            all of this sounds so negative, BUT... its not, there are ways of sensibly structuring this so you can move, they can help, and no one is overwhelmed with Tax and future family worries...

            my advice would be, see a solicitor/accountant (for the tax side) you are all comfortable with , explain what you want to achieve and let him/her come up with the best solution based on your personal situations
            Good Luck

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            • #7
              Re: 'Parents-in-law' buying our flat but leaving in our name

              Hi Jackie,

              Thanks for your response! The points you made were excellent. Another one that was bugging me was what if either my partener or myself was made redundant, as the rent would class as income we wouldn't be able to receive job seekers allowance. There seem to be a lot of implications that complicate things. One of the main things that bugs me is the potential stress and confrontations it could create for the family, somthing I have always been weary of when you start mixing buisness and family life.

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              • #8
                Re: 'Parents-in-law' buying our flat but leaving in our name

                Hi Jamesj,

                It really depends on what you and your partner want... and if these what if's are big enough barriers to stop you.

                Also its easy to create what if's... its about then understanding they are their and then accepting a level of risk you are ok with.

                Each person is different about taking on Stress, its all about what's important to you...

                Would you object to your Partner being the sole 'owner' of the old flat? As she seems to be more interested in this arrangement than you?

                -----------
                Thanks Jackie for clarifying its 7 years not 5 (I was a bit gray on the number but the principle is sound)
                Randeep Mann

                Want to Rent or Sell quickly? I can help.
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                • #9
                  Re: 'Parents-in-law' buying our flat but leaving in our name

                  Hi Randeep

                  think the tax man makes it complicated so we don't question the bills! LOL
                  Jackie

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                  • #10
                    Re: 'Parents-in-law' buying our flat but leaving in our name

                    Hi James
                    Happy to help... your point on redundancy is also very valid... so theres another consideration.

                    I meet with clients every day regards property purchase, refurb, letting, inheritance and on and on and every day there is a different query based on 'their own circumstances' so the forum is a great place for generic guidance... but this situation is very particular to you on a number of levels.... as I said it my last post there are a number of good options available to you, so just seek out the advice

                    Good Luck
                    Jackie
                    Originally posted by jamesj View Post
                    Hi Jackie,

                    Thanks for your response! The points you made were excellent. Another one that was bugging me was what if either my partener or myself was made redundant, as the rent would class as income we wouldn't be able to receive job seekers allowance. There seem to be a lot of implications that complicate things. One of the main things that bugs me is the potential stress and confrontations it could create for the family, somthing I have always been weary of when you start mixing buisness and family life.

                    Comment

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