Mum's House

[Slamb]

I am sure i am in a position quite a few people are in and would value some guidance!
My mother is 72 and struggles to pay her bills, let alone the mortgage outstanding on her house.
This stands at £56K and i have been paying the mortgage for the past year! The mortgage firm are unhappy about this and so to the question.

How can i take over ownership of the house worth £200k ish without incurring tax!

All i want is to secure Mum's house for her long term use.

Cheers Spencer

[Generix]

Although you have posted in the IHT section, I thought I would just bring these other taxes to mind also, as you say you don't want to 'incur tax', rather than just IHT.

(1) If you purchased it at market value, and you don't qualify for first time buyers relief then you will pay 1% stamp duty. (tax 1)
(2) If you have another property (which you live in) then when you come to dispose of your mothers property (after buying it) the sale will be subject to CGT if any gain is made.
(3) If the house if sold to you for the amount outstanding on the mortgage (assume this would be the minimum any sale could go for), and your mother was to die within 7 years of the sale then IHT may become due.


[Re (3) I have no idea about IHT other than this 7 year rule - so best wait for confirmation on how that might be applied i.e. valuation etc/anti avoidance etc

Re (1) and (2) feel fairly confident I am right on those]

[AvocadoK]

Can you tell us if you live with your mother? This affects the IHT and CGT.

[pqtaxation]

My mother is 72 and struggles to pay her bills ......

How can i take over ownership of the house worth £200k ish without incurring tax!

All i want is to secure Mum's house for her long term use.

Is your concern over tax possibly clouding the thinking on the overall situation? Cart before horse possibly.

Is it just you and your mum – if so, when she dies will you inherit whatever she has left? Then I’d suggest you think of you and her as a combined economic unit.

The problem for that combined economic unit looks to be that she cannot afford to live independently and that is presumably because her income is not enough even if she utilises capital from any savings.
Obviously one approach is to reduce her outgoings - for example can she move in with you?
If she/you wants her to live separately then can you afford to continue to supplement her income/pay her mortgage? If not, tax is a red herring and her outgoings from living separately will have to be reduced. If yes, why does mortgagor care which of you pay its mortgage provided payments are made on schedule?

If the issue is that on her death parts of her estate will pass to others as well as to you but those others cannot afford to support her, then you can formally lend her the money you pay her under a loan agreement so that the loan is repaid to you after she dies (and house sold) before the residue is shared out to you and others- that is, they don't benefit from your support payments to her.

As far as taxes and payments to other third parties are concerned, IHT does not look to be an issue if her NRB (available threshold) is £325k – is there a transferrable NRB from your father if he pre-deceased her as her spouse? If she owns (part of ) house then no CGT is payable on part she owns while she lives there because of PPR relief. But if you own all of it and don’t live there, there is no PPR relief from any chargeable capital gain --- so that is a benefit to her owning house until death/going into care. But on the other hand if her health deteriorates and she has to go into care then if her assets (including the empty house if she alone lives in) are above a level of around £25k then she has to pay for care costs – so that’s a benefit to her having previously transferred ownership to you (but complex area in respect of deliberate deprivation of capital rules).

So, in summary, my comment would be to work through problem ignoring tax primarily; only after that introduce the impact of liabilities for tax and care (per above paragraph).

[maths]

The mortgage firm are unhappy about this and so to the question.

I am a little bemused about this comment.

In short, once a mortgage is granted (which it would be only when at that time the mortgage company are satisfied as the financial status of the borrower(s)) then so long as the monthly repayments are made on a timely basis it is none of the business of the mortgage company how your mother finances such repayments.

No reason therefore to change ownership of the property; if you do not inherit the property you might like to structure the monies you use to repay her mortgage as a loan to be repaid out of here estate.