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Where Taxpayers and Advisers Meet

Parents, state benefit, houses and gifts

Joined:Wed Aug 06, 2008 3:31 pm

Postby mywillia » Mon Dec 05, 2005 1:57 pm

Please can someone tell me if the following is legal / sensible or could be done more effectively.

My parents own there own house with a value of about £80k. My mother is retired and my Dad is soon to be retired. They have effectively no income and so are in receipt of income support (soon to be pension credit) and other state benefits.

I am looking to buy an investment property for around £120k.

I want to allow my parents to live in my investment property rent free for the rest of their lives but I don't want them to loose any entitlement to benefits as a result of an influx of capital from the sale proceeds of their own home.

If they were to gift the proceeds of their sale to me as an irrevocable gift could I then gift it back to them as and when they need it so long as their total savings remained under the £6000 savings threshold for benefits?

I would buy the investment property myself and would place their gift to me into a savings account so as to not have a reservation of benefit.

I understand that there could be an impact on my IHT liability should I die and also on any income from the savings account. I am happy that my own estate would cover this. It's time for me to repay my parents for my upbringing but is this proposal workable or is there a better way?

Thanks in advance for any help

Joined:Wed Aug 06, 2008 3:24 pm

Postby JasonButcher » Wed Dec 07, 2005 1:04 am

Why dont you let out the invetestment property and pay your parents the money your receive from the rents.
And your parents continue to live in the property they are currently living in.

Joined:Wed Aug 06, 2008 3:31 pm

Postby mywillia » Wed Dec 07, 2005 11:53 am

The objective is to free up the capital my parents have in their house so that they can have a comfortable retirement but without giving up any of their benefits. Equity release probably wouldn't free up enough of the capital and would still leave us with the problem of them having more cash than bebfits allow. Is the limit of £6k of savings allowed before benefits are reduced an "at one time" amount? i.e. could I effectively gift back to them as much as they wanted as long as they spent it all within a given time frame?

Joined:Wed Aug 06, 2008 3:24 pm

Postby JasonButcher » Thu Dec 08, 2005 1:18 am

If that is all your parents have to their name I would not do it this way.
If the money is in your name that means if you get divorced , become bankrupt , sued etc then the person can get there mits on this money.
This might never happen to you, but if it did then your parents could loose there nest egg.
If you pruchase the property and let your parents live there rent free and then give them £6K a year i.e 500 pm then the money you are going to be down is on the morgage for the rental property.
Why dont you get a tenant in there who can can cover the morgage and then pay your parents the £6K per year. You might be slighlty better of or slightly worse off - but least this way your parents nest egg i.e there house / 80K is safe.

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