* Middle-class property discussion trigger-warning *

I see the wisdom of the STW collective oracle – who has useful experience of buying, or trying to buy, a property to share (with granny flat or annexe-type arrangement) with a parent?

My wife and I are looking to move out of the (ex-council, poorly built and woefully insulated) flat she owns in Bath, and buy something detached. We neither have or intend to have children, as it happens, so they aren’t a factor. We both work and are earning reasonable but not spectacular salaries, and don’t have much in the way of our own deposit.

Simultaneously my father-in-law is looking to move out of the flat he owns in Malvern and move to the south west to be nearer us and his other children. He also owns another flat on the south coast. He’s retired and getting on a bit, though still in reasonably good health at present, and wants to be close to family in the expectation that he will deteriorate and need some looking after.

Our plan is to pool our resources – he has the capability to supply a hefty deposit, but couldn’t get a mortgage, while we don’t have much of a deposit (selling our flat wouldn’t yield huge sums as it hasn’t gained much value) but have decent earnings capacity to support getting a mortgage. We’d then share the property title, and his contribution would be considered part of his estate, so if & when he dies we’d either buy out his share (such that the money goes to my wife’s siblings) and we keep the property, or we sell up and have our share of the total.

However, so far from talking to the Halifax it’s not that easy – they say if he’s on the title he has to be on the mortgage too. Apparently they would only look at the first two applicants for lending purposes, but his age might still spike the whole deal.

The obvious alternative would be for him to not be on the mortgage, but in that case the deposit cash he provided would apparently have to be a gift given free and clear, and he (or his estate) would have no legal claim on it… though I’m not sure how that squares up with what I understand about parents not being able to dodge inheritance tax by ‘gifting’ large sums to children.

The brother-in-law and sister-in-law have both already given their blessing to the idea in concept, but that was with us explaining that there wouldn’t be any danger of us being able to ‘steal’ their inheritance. If it all came down to a gentleman’s agreement that he’d ‘given’ us the deposit then that wouldn’t be the case – not that we have the slightest intention of doing so, but we know when wills are read things can get hostile.

So – does anyone have experiences of making similar arrangements that worked (or didn’t work) or relevant* advice for this situation?

*for an STW value of relevant

Get legal advice . my mum has gifted a major chunk of cash to my brother without detriment to my or my other brothers inheritance by tweeking her will to account for the gift. This was so he could buy his cheating ex’s share of their joint home.The only downside would your father in law would have no rights over the house or right to occupy it which would mess up his world if you fell out or could not pay your mortgage.
Gifts prior to death are potentially exempt transfers for inheritance tax purposes so only a problem if the giver dies soon after donation . but inheritance tax thresholds are very high anyway.

As for IHT a gift would be “potentially exempt” meaning if he survives 7 years then it is actually free of tax, otherwise some IHT could be payable (amount depends on how many years he survives and of course the size of the estate). However, if his estate is small enough that you would need to pay back to other siblings (rather than just him divvying up other assets so as to balance out the gift), it seems very unlikely that IHT is going to be an issue anyway. Might be more of a risk that he is struck down quickly with some serious illness, needs to go into care, and the local authority goes after his (ex-)assets.

But more fundamentally…are you sure you really want to be tied in to living with and looking after him indefinitely? I get on well with my FIL but that’s a step too far. After a few years (or weeks!) you may also start to think you’ve earned that inheritance…

From what I remember from calling around mortgage providers a while back, HSBC will allow you to have him on the title deeds and not on the mortgage (with a certain amount of legal paperwork involved).

Would have thought that it would be better from the inheritance tax perspective for it to be a gift, though, and taking an appropriately smaller cut of the remainder when the time comes (sorry if that’s overly crass).

My penny worth.

We sold up 4 years ago and moved in with my folks (their house/garden/buildings were too much for them, but they loved living there).

The original plan was to develop one of the buildings into a granny annex, which they’d move into. This changed when my Mum decided she wasn’t old enough for that yet, and they moved into a cottage 100 yards away. They signed over their old house to us (legally).

We are now developing the granny annex, should be ready for Easter-ish as my Dad has got progressively ‘worse/old’.

While we gained the house, we’re also spending in excess of £100k to develop the annex. My brother has been excluded from all this, but since we’ve not seen him in years.

Is it right/wrong?

It is as far as my folks are concerned, and to quote my Grandma “I don’t want them fighting over my money when I’m dead, so I’ll spend how I want before then”. Who basically made sure all her children, grandchildren, great-grandchildren and great-great-grandchildren got good birthday/Christmas gifts all her life; and children and grandchildren got helped to buy houses. And she was very contented by it.

And I do the same for my children.

Just make sure you consider the end game. Let’s assume it all goes ahead and the unfortunate time comes when he’s no longer with you. If some part of the house deposit etc is part of an inheritance then you could become homeless? Family disputes over such things can be very damaging and costly. I guess take legal advice and have the agreement or whatever drawn up so its legally binding.

Oh p.s there is no right or wrong in this. Looking after elderly parents, who can put a price on that?

Given the current state of affairs (large chunk of elderly people requiring care & lack of housing stock) you would have thought the government might have intervened & coerced the banks into making co-living a bit easier financially. I have my dad living with me & rather than him giving/lending me money to buy a bigger house, I had to take out all the extra cash required in an offset mortgage & then once the house was bought pay a large chunk of it off with money from my dad as mortgage company wouldn’t accept part of the deposit coming from him in the first place…..

For the OP, I suggest if you or your family are not absolutely 100% sure (I keep my siblings fully informed at all times & brother has access to mine & fathers accounts) then consult a professional & get a loan agreement between your FIL & yourself/partner drawn up to cover the cash he puts in.

at least I now know I’ll end up in heaven as living with my father is some kind of hell 😕

To my (untrained, unqualified) eyes, it seems like a loan is the ideal situation here – his estate remains the “owner” of the cash, but you get it to use as a deposit.

I’m not wholly convinced Halifax are right there, unless things have changed in the last 15 years.

When I bought my first flat, my Dad ‘lent’ me 20k for the deposit, and I mortgaged the rest. He was on the title and we also had an agreement drawn up with a solicitor that said he owned 20% (handily it was 100k) of the flat, and if it was sold, he took 20% of the proceeds. This was in case I got married (which I did) and a third party ended up having a claim on it.

I can’t see that this is any different from your scenario, expect that my Dad wasn’t living with us. I was the only person on the mortgage. And he ended up with a 150% return on his investment as well!