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Hi,

My wife and I, and our two children, currently rent. My mother-in-law is becoming increasingly frail, so is selling her house, and the money will be used to buy a house suitable for all of us.

The question is how best to prepare for what happens when she dies, which will hopefully not be for some time.

The options are:

  1. She buys the house
  2. She buys the house and gifts it to my wife
  3. She gifts the money from the sale of her house to my wife, who then purchases the new house

AFAICT, the first is straightforward, and the combined inheritance allowance of my mother-in-law and her deceased husband should cover the IHT. The second is problematic unless my mother-in-law pays the market rent. The third I'm not sure about, since it looks like number 2 with a bit of sleight of the hand. (2 and 3 also assume that she lives for at least 7 years after making the gift)

Anyone got any experience of this? What sort of advice service do I consult to get a clear answer? Solicitors don't seem to cover this.

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I knew someone through dog walking that got divorced and used her half of the money as a deposit for her daughter and her partner. After a while they found it strained living together and she regretted giving them the money as she felt trapped. 

I think she should just bbuy the house and keep it simple. 

 

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On 25/02/2021 at 09:36, tomandlu said:

Hi,

My wife and I, and our two children, currently rent. My mother-in-law is becoming increasingly frail, so is selling her house, and the money will be used to buy a house suitable for all of us.

The question is how best to prepare for what happens when she dies, which will hopefully not be for some time.

The options are:

  1. She buys the house
  2. She buys the house and gifts it to my wife
  3. She gifts the money from the sale of her house to my wife, who then purchases the new house

AFAICT, the first is straightforward, and the combined inheritance allowance of my mother-in-law and her deceased husband should cover the IHT. The second is problematic unless my mother-in-law pays the market rent. The third I'm not sure about, since it looks like number 2 with a bit of sleight of the hand. (2 and 3 also assume that she lives for at least 7 years after making the gift)

Anyone got any experience of this? What sort of advice service do I consult to get a clear answer? Solicitors don't seem to cover this.

Gifting the house has a few conditions:

https://www.gov.uk/inheritance-tax/passing-on-home

Giving away a home before you die

There’s normally no Inheritance Tax to pay if you move out and live for another 7 years.

If you want to continue living in your property after giving it away, you’ll need to:

  • pay rent to the new owner at the going rate (for similar local rental properties)
  • pay your share of the bills
  • live there for at least 7 years

You do not have to pay rent to the new owners if both the following apply:

  • you only give away part of your property
  • the new owners also live at the property
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On 26/02/2021 at 12:50, tomandlu said:

That was my thought. However, the added wrinkle is her preference is to give my wife the house.

If you are married then thats N/A.

The house has to big - or unusual =- to allow her to live without getting under your feet.

Sharing a bathroom + kitchen + living space will send most people over the edge.

 

 

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On 25/02/2021 at 09:36, tomandlu said:

Hi,

My wife and I, and our two children, currently rent. My mother-in-law is becoming increasingly frail, so is selling her house, and the money will be used to buy a house suitable for all of us.

The question is how best to prepare for what happens when she dies, which will hopefully not be for some time.

The options are:

  1. She buys the house
  2. She buys the house and gifts it to my wife
  3. She gifts the money from the sale of her house to my wife, who then purchases the new house

AFAICT, the first is straightforward, and the combined inheritance allowance of my mother-in-law and her deceased husband should cover the IHT. The second is problematic unless my mother-in-law pays the market rent. The third I'm not sure about, since it looks like number 2 with a bit of sleight of the hand. (2 and 3 also assume that she lives for at least 7 years after making the gift)

Anyone got any experience of this? What sort of advice service do I consult to get a clear answer? Solicitors don't seem to cover this.

As others have said, if she gifts it and then dies within 7 years it will be liable for IHT. You wife should also consider the risk you might divorce her! You would be within your rights to chuck her and MIL out to sell the house and get your half.

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