Inheritance Question

RickST

RickST

RickST

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Joined
5 Feb 2008
Posts
1,261
Bit of a random one this but I was just thinking:

So my granddad past away a few months ago and part of my inheritance was 1/3 of his house. The issue I currently face is that the other 2/3 are owned by my aunt and cousin who live in the house. Now I would never want to put any pressure on them to leave the house (nor do I have a majority stake so couldn't force anything even if I wanted to (which I don't)) and they can not afford to buy out my third (they struggle to get by as is).

I was wondering, theoretically could I use the equity (think thats the right word) I have in that house to act as a deposit on a flat in london?

My granddad's house had no mortgage.

anyway just something I was pondering, my GD left the inheritance to me for the express purpose of a deposit so I am looking at a way of honouring that wish

also if you know, how would inheritance tax work in a situation like this.
 
I don't know how much the house is worth exactly, based on location / size I would say about 300k, and his life insurance covered off all debts and things like that.

He passed away in, wow, it was actually in june (can't believe its been so long, quite sad again now :()

and my grandmother passed away 10-12 years ago.
 
Inheritance tax threshold is 325k so no issues there. The asset could be used as security but not a deposit as such. I would also ensure that your family are comfortable with you doing this as you are potenitally putting their home at risk.
 
Don't take this as gospel but I believe that your aunt and cousin effectively owe you a third of the property value. In normal circumstances what would happen is that either the house would be sold and proceeds split, or the people who are still living it would buy you out.

In terms of using the equity one option is your aunt would need to take out a mortgage with 33% LTV in order to give you the cash you are owed but it sounds as though they can't afford the repayments. Not sure about using it as security against another house purchase, I'd imagine that might restrict your mortgage options a bit.

In terms of IHT if his wife has already passed away then I think the limit is something like £640k before it becomes due.
 
Hi guys,

thanks, that is pretty much what I thought. I would never really do anything like this as I have a very comfortable life and they do not. In all likelihood things will stay as they are and I will just get a deposit the old fashioned way.

Cheers for your time, if anyone thinks of a clever solution that doesn't risk their future let me know :p
 
Moses said:
If two people (who each own a third) are living in a house you own a third of, but you don't want to put any pressure on them to leave... get them to give you a third of what the market rent would be?
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That makes sense however as I mentioned in the original post they have not been as fortunate as myself so I would never want to ask them for money.

The ideal senario for me would be to buy out the other 2/3 renovate and sell the property, however they rightly have sentimental connection to the house that I do not share.
 
Moses said:
You're effectively subsidising a third of their housing costs, though. By taking a third of the market rate, you'd be putting yourself in a zero position, in reality... as it stands, you're effectively giving them money.
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It all depends if the Aunt was paying rent before the death?
 
I can't really see it that way. He didn't have anything before, now he owns 1/3 of the property. Presumably they weren't paying anything beforehand either, so there's no difference at all now.
 
I understand your point moses, and I agree with what you are saying however this is family and their stability is more important to me than a few hundred pounds a month.
 
On a completely unemotional front I would be concerned that two adults living mortgage/rent free are unable to make ends meet. With that in mind I cannot see how you could ever attain your share in the property as they can neither afford to buy you out or are willing to sell. Unfortunately, apart from existing on paper your inheritence is worth nothing to you.
 
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Moses said:
But the current situation is the same as if the house didn't exist, and the OP was just paying a third of their rent for them. That's just insane.
If this house didn't exist, would you willingly pay a third of their rent on a different property?
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In what way is it like that? I am truly baffled.
 
Strife212 said:
I can't really see it that way. He didn't have anything before, now he owns 1/3 of the property. Presumably they weren't paying anything beforehand either, so there's no difference at all now.
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There is a difference because the property has changed ownership:

Before: Grandfather owns the property, chooses to let Aunt & Cousin live rent free.

After: OP owns a third of the property, presumalby other 2/3rds are owned by the Aunt & Cousin(?). OP is now entitled to somehow get his share, whether that be by sale of the property, mortgaging, charging rent or whatever.

Of course, the OP doesn't want to disrupt the family life so is looking for a suitable solution that means they can remain living there meanwhile he gets a deposit for a house. Charging rent won't be sufficient for that anyway, he needs a lump sum or somehow to use it as security.
 
Moses said:
No it doesn't? The past situation (when the grandfather owned the property) is completely detached from the situation now (where the aunt, cousin and OP co-own the property).

If you and I own a house (outright)... you live there, I don't. That means you're living rent/mortgage free, and I'm effectively missing out on half rent.

In our scenario, the fair thing would be for you to pay me half of the market rate rent, no?
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You serious?

If the Aunt was living there rent free before but own 0% of the house, and now her and son how owns 2/3 then all of the sudden she ends up paying rent? Rent to family?

If they were paying rent to the grandfather before then fine and now living rent free. I see your logic but you really would ask your aunt for say £200 a month rent (i.e. if a typical house is £600 a month in the area) if you were in OP's shoes?

Hey Auntie, I am here to collect £200.

What if she says "bite me". What on earth are you going to do?

Besides, it also depends if they are joint tenancy or tenancy in common too.

If they are all joint tenants they they all own 100% and no shares as such, if it is tenancy in common then OP can effectively sell his 1/3.
 
HangTime said:
There is a difference because the property has changed ownership:

Before: Grandfather owns the property, chooses to let Aunt & Cousin live rent free.

After: OP owns a third of the property, presumalby other 2/3rds are owned by the Aunt & Cousin(?). OP is now entitled to somehow get his share, whether that be by sale of the property, mortgaging, charging rent or whatever.
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Of course he is entitled to, but that doesn't mean he wants to affect his family.
 
Moses said:
No it doesn't? The past situation (when the grandfather owned the property) is completely detached from the situation now (where the aunt, cousin and OP co-own the property).

If you and I own a house (outright)... you live there, I don't. That means you're living rent/mortgage free, and I'm effectively missing out on half rent.

In our scenario, the fair thing would be for you to pay me half of the market rate rent, no?
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no because the other guy owns part of the house, if your not living their that's your problem not his, the fair thing would be you live there too.

what if me and a mate decided to buy a house together, then i go on holiday for 4 months, is he then expected to pay me rent for 4 months? what a retarded way of doing things.
 
Moses said:
We own a house 50/50, but you live there whilst I live somewhere else. We own the house 50/50, but you're the only one getting any kind of benefit. Move yourself out of that house, and rent it to yourself - you'd pay yourself half the rent, and me the other half. So overall you'd be paying half rent (to me).

Make any kind of sense? It does to me, but I guess I'm explaining it really badly :(.
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Yes I get you, but you and I are not family. And OP and his auntie and cousin never went into the agreement to buy the house together in the first place.
 
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