Changing House Ownership

Kris_90 · 4 Nov 2012 at 21:55

Hi all

Is it possible to change the ownership of a house without any money changing hands?

The house is owned by my grandfather who is currently in hospital and will be moving into a nursing home within the next few months. The house is left to my mother in his will and she wants me to pay about £35k for it when it's hers. The house is probably worth around £80k judging by how much other houses have sold for in the area.

I'm not 100% sure about this but I believe when you get a mortgage, the amount borrowed is based on the valuation of the house? If that's correct, I would have to get an extra £45k mortgage which I'm not keen on doing.

Does anyone know if it's possible/legal for my mother to pass ownership of the house to me with no money changing hands?

If this is possible, I will pay her £200 a month for 15 years and save money by not paying interest on a mortgage.

Any help appreciated.

malfunkshun · 4 Nov 2012 at 22:01

I believe that, potentially, inheritance tax would be payable on it unless he lives for more than 7 years. It seems quite complicated to me, I would seek professional advice to make sure.
As for your mother passing it to you one of you might end up paying CGT? get professional advice.

Destination · 4 Nov 2012 at 22:04

Okay,

1. 80K is below inheritant tax thredhold, so no money to govt.
2. lawyers will eat into the money by arranging deeds etc, make sure the will is up to date and well written.
3. You do not have to borrow the full value of the house, that isn't remotely how it works, you borrow what you need, and the bank holds the deeds until you pay them off, then you own the deeds.
4. In theory you could arrange a 'loan' directly from your mother, legally repaying it with zero interest over a number of years. If done in writing the exchange of deeds can happen. Again solicitors will need to be involved.

Kris_90 · 4 Nov 2012 at 22:06

Will do, cheers. I thought it was worth posting first as I haven't seen many questions that go unanswered here.

semi-pro waster · 4 Nov 2012 at 22:07

malfunkshun said:
I believe that, potentially, inheritance tax would be payable on it unless he lives for more than 7 years. It seems quite complicated to me, I would seek professional advice to make sure.
As for your mother passing it to you one of you might end up paying CGT? get professional advice.

The inheritance tax threshold currently stands at £325k (HMRC website) so this house (and quite possibly the total estate) is well under that. However you're right that getting professional legal advice is a good strategy here as it can be complicated.

FluffySheep · 4 Nov 2012 at 22:11

I don't know the exact specifics, but my mate had the issue where the house was owned by his dad who went into a care home and the fees for the care home came out from the sale of the house, and as I remember if the house was transfered from his dad to him within 5 years previous to this (Don't quote me on that figure) the fees still came from the estate/house, so be careful! If you transfer ownership whoever owns the house will almost certainly owe the council (I think it's them!) for the fees for the care home

Hope this make sense. I'd take proper legel/financial advice
FluffySheep

BinnsY · 4 Nov 2012 at 22:17

FluffySheep said:
I don't know the exact specifics, but my mate had the issue where the house was owned by his dad who went into a care home and the fees for the care home came out from the sale of the house, and as I remember if the house was transfered from his dad to him within 5 years previous to this (Don't quote me on that figure) the fees still came from the estate/house, so be careful! If you transfer ownership whoever owns the house will almost certainly owe the council (I think it's them!) for the fees for the care home

Hope this make sense. I'd take proper legel/financial advice
FluffySheep

I belive this is accurate. Though I think it may actually be seven years. As I understand it the council can use the value of your home to pay for your treatement once you have moved into a care home, even if you have already passed ownership of the home to other members of your family.

Essentially the house would have had to be in your mothers ownership for 7 years before the council would not be able to use its value to pay for your Grandfarthers care.

I believe the only way around it is to setup a family trust though I dont know much about how this works.

Kutter · 4 Nov 2012 at 23:12

They can gift you part of the house value and you can get the rest as mortgage. You have to take out insurance though, incase they go bankrupt.

I did it with my house in the UK parents gifted me 25k and i took a mortgage for the rest.

aln · 5 Nov 2012 at 01:17

You get a mortgage based on how much you need to borrow vs the value of the house. If the house is valued at ~80k, and you borrow 35k, the bank will give you a loan as if you'd paid 45k in cash for the house and they'd still take the entire lot in a repossession.

It should be really easy to get a mortgage under those circumstances. Good rates too.

jamief · 5 Nov 2012 at 06:23

Get legal advice. Certainly here in Scotland the local authority would consider what you are doing as the being for the purpose of avoiding care home fees, and could force the sale of the house.

semi-pro waster · 5 Nov 2012 at 07:42

jamief said:
Get legal advice. Certainly here in Scotland the local authority would consider what you are doing as the being for the purpose of avoiding care home fees, and could force the sale of the house.

In effect it could be considered a gratuitous alienation of sorts and that would be a reason why it might run into problems - however English law is a bit different with regard to such things I believe which is why I've not tried to offer a full viewpoint. It's definitely worth getting proper legal advice even if someone here offers their suggestions.

MrMoonX · 5 Nov 2012 at 08:22

semi-pro waster said:
In effect it could be considered a gratuitous alienation of sorts and that would be a reason why it might run into problems - however English law is a bit different with regard to such things I believe which is why I've not tried to offer a full viewpoint. It's definitely worth getting proper legal advice even if someone here offers their suggestions.

you cant do it in England either, what hes essentially doing is getting his grandfather to dispose of a significant asset for the purpose of care home funding. You cant do this, the LA will use the value of the Grandfathers assets and determine that they should be sold to pay care home fee's instead of the taxpayer picking up the bill.

Destination · 5 Nov 2012 at 08:24

I think some of you are overthinking this.
The grandfathers will gives it to the mother, not when he hits the care home, more likely when he leaves the care home

Then she will pass it to the son.

Beans on toast Dave · 5 Nov 2012 at 08:53

as soon as he goes into care he will have care home fees to pay, i believe they will put a marker on his house and when that's sold the fees will come from there, hes allowed assets upto 23k that they cannot touch
also that all depends on why he is going into a care home as if he has certain conditions he wont have to pay any fees iirc
you need to seek professional advice

Kris_90 · 5 Nov 2012 at 19:43

Thanks for the replies.

The house becomes my mother's property when my grandfather dies, sorry I should have wrote the post more clearly. As for the care home, he is classified as an EMI patient as he suffers from dementia. We are awaiting a hearing that will also classify him as a DST patient.

If someone is classified as a EMI patient, they get partial funding for a care home (I believe around 40-50%). If someone is classified as a EMI + DST patient, they are fully funded for a care home (by the local health board).

The care home part is not a problem, it's how we go about changing ownership to myself. I'll take the advice and speak to a solicitor about passing ownership.

Thanks again.

Vanilla · 5 Nov 2012 at 19:49

Firstly look into getting lasting Power of Attorney, this will take about 5 months but will allow your mother to act on her fathers behalf in all aspects regarding health, finance and property. pretty essential when someone has dementia.

A solicitor will give you the right advice, this is bread and butter to them.

Personally I would not bother transferring the house to your mum to have to eventually move it to you. You're just doing twice the work.

Get the house to you straight away and then take out a loan or remortage and give your mum the cash.

It can be crippling to a family if a member has to go into a care home. Can be as much as a grand a week, which could cripple most families financially.