Advice needed on protecting dad’s house from future sister in law

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    Advice needed on protecting dad’s house from future sister in law

    I’d like some advice on this peculiar situation.


    First a bit of background, a few years ago my dad and brother bought a residential property with cash. It was my dad’s money but he gifted it to my brother to buy the house, so it is solely in my brothers name. My dad lives there too however we didn’t include my dad’s name on the title as he owns another BTL property so he would have had to pay higher rate stamp duty, plus he is quite old and we wanted to avoid inheritance tax issues when the unfortunate time comes. So although we still see this as my dad’s house as it’s his money invested in this, legally my brother owns this property outright in his sole name. He was single at the time, in his 30’s, sensible, responsible, etc.


    Fast forward to now, my brother has met and proposed to someone who we believe to be a bit of a gold digger. Not only that, she seems to have a strong influence on my brother and he has changed dramatically. To cut a long story short, we are all concerned about them rushing into marriage, not working out and then the new wife potentially taking half the house in divorce.


    So in order to minimise this from happening, I see I have two options…
    1. Add my dad to the title as a joint owner - As there is no money exchanging hands and no mortgage involved, there will be no stamp duty to pay. The only downside to this is when my dad does eventually pass away, there will be inheritance tax to pay.
    2. Add my name to the title as a joint owner - Again there will be no stamp duty to pay, but am I right in thinking that if they do ever decide to sell, I will have to pay capital gains tax on my share when the time comes?

    I have briefly spoken to my brother about these options and he doesn’t mind. He doesn’t really have a clue when it comes to paperwork.


    I’d be interested to hear your views on the two options above, anything else I have missed, or any other routes we can go down to prevent any complications in future.


    Just to add, the reason for doing this is purely to protect my dad from being kicked out of his house while he is alive. After he passes away, we are all happy for the house to go directly to my brother. Whatever happens after that is up to my brother.


    Any advice welcome.


    #2
    There's a point in reading this kind of background where you suddenly realise that the people involved didn't take legal advice (and really needed to) before doing what they did and retrospectively sorting things out is going to be more tricky.

    It's quite likely that if your father gave your brother money to buy a property that the father (and not the son) lives in, it's still part of his estate. There's a concept called "Gifts with Reservation of Benefit" which comes into play when the gifter continues to benefit from the "gift"; for tax purposes it's treated as if the gift hadn't happened.
    I'm not at all qualified to offer advice on this kind of thing, but I suspect it's applicable here.
    And fixing it more firmly so your father can't be thrown out may make that even more obvious.

    IHT isn't an issue for most people - there's nothing to pay on a single person's estate up to £325,000 (and if it's a surviving spouse it's often double that). And there's a specific exemption for a person's residence that can add another £175,000 depending on who inherits the property.

    If IHT is going to be an issue, it would probably have been helpful to use a trust to fix the issues that exist with the tax and protect your father from being thrown out.

    As it stands, your brother and his new wife could do exactly what you fear.
    On the plus side, however, it's less likely that a wife of a short period would be entitled to half of a spouse's property, as settlements should consider the financial position of each person at the start of the marriage. Although it's rarely that simple in practice.

    If you become involved, CGT would be an issue, so the decision may depend on the size of any expected gain.

    And there are non-financial issues here - the person causing some of your concerns may not like it when they find out what was done, because it's easy to infer why the changes were made.
    And the property belongs to your brother, he's an adult and assuming that he's somehow weak willed enough to make his father homeless because he's somehow in thrawl to his wife isn't very flattering either.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Originally posted by Madmax86 View Post
      I’d like some advice on this peculiar situation.[*]Add my dad to the title as a joint owner - As there is no money exchanging hands and no mortgage involved, there will be no stamp duty to pay. The only downside to this is when my dad does eventually pass away, there will be inheritance tax to pay.[*]Add my name to the title as a joint owner - Again there will be no stamp duty to pay, but am I right in thinking that if they do ever decide to sell, I will have to pay capital gains tax on my share when the time comes?[/LIST]
      I have briefly spoken to my brother about these options and he doesn’t mind. He doesn’t really have a clue when it comes to paperwork.
      Suppositions are wrong.

      CGT is payable at the point the gift is returned - that has nothing to do with money (not) changing hands.

      Stamp duty is not payable on such a return of a gift - True.

      Inheritance tax will; not only be payable by Dad who now has property (if he dies), but also by brother if he dies within 7 years.

      Sounds very much to me as if you are trying to bully your brother. Does he AGREE that he is marrying a gold digger and is later going to get divorced. Somehow I doubt he believes that on either count (albeit they might be true).

      And it is a GROB (which impacts on inheritance tax, but doesn't mean the gift did not take place).

      Comment


        #4
        Shame everyone colluded to cheat the system at the outset.

        Hope you're all screwed as a result.
        My views are my own - you may not agree with them. I tend say things as I see them and I don't do "political correctness". Just because we may not agree you can still buy me a pint lol

        Comment


          #5
          Originally posted by landlord-man View Post
          Shame everyone colluded to cheat the system at the outset.

          Hope you're all screwed as a result.
          They didn't cheat the system. They took a gamble, structured it badly, and might lose. They gave a gift and imagined it is still theirs.

          Comment


            #6
            Originally posted by AndrewDod View Post

            They didn't cheat the system. They took a gamble, structured it badly, and might lose. They gave a gift and imagined it is still theirs.
            Using dads money to put a house in sons name to avoid stamp duty and inheritence tax IS cheating the system if its believed the house still belongs to dad and attempts are now discussed to get it in to his name.

            ​​​​​​

            My views are my own - you may not agree with them. I tend say things as I see them and I don't do "political correctness". Just because we may not agree you can still buy me a pint lol

            Comment


              #7
              I have heard of something called a pre-nuptial agreement which although are not legally binding they are taken into consideration - so might be worth looking into -

              lots of older people 'gift' houses to their children to help them out and yet still live in the house , so you are not alone in this -

              Im not sure if a clause can be written into a document to ensure your father has lifelong habitual rights to live there . Did someone not realise that the 30 year old brother may wish to marry and have children at some stage ? Just wondering why this was not considered as a facto

              Comment


                #8
                Originally posted by jpkeates View Post
                There's a point in reading this kind of background where you suddenly realise that the people involved didn't take legal advice (and really needed to) before doing what they did and retrospectively sorting things out is going to be more tricky.

                It's quite likely that if your father gave your brother money to buy a property that the father (and not the son) lives in, it's still part of his estate. There's a concept called "Gifts with Reservation of Benefit" which comes into play when the gifter continues to benefit from the "gift"; for tax purposes it's treated as if the gift hadn't happened.
                I'm not at all qualified to offer advice on this kind of thing, but I suspect it's applicable here.
                And fixing it more firmly so your father can't be thrown out may make that even more obvious.
                Thank you for comments.

                I'll be honest I have not heard of a Gift of Reservation of Benefit. I've since googled it and you are right this does seem the case here, and the things I'm now reading seem worrying. Apparently it seems this is not associated to the 7 year IHT rule either which is not good.

                You mentioned that legal advice was not sought however this was done via a solicitor when purchasing my brother's house. The solicitor was aware the funds were coming from my father and we were all in agreement it was a gift and they explained the 7 year rule. Not once did they mention the reservation of benefit. So I'm not sure how else we could have come to know about this and more importantly, what should be done now. I realise this may now be the bigger concern than that of my original post.


                Originally posted by jpkeates View Post

                IHT isn't an issue for most people - there's nothing to pay on a single person's estate up to £325,000 (and if it's a surviving spouse it's often double that). And there's a specific exemption for a person's residence that can add another £175,000 depending on who inherits the property.
                Yes unfortunately with my dad's other BTL property and the value of this property, the estate will be well above £500k. I'm also aware of the widow(er) allowance.


                Originally posted by jpkeates View Post

                And the property belongs to your brother, he's an adult and assuming that he's somehow weak willed enough to make his father homeless because he's somehow in thrawl to his wife isn't very flattering either.
                No he would never intentionally make my father homeless however if we was to marry and then get divorced, this would be out of his control.

                Comment


                  #9
                  Originally posted by landlord-man View Post
                  Shame everyone colluded to cheat the system at the outset.

                  Hope you're all screwed as a result.
                  Very helpful, thanks

                  Comment


                    #10
                    alice123,

                    Thank you for your comments. Yes a pre-nup was going to be the 3rd option. Like you say, from what I've read it doesn't seem to be bulletproof but I believe it still has some weight and will be a lot easier to arrange. His future wife may not be keen but it can likely be worded in a way so the primary reason is to protect my father's home, which is what you've also suggested.


                    Regarding your last point about were we not aware he may get married... we didn't anticipate him meeting someone like his fiancé. Without going into it too much, she's has my brother wrapped around her finger and has a very strong influence over him. He will go to great lengths to please her, oblivious to anything else including his own family, friends and even his own health. They are both eager to get married despite barely knowing each other (met during lockdown) and seem reluctant to wait. My brother is aware of the tension in the family but is blinded by love. We would never have imagined this to happen and for his character to change so dramatically, hence the concern.

                    Comment


                      #11
                      Originally posted by Madmax86 View Post
                      I'll be honest I have not heard of a Gift of Reservation of Benefit. I've since googled it and you are right this does seem the case here, and the things I'm now reading seem worrying. Apparently it seems this is not associated to the 7 year IHT rule either which is not good.

                      You mentioned that legal advice was not sought however this was done via a solicitor when purchasing my brother's house. The solicitor was aware the funds were coming from my father and we were all in agreement it was a gift and they explained the 7 year rule. Not once did they mention the reservation of benefit. So I'm not sure how else we could have come to know about this and more importantly, what should be done now. I realise this may now be the bigger concern than that of my original post.
                      If the solicitor didn't raise the potential issue with the gift, it's possible that I'm simply wrong.
                      I'm not a solicitor and it's something you'd reasonably expect them to know.
                      It's possible that by gifting the money (as opposed to gifting a property, for example) the issue goes away.

                      It's probably worth checking,just to be sure.
                      Yes unfortunately with my dad's other BTL property and the value of this property, the estate will be well above £500k. I'm also aware of the widow(er) allowance.
                      I'd talk to a solicitor about putting things into a trust to protect them from IHT (a process that can also protect what can be done with the property).

                      No he would never intentionally make my father homeless however if we was to marry and then get divorced, this would be out of his control.
                      If there was a solicitor involved, though, I think you should be a bit careful.
                      The solicitor would have been aware that your brother could sell the property and might get married, become a drug addict or die (usual happy legal considerations) and if there wasn't a trust set up, it's possible your father wasn't concerned or didn't think it was any of his business.
                      I.e there's possibly a reason why there's not a trust already.
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        Originally posted by jpkeates View Post
                        If the solicitor didn't raise the potential issue with the gift, it's possible that I'm simply wrong.
                        I'm not a solicitor and it's something you'd reasonably expect them to know.
                        It's possible that by gifting the money (as opposed to gifting a property, for example) the issue goes away.

                        It's probably worth checking,just to be sure.

                        I agree about double checking with them. I will get in touch with the original solicitor and ask them for their advice. Could it maybe be that this is a tax issue and not a legal issue? Just thinking why they may not have been able to advise. Solicitors often get things wrong where tax is involved.

                        Interesting point about whether the issue goes away if gifting money as opposed to property. I will look into that too, see if it has any legs.


                        Originally posted by jpkeates View Post
                        The solicitor would have been aware that your brother could sell the property and might get married, become a drug addict or die (usual happy legal considerations) and if there wasn't a trust set up, it's possible your father wasn't concerned or didn't think it was any of his business.
                        I.e there's possibly a reason why there's not a trust already.
                        The solicitor did ask the usual questions and run through the risks. We are a close family and this was a joint decision. We were all aware of the potential risks but were happy to proceed.

                        For what it's worth, my brother is happy to do what is necessary regarding the house. Whilst he is deluded when it comes to his fiancé, he does (for now) appreciate the risk in losing the house so is willing to share the title, it's just figuring out the most cost-effective way of doing things in the long run. Maybe as suggested above a pre-nup is the way to go.

                        Comment


                          #13
                          Originally posted by Madmax86 View Post
                          I agree about double checking with them. I will get in touch with the original solicitor and ask them for their advice. Could it maybe be that this is a tax issue and not a legal issue? Just thinking why they may not have been able to advise. Solicitors often get things wrong where tax is involved.
                          Everyone gets things wrong, but if part of the discussion was about avoiding IHT, they should have been able to raise the issue or point the family at someone who could give tax advice.



                          For what it's worth, my brother is happy to do what is necessary regarding the house. Whilst he is deluded when it comes to his fiancé, he does (for now) appreciate the risk in losing the house so is willing to share the title, it's just figuring out the most cost-effective way of doing things in the long run. Maybe as suggested above a pre-nup is the way to go.
                          Pre-nuptual agreements don't have legal force, in England at least.
                          The simplest thing is probably a change in ownership, but that does undo the gift, at least partially, which seems a little unfair on your brother.

                          A lifetime trust would do the trick better.
                          And when your father is no longer an issue (mangling the language in order not to offend) the property could then simply revert to your brother who could then lose half of it in a divorce just like anyone else.

                          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                          Comment


                            #14
                            Originally posted by jpkeates View Post
                            And when your father is no longer an issue (mangling the language in order not to offend) the property could then simply revert to your brother who could then lose half of it in a divorce just like anyone else.
                            That is the key issue here. The gift was given -- which is a perfectly reasonable and sensible thing to do and is not cheating the system as someone suggested. The fact that it was a GROB makes it no less a gift (and GROB gifts are perfectly sensible and allowed gifts - they radically change the tax nature of the gifts but that does not mean they are cheating).

                            But if you want to compel your brother to give the gift back (which has big implications) what happens a year down the line when he inherits it -- are you going to ban that too, or do you just hope the marriage will last less than a year?

                            And by the way returning a large gift just before getting married is not likely to help either -- it will likely be drawn into any alimony settlement anyway unless you are also wanting brother to lie to (or hide stuff away from) his spouse.

                            Comment


                              #15
                              Originally posted by AndrewDod View Post

                              That is the key issue here. The gift was given -- which is a perfectly reasonable and sensible thing to do and is not cheating the system as someone suggested. The fact that it was a GROB makes it no less a gift (and GROB gifts are perfectly sensible and allowed gifts - they radically change the tax nature of the gifts but that does not mean they are cheating).

                              Exactly. To imply I did it by cheating the system is a bit harsh and I no longer care to correct stupid posters as above in this thread.

                              Regarding the GROB, I am due to have a conversation regarding this with my accountant. As jpkeates touched upon, the fact the money was given to my brother rather than the house (the house was bought with the money) may prevent this from being a case of GROB. I will update this thread once I've spoken to my accountant but from a very brief phonecall, he seems to think GROB does not apply.



                              Originally posted by AndrewDod View Post

                              But if you want to compel your brother to give the gift back (which has big implications) what happens a year down the line when he inherits it -- are you going to ban that too, or do you just hope the marriage will last less than a year?

                              And by the way returning a large gift just before getting married is not likely to help either -- it will likely be drawn into any alimony settlement anyway unless you are also wanting brother to lie to (or hide stuff away from) his spouse.

                              I am happy for my brother to do whatever he likes with the property when my dad is no longer in the picture. If he gets divorced, loses the house, etc, then that is his business. He would have made his decisions. My interest is solely to protect my dad's home whilst he is alive.

                              You seem to imply there will be instances of hiding the truth from my brother/future wife, and above you mention 'bullying' my brother into doing this. We are all aware and in agreement on doing this, even my brother. His future wife may not be keen but she's not really in a position to say anything especially as it is to protect my dad's interest. If she can't understand that, then hopefully that is clear red flag for my brother.

                              And to answer your earlier question, no of course he doesn't agree that he's marrying a gold digger. That's like saying does someone being scammed agree to giving money to a scam artist. I doubt there would be many people that agree to go into marriage with a gold digger.


                              By the way, this post is just to see what potential options are available. We may not go ahead with any, but good food for thought.

                              Comment

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