making a will, leaving a house

[peterchichester]

I need to make a will. The major dosh is my house which will go to the two kiddies who are in their 20's. I was wondering if it was possible to leave them house to them in a way that they could rent it out? That might suit them better.
I'm thinking not because I would be leaving them the value of the house and not the house. Does that make sense?
I'm loathe to give it to them now, may be tax implications.

 

[Shutpa]

I need to make a will. The major dosh is my house which will go to the two kiddies who are in their 20's. I was wondering if it was possible to leave them house to them in a way that they could rent it out? That might suit them better.

With due respect,your children are in their 20s and old enough to decide for themselves how to handle their inheritance. You estate should be divided equally between them if that is what you want.

I'm loathe to give it to them now

And so you should be. I know of a man who did just that and is now homeless because he gifted his house to his daughter who, having got it, threw him out!

 

[peterchichester]

old enough to decide for themselves how to handle their inheritance.

You haven't met my daughter!
My point is that they might prefer to collect the rent and watch the price go up for a couple of years, my money would still leave them with a mortgage and neither earn enough to pay one.

 

[EFLImpudence]

My point is that they might prefer to collect the rent and watch the price go up for a couple of years, my money would still leave them with a mortgage and neither earn enough to pay one.

They will if they rent it.

Do you mean that they do not earn enough (even jointly?) to get a mortgage to pay off yours?
If that is the case then your building society will order it to be sold so your children's preference does not come into it.

 

[conny]

If you have life insurance and will be leaving them the house for after you have died then the life insurance will pay off the mortgage.
Always assuming you haven't paid it off yourself in the meantime.

 

[Doggit]

Now don't take this as completely gospel, but I'll give you a general rundown on things. You would need to set up a trust so that they couldn't get the house till a they reach a certain age. The trust can be managed by the solicitors (at a possible exorbitant fee), or by relatives/friends you could trust. You'd need to find a trustworthy managing agent for the property, and they'd pay the rent into the trust, who'd then pay the mortgage. The drawback to this method, is you'd need a buffer fund for the times the place is empty, and for repairs, so the kids may not get much from the rent.

Inheritance tax doesn't kick in till you're assets are worth more than £325K, so as long as house less the mortgage, is less than this figure, then they'll be okay. If you're net assets are more than this, then you'dd need spare cash to pay the IHT. And the other problems, is getting a mortgage that'll work within a trust.

If you were to give the kids the house now, you'd then have to pay a commercial rent to them on the property, but if the net worth of the house is worth more than the £325K, and you live more than 7 years, then there'd be no IHT to pay.

As you don't seem the trust the kids with their inheritance, then you really need a chat with a solicitor that's conversant with trusts, to draw up your will.

Assuming you died next week, is there enough value left in the house for them to put down a deposit on a one bed flat each, on which they'd be able to afford a mortgage, or are they in a catch 22 situation whereby they won't have enough to establish themselves, nor to keep themselves going.

 

[JohnD]

if you "give" it to them and continue to live in it, it will be a gift with reservation and inheritance tax will still apply.

If you have while to go, you could look at a Mortgage Protection Life Insurance Policy. These are good value as they assume the balance outstanding will reduce over time (provided you keep up the repayments).

 

[big-all]

the house belongs to whoever you have the mortgage with
they will want there money back first
you cant actually wil the house to anyone just your share the value you own
they need to get the mortgage into there name before you die as the mortgage will terminate on your death as will the insurance the electric gas and other utilities
talk to your lender and see what they will require on your passing and iff they are likely to give them a buy to let mortgage or other solution
the executors must inform all parties off change off circumstance and iff required send an origional off the death certificate and proof they are allowed to act as an executors
as i say that applies to the mortgage that will terminate on death
all parties contacted will then inform you off what action is required
things like the power and gas will be on hold until the wil is completed and be due from the estate for the full amount used

 

[HawkEye244]

I find it amusing how deliberately difficult tax is to understand. We're all lemmings trying to jump through hoops so as not to get shafted by robberies and revenues, meanwhile the super rich who can afford long term tax planning don't pay it at all It's wealth redistribution working the exact opposite way it was intended do this country eh

 

[Shutpa]

Peter, although you have had lots of good advice here, I would suggest that you leave everything to your children and let them, on your demise, sort things out between them. If you name both as executers , then they can pay off all your debts including your mortgage and funeral expenses and if there is anything left, split it right down the middle. That is, of course, that there are no other siblings, steps or otherwise, who have a claim on your estate.

 

[Doggit]

the house belongs to whoever you have the mortgage with
they will want there money back first
you cant actually will the house to anyone just your share the value you own

Not quite big-all, but in practice, possibly yes. The mortgage company take out a charge on the property when they lend you the money, but the house never belongs to them, but the charge on the property gives them a lot of control.

When the owner of the house dies, if there's a will in place, then the appointed executor has the job of winding up the estate, and that might require the sale of the property in order to discharge the "charge" on the property, but only if the recipients of the estate weren't able to pay off the mortgage themselves - which the OP doesn't think they'll be able to do. The mortgage company will only step in if the executor stops paying the mortgage; but if there's sufficient funds in the deceased's bank account, then there wouldn't be any missed payments for a few months, and the mortgage company wouldn't have any idea of what's happening.

But if the OP doesn't get his will sorted out, then the estate would go to probate, and that'd cause other delaying problems, but in either case, if the mortgage company want their money back, then they have to take the estate to court, and the judge would more than likely tell them to back off for a bit.

 

[EFLImpudence]

It's wealth redistribution working the exact opposite way it was intended to

No - that's the way it was intended.

'twas ever thus.

 

[big-all]

they would foreclose on the mortgage once you tell them and as the executors you are required to tell all parties with connections or interests including a public announcement usually in a national paper for people unknown to lay claim to the estate or present proof of money owed like unsettled bills

and remember the lender holds the deeds so has the whip hand

 

[HawkEye244]

It's wealth redistribution working the exact opposite way it was intended to

No - that's the way it was intended.

'twas ever thus.

To steal from the middle class and make the wealthy even more wealthy

 

[Doggit]

I'm not sure about putting a notice in the paper, so can't comment on that point, but I know they won't foreclose whilst the executor is dealing with the estate. and most deed's are held at the Land Registry nowadays, not at the Mortgage company any longer. But at the end of the day, the OP still owns the property, not the Mortgage company; the only scenario that you're talking about, is Hire Purchase where the lender is the owner of the item until it's paid off in full.