Re: House sale to finance extension of daughter's property

In message <MJfeg.77034$wl.71797@xxxxxxxxxxxxxxxxxxxxxxxxxx>, Ronald Raygun <no.spam@xxxxxxxxxxxxxxxxxxxxx> writes
The wording "there may be some money left over" suggests that there might
not, or might not be much. I would have thought that extending a house to
create just one additional bedroom, and perhaps an ensuite bathroom to go
with it, would cost relatively little, likely not enough to gobble up the
lion's share of the sale proceeds of a whole house or flat. This leads me
to suspect that the extension is likely to be more substantial, creating a
self-contained flat under the same roof, with its own kitchen, sitting room,
etc. It could in principle form a completely separate property, in effect
turning Y's presumably detached house into a semi-detached property of
which the granny flat would form the other half and could be wholly owned
by Mrs X.

In such a case there need not be any gift as such at all, though Mrs X
might be minded to leave her semi to the Ys in her will.

Although the wording "to move in with" perhaps contradicts this, there
is no reason, even if there are not two separate households, why Mrs X
could not end up co-owning the new combined property, perhaps in such
proportion as the difference in before and after values bears to the new
combined value.

The danger, if the properties really are separate, is that if she gifts
her half, then there *would* be reservation, and the granny flat would not
be part of the Y's PPR, so *both* IHT and CGT might apply.

From this point of view it is important that even if the granny flat has
its own "front" (external) door and is largely self-contained, there should
be some internal connection (even if this is a door normally kept locked)
which would allow the combined property to be reasonably classified as one
household.

Ingenious (as ever) but this over complicates things and misses an opportunity to reduce Mrs X's estate. Splitting the house will incur legal costs and will need Y's mortgagee (if there is one) to agree and they might need a valuer's opinion (more cost). Making X a joint owner (even a mere equitable owner) wont help for IHT either.
--
John Boyle
.

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