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Selling Parents’ House Before Death UK

Property Saviour » Inherited Property » Selling Parents’ House Before Death UK

Selling your parents’ house before death in the UK requires careful consideration.  Where will your parents move following the sale of their home?  

Is your goal to simplify their estate planning or avoid a large inheritance tax bill?

Selling a parent’s house before their death is a journey filled with emotional and practical challenges. It’s a decision that requires careful thought, balancing legal, financial, and personal considerations to ensure the best outcome for your parents and family.

Let me share some insights and real-life stories to guide you through this process and help you make informed and compassionate choices.

Table of Contents

Why Consider Selling Before Death?

One benefit of selling your parents’ home before death is that you don’t need a Grant of Probate.  Another added benefit is that you won’t have to pay capital gains tax.

Imagine this: your parents’ house, once bustling with life, now stands empty as they move into a care home.

The thought of selling it might seem daunting, but there are compelling reasons to consider it:

  • Avoiding Probate: Probate can be a lengthy and costly process. By selling the house before death, you can sidestep the delays and expenses that come with it. This was the case for my friend Sarah, who managed to sell her father’s house.  She didn’t require a probate valuation and avoided the whole inheritance of a home from her parents’ scenario, saving time and money.
 
  • Tax Benefits: Selling the house while your parents are still alive can help avoid substantial capital gains taxes. If the house is sold after death, the increase in value since the purchase may be subject to capital gains tax. This was a crucial factor for John, who sold his mother’s house and avoided a hefty tax bill.
 
  • Financial Flexibility: Selling the house can provide immediate funds for your parents’ care or other needs. This can be particularly important if they require expensive medical care or assisted living. For instance, Emily sold her parents’ home to cover her mother’s care home fees, ensuring she received the best possible care.
 

Steps to Selling a Parent's House Before Death

It goes without saying that your parent should have a say in the matter unless they are unable to make their own decisions:

 

1. Discuss with Your Parents

The first step is to have an open and honest conversation with your parents about their wishes and the potential benefits of selling the house. It’s important to ensure that they are comfortable with the decision and understand the implications. You can also discuss putting the property into a trust.  I remember sitting down with my own parents, discussing their future and the house. It wasn’t easy, but it was necessary.

 

2. Consult Professionals

Engage with professionals such as estate planners, tax advisors, and solicitors to understand the legal and financial ramifications. They can provide guidance on the best course of action and help you avoid any potential pitfalls. When my neighbour, Tom, decided to sell his mother’s house, consulting a solicitor made all the difference in ensuring a smooth process.

 

3. Value the Property

Assess the current market value of the property. You can do this by getting valuations from multiple estate agents or using online valuation tools. Understanding the property’s worth will help you make informed decisions about pricing and selling strategies. 

 

4. Prepare the Property for Sale

Make any necessary repairs or improvements to enhance the property’s appeal. This might include decluttering, cleaning, and staging the home to attract potential buyers. Remember, the goal is to present the house in the best possible light to maximise its value. I helped my cousin declutter and stage her home, and it made a significant difference in attracting buyers.

 

5. Choose the Right Selling Method

You have two main options: selling through an estate agent or using a property-buying company like Property Saviour.

 

6. Handle Legal and Financial Matters

Ensure all legal documents are in order, including the title deeds and any necessary permissions. If your parents have a Lasting Power of Attorney, ensure it is registered and valid. 

 

7. Complete the Sale

Once you have accepted an offer, work with your solicitor to complete the sale. Ensure that all proceeds are handled according to your parents’ wishes and any tax implications are addressed. 

Real-Life Example

Consider the case of Bertie, who decided to sell her mother’s house before her death. Bertie’s mother had moved into a care home, and the house was sitting empty. By selling the house, Bertie was able to avoid the lengthy probate process and use the proceeds to cover her mother’s care expenses.

She chose to work with Property Saviour, which allowed her to complete the sale quickly and without the hassle of estate agent fees or viewings.

Key Considerations When Selling Your Parents' House Before Death

These are some of the obvious consideration to note when selling parents’ home before death in the UK:

 

Legal Requirements

  1. Power of Attorney
    • If your parents are still alive but unable to make decisions, you will need a Lasting Power of Attorney (LPA) for property and financial affairs. This legal document allows you to act on their behalf.
  2. Probate
    • If selling after their death, you must obtain a Grant of Probate to legally sell the property. This process can take several months, so it’s important to start early.

 

Financial Implications

  1. Capital Gains Tax
    • Selling the property before your parents’ death may help avoid substantial capital gains tax, provided certain conditions are met. Consult a tax advisor to understand the implications.
  2. Inheritance Tax
    • If the estate is liable for inheritance tax, selling the property quickly after probate can help manage these costs. The threshold for inheritance tax is £325,000, with a rate of 40% on the portion above this amount.

 

Emotional and Practical Considerations

  1. Emotional Impact
    • Selling a family home can be emotionally challenging. It’s important to communicate openly with your parents and siblings to ensure everyone is on the same page.
  2. Clearing the Property
    • Preparing the house for sale involves clearing out personal belongings, which can be a daunting task. Consider hiring a professional service to help with this process.

Understanding the 7-Year Rule

The 7-year inheritance tax rule in the UK is a crucial aspect of estate planning, particularly when it comes to gifting assets. This rule can significantly impact the inheritance tax (IHT) beneficiaries might have to pay. 

Here’s a detailed explanation of how it works and practical examples to illustrate its application:

 

What is the 7-Year Rule?

The 7-year rule pertains to gifts made during a person’s lifetime. If you give away assets and survive for at least seven years after making the gift, those assets are generally exempt from inheritance tax. This type of gift is known as a “potentially exempt transfer” (PET).

 

How It Works

1. Gifts and Potentially Exempt Transfers (PETs)
– When you make a gift, it is considered a PET. If you survive for seven years after making the gift, it becomes exempt from IHT.
If you die within seven years of making the gift, its value is added back to your estate for IHT purposes.

2. Taper Relief
– If you die between three and seven years after making the gift, taper relief applies, reducing the amount of IHT payable on a sliding scale. The closer to seven years you survive, the less tax is due.

 

Taper Relief Scale

The table below illustrates the amount of tax you may have to pay if your parents pass away within seven years of gifting any assets.

Years between gift and deathTax paid
Less than 340%
3 to 432%
4 to 524%
5 to 616%
6 to 78%
7 or more0%

 

Example Scenario

Imagine you gift your child £500,000. If you die within two years, the full 40% IHT rate applies, resulting in a tax bill of £200,000. However, if you die five years after making the gift, the tax rate drops to 16%, resulting in a tax bill of £80,000.

 

Annual Exemption

You can give away up to £3,000 each tax year without it being added to the value of your estate. If you don’t use this allowance, you can carry it forward to the next year, but only for one year.

 

Small Gifts and Special Occasions

– Small Gifts: You can give up to £250 to as many people as you like each tax year, provided you haven’t used another exemption on the same person.
– Weddings and Civil Partnerships: You can give up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to anyone else for their wedding or civil partnership.

 

Gifts from Income

Regular gifts made from your surplus income (after meeting living expenses) are also exempt from IHT, provided they do not affect your standard of living.

 

Giving Away a Home

If you give away your home, move out, and survive for seven years, the home is exempt from IHT. However, if you continue to live in the property without paying market rent, it is considered a “gift with reservation” and remains part of your estate for IHT purposes.

 

Example Scenario

Suppose you transfer ownership of your home to your child but continue living there without paying rent. If you die within seven years, the home’s value is included in your estate. However, if you move out and live for seven years, the home is exempt from IHT.

What Happens if My Parent Moves into a Care Home?

If your parent moves into a care home, you may need to sell their house to cover care costs. Having a Lasting Power of Attorney for property and financial affairs can be essential in this case.

This allows you to manage their property and finances legally. My friend, Anna, had to sell her father’s house to pay for his care home fees, and having the Power of Attorney made the process much easier.

Care Home Fees Scenario

Imagine you are in Leeds, and your elderly parents have decided to move into a care home. Their house, which they have lived in for over 40 years, needs significant repairs.

You decide to sell the house to fund their care costs. Here’s how the process might unfold:

  1. Initial Decision: After discussing with your parents and siblings, you decide to sell the house to Property Saviour for a quick and hassle-free sale.
  2. Legal Preparations: You obtain a Lasting Power of Attorney to handle the sale on your parents’ behalf.
  3. Sale Process: Property Saviour evaluates the house and makes a cash offer. You accept the offer, and the sale is completed within 10 days.
  4. Outcome: The funds are quickly available to cover your parents’ care costs, and you avoid the stress and expense of repairs and a prolonged sale process.
selling parents house before death UK
Watch out for deliberate deprivation of asset rule when it comes to care home fees

Deliberate Deprivation of Asset

Imagine your elderly parents, John and Mary, have reached a point where they require the around-the-clock care and support that only a residential care home can provide. As you begin exploring options, you quickly realise that the fees for quality care can be staggering, often ranging from £800 to £1,078 per week, depending on the level of care required.

Understandably, the thought of depleting your parents’ hard-earned savings to cover these costs is concerning. In a moment of desperation, a well-meaning friend suggests gifting a portion of your parents’ assets to you or your siblings, thereby reducing their overall wealth and potentially qualifying them for greater financial assistance from the local authority.

However, this strategy, known as deliberate deprivation of assets, is a risky proposition that could backfire. Local authorities are well-versed in these tactics and will scrutinise any significant transfers or disposals of assets, particularly if they occur around the time your parents require care.

The key factors that authorities consider are the timing and motivation behind the asset transfer. If they determine that a primary motivation was to avoid paying care fees, they can treat your parents as if they still own those assets, a concept known as “notional capital.” This means that despite gifting away a portion of their wealth, your parents could still be assessed as having sufficient means to cover the full cost of their care.

 

A Cautionary Tale

To illustrate the potential pitfalls, let’s consider the hypothetical case of the Wilsons. When Mr. Wilson’s health began to decline, and it became clear that he would need residential care, the family decided to gift his £200,000 home to their daughter, Sarah. Their intention was to reduce Mr. Wilson’s assets and qualify for local authority funding.

However, the local authority deemed this a deliberate deprivation of assets and treated Mr. Wilson as if he still owned the property. As a result, he was ineligible for financial assistance, and the family was left to cover the substantial care home fees entirely out of pocket.

 

Explaining the Rules

While the deliberate deprivation of assets rule may seem draconian, it serves an important purpose: ensuring that individuals with means contribute appropriately to the cost of their care, preserving limited public resources for those truly in need.

That said, the rules do allow for legitimate asset transfers and disposals, provided they are not primarily motivated by avoiding care fees. For instance, if your parents had a history of making regular gifts to family members or charities, these would likely be viewed as permissible, especially if they occurred well before any care needs arose.

The rules recognize that individuals should be able to spend their money as they wish, within reason. Modest expenditures on personal items or experiences, even shortly before entering care, are generally acceptable.

Different Methods of Sale

Selling a property is a huge decision and can be a stressful experience. 

Here we compare two different methods of sale for inherited property:

 

AspectEstate AgentProperty Saviour
SpeedIt can take several months.Often, within 10 days
FeesEstate agent fees and commissions.No fees. Will pay £1,500 towards your legal fees.
Market ExposureHigh, potentially higher sale price.Private sale, no nosey neighbours or endless viewings.
ViewingsMultiple viewings required.No viewings needed.
RepairsMay need to make repairs and improvements.No repairs needed.
CertaintyRisk of fall-throughs and price reductions.Guaranteed offer with no price reduction.

Why Choose Property Saviour?

Here why our sellers love our service:

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Property Saviour Price Promise

  • The price we’ll offer is the price that you will receive with no hidden deductions.
  • Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
  • These valuations or surveys result in delays and price reductions later on.
  • We are cash buyers.  There are no surveys.
  • We always provide proof of funds with every formal offer issued.
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We'll Pay £1,500 Towards Your Legal Fees

  • No long exclusivity agreement to sign because we are the buyers.
  • You are welcome to use your own solicitor. 
  • If you don’t have one, we can ask our solicitors for recommendations.
  • We share our solicitor’s details and issue a Memorandum of Sale. 
Sell

Sell With Certainty & Speed

  • Our approach is transparent and ethical, which is why sellers trust us.
  • 100% Discretion guaranteed. 
  • If you have another buyer, you can put us in a contracts race to see who completes first.
  • Complete in 10 days or at a timescale that works for you.  You are in control.

Sell with certainty & speed

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