You have to be very careful with these type of arrangements if inheritance tax is likely to be an issue. If you buy the house from your parents but allow them to live there without paying you a market rent then the house is still part of their estate for inheritance tax purposes. Its called reservation of benefit.

If they do pay full market rent and you've had part of it gifted then so long as they survive 7 years from the date of the gift there is no tax to pay. There is a sliding scale of tax payable on death within the seven year period.

I'm not sure of the position re care fees but direct quote from the help the aged website below:

"It is illegal to make over property or savings to another person in order to qualify for financial help from your local council. This is called deprivation of assets. If your local council believes that you have deliberately given away assets in order to reduce or avoid care home fees, it has the power to treat you as still having those assets – known as notional capital.

There is no set time limit within which giving away property or savings is treated as deprivation of capital. However:
- If the transfer took place up to six months before you moved into the care home, the local council may try to claim the fees from the person you have given your assets to.
- If the transfer took place more than six months before you moved into the care home, the local council may consider whether it is possible to recover the fees from you personally. This means that you could be given a bill for your home fees, even though you don't actually have the money any more.

The local council will be more interested in the intention behind any transfer of assets than how long ago the transfer took place. If a main reason was to avoid paying for care fees it might investigate, even if the transfer took place a few years ago. "

They also make the point that if a house is signed over to offspring then their right to stay there may become at risk if the offspring get divorced at some point in the future. Only 4% of people over 65 are currently in care which is a far better statistic than the divorce rate. An interesting point I hadn't considered before.

Yes, you are right. But I'm guessing that, if the house is worth £150k and the parents are wanting to use that to raise £50k, then the total estate is likely to have a value less than the inheritance tax threshold (currently £325k).

If you buy the house for 50K, and have the 100K gifted, does the seven year rule apply re inheritance? also i thought the annual 'gifting'allowance before you had to pay tax on the gift was only £2000? , or if within a short space of time either/both parents require residential care, will the authorities deem that the house must be sold in order to pay care fees or can they come after you for their care fees, ?especially if this is your personal ' 2nd home ' on paper too? I am in the same situation ,but my parents are older,they retired 10 years ago, but would like to secure the future of the house to me after their demise..rather than loose it to residential care costs.

It sounds like inheritance tax is not going to be an issue. If true, you could either buy a third share of the house or you could buy it all for £50k cash plus £100k gift. The former is probably preferable as your parents would still retain the larger share in the property. What happens to the other two thirds will depend on wills, future wishes and so on of your parents.

You should avoid buying it all for £50k though because that would result in a large capital gains tax bill if you one day sold the house for £150k. The transaction should go though a solicitor who handles conveyancing.

My parents will be retiring soon and they wish to raise a little extra money so that they can enjoy their retirement that little bit more, instead of selling the house to an equity company they have offered to sell it to me.

The house is probably worth about £150,000.00 but they only need £50,000.00 so that is the price they would want from me. They would want me to sign something to say that I would never force them out and that I could only sell the house with their permission.

First of all I would like to make sure that this is legal and secondly ask what is the best way to go about it for all parties. Should I legally buy all of the house, or should it just be a third with the other thirds reverting to me on my parents deaths or when they decide to move.....All comments welcome.