inheriting a house

[lildiva]

this is quite long winded and im sorry if it gets complicated, my grandma has just inherited everything including a house from her auntie, as the only grandchild my grandma has said to me that she is leaving it to me in her will but i can have the house now if i want to live in it as she is happy where she lives and was giving it all to me anyways, i am only 19 and at university and simply couldnt afford to run a house and to be honest wouldnt want to just yet however would like to live there after i have finished university and have got myself a job and a steady income as it is a nice house in a nice area therefore don't want to sell the house, i suggested to my grandma that she rents it out and uses the extra income to support her and my grandad but she says she is too old and doesn't want the hassle and she is comfortable money wise, it seems stupid to keep the house empty, my dad doesn't want to get involved as it is my mums side of the family and they are divorced, i am only 19 and have no idea and my grandma says she doesn't need all the hassle at 78. any advice on what we should do?

[Ethel]

You and your grandmother could rent it out through letting agents that deal with everything.

Their fees can be quite high, but it means the house isn't standing empty, the council tax is paid by the tenants and there will be an income from the rental.

Choose the letting agent very carefully.

[simsfreq]

Since you're at university, would it not be worth getting quite a few friends together and living in the house together, sharing the running costs?

You could have some wicked parties too XD

[dans1977uk]

The idea of renting the house out is sound so go for that through a reputable agent.

However, consider the option of your Nan giving you the house now as if she leaves you it in her Will it may be subject to inheritance tax (you pay 40% on all assets over �280,000 or so in tax to government on death). If she gives you the house now (and lives for another 7 years which hopefully she will) it would probably be exempt.

If the house was in your name and you do choose to let it out you could always take out a Buy to Let mortgage on it to help fund university and minimise your tax liability from the rental income. As you're 19 if you do take out a By to Let mortgage try Platform Home Loans.

[jake-the-peg]

Carefull about dan's advice about giving you the house now because I believe he may be a little out of date.

I think the test recently changed and that loophole was plugged. It would not be exempt from capital gains tax if she gave it to you and "continued to derive benfit from it".

In other words if she gave it to you but continued to live in it rent-free or at a reduced rent then you'd still be liable for inheritance tax

[jake-the-peg]

OK I think I see - If your Grandma isn't living in the house you can avoid CGT if she gives it to you now but if you rent it out you need to get the money and not her otherwise she'll be "deriving benefit" and you'll get stung.

If you go down this route I believe that even if she were not to survive 7 years you'd pay tax based on the proportion of the time she survived since making you the gift.

[WendyS]

Obviously I don't know your grandmother's financial situation but if it may be that if her own assets with her husband including her house are above the Inheritance Tax level, and the willed property remains in her name, it might have to be sold to pay an Inheritance Tax Bill if she is the last one in the couple to die. If she contacts the Executor solicitor very quickly she might be able to instigate a Deed of Variance which would transfer the property to your name now to avoid this risk. This would remove it from any risk that it might have to be sold when your grandparents die. What you then do with the property can be up to you and your grandparents to decide. The other risk is that if you grandmother is the last survivor of the marriage and the willed house is still in her name, it might have to be sold to meet care home fees if she needed to go into residential accommodation.
As your grandmother doesn't want a lot of hassle on this, I suggest you jointly get an independent financial advisor to ensure that her best intentions for you to benefit don't badly wrong through lack of professional advice or ignorance of all the pitfalls. (Of which there any many in this situation). Good luck. You are very lucky and it would be a tragedy if lack of professional adviced caused this very fortunate windfall to be snatched away from you.