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My sister and I will in the future each inherit a 50% share of our parents' house.

The house needs immediate significant repairs, amounting to tens of thousands of pounds.

I am prepared to pay the maintenance costs for my parents, but my sister will not pay anything towards those costs.

Is there a way to handle this fairly, so I can get back the value of my "investment" in the property?

Is something like "loaning" my parents the money a good idea, with an agreement that the estate pay me back that loan before the property is inherited?

There is no outstanding mortgage.

4 Answers 4

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Is there a way to handle this fairly, so I can get back the value of my "investment" in the property?

What's "fair" is whatever you both can agree to. If she wants you to pay for the repairs and split the repaired estate 50/50, that's not "fair" but is it worth harming a relationship?

Is something like "loaning" my parents the money a good idea, with an agreement that the estate pay me back that loan before the property is inherited?

That would certainly ensure that you got your money back, but it is not clear how your sister would feel about this arrangement. If she is fine with it, that's not a bad way to approach it.

The cleanest way would just be to let your parents pay for the repairs, or to have them pay you back during their lifetime, then continue to split the estate 50/50.

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    Great - than I think having either your parents or the estate pay you back is appropriate. Whether you want t put that in writing (i.e. in the will) depends on how much you trust your sister :)
    – D Stanley
    Commented Apr 25 at 15:52
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    Don't forget to consider the interest you forego by putting this money up now and not getting repaid until later.
    – Hart CO
    Commented Apr 25 at 20:23
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    @i-am-penguin Keep in mind that what is "fair" depends a lot on interpretation. (e.g. to one person "if you invited me out to a celebratory dinner, you should pay" is "fair" but to someone else "fair" would be "we split the bill 50/50".) What you think is "fair" and what your sister thinks is "fair" is possibly quite different (both of which may be different again from what your parents think "fair" is). Making sure you're all on the same page with respect to what counts as "fair" (possibly by putting it in writing) would be a good idea.
    – R.M.
    Commented Apr 26 at 15:02
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    @i-am-penguin - you mention 'pounds' as your currency, which makes me think you may be a UK resident. I expect you are aware that parental estates can be very much reduced by care charges if the parents turn out to need it later on. Personally I'd hate it if my kids offered to loan me money I needed, provided they got it back when I croaked, and if they wanted interest too, I might be thinking about the cats' home for a new will. Not that I'm judging you; we're all different. Commented Apr 26 at 18:36
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    @i-am-penguin "I won't ask for interest." - Before you do, consult with a financial advisor. In my country, a non-trivial loan with no interest may be viewed as you gifting the interest, which may have tax consequences, and perhaps even affect the loan/inheritance situation. It's worth getting some expert advice to ensure you dot your i's. I also advise discussing the plan with both your parents and your sister, so everyone understands the situation, to avoid nasty surprises later. Family and money can be a tricky combination.
    – marcelm
    Commented Apr 27 at 8:45
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The easiest way would be giving a loan to the parents. Just make sure it is fine in such a way that the estate has to pay you back. If I was in place of the parents, I’d add generous interest to be paid after their demise, and mention the reasons in my will.

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    I'd be careful with paying interest after death according to a will. I don't know about the UK, but in some jurisdictions, this can be treated like an inheritance.
    – Marco
    Commented Apr 26 at 6:53
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    @Marco: There's a subtle difference between interest accruing and paying interest. If the parents don't pay out interest, basically the loan grows. And if the interest is reasonable, it's not a gift either way (parent<>child). After death, the loan plus accrued interest is a debt which should be paid off first before the inheritance is divided.
    – MSalters
    Commented Apr 26 at 13:57
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    There might be income tax implications to accruing interest, particularly with it all being paid out at once "at the end". Commented Apr 26 at 16:36
  • "I’d add generous interest to be paid after their demise" To whom does "their" refer? In this hypothetical, wouldn't the parents be you? Also any interest is coming out of the other child's inheritance. Commented Apr 27 at 3:42
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    Don't know about the UK, but in some jurisdictions, on some loans, there can be tax implications depending on whether the interest rate is at or below some published rate or above it.
    – jcaron
    Commented Apr 27 at 12:01
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You can treat it the same way as investing in a company and change the inheritance split.

Assume the house is presently worth £250,000 (you'll have to agree on a value or get a valuation done). You invest £20,000. The assumed value of the house becomes £270,000.

Of that £125,000 (the prior present value of your inheritance) and £20,000 repair investment are yours. That sums to £145,000. 145k/270k=53.7%, so your share of the inheritance should be increased to 53.7%.

With this system you gain a proportional share of any value appreciation in the future, as you would investing, and is more fair in that aspect.

The downside is that you'll have to have the will changed with the assistance of a solicitor (lawyer) and ideally in such a way to account for future repairs with the same system.

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    Is it really so simple that investing £20k in a house increases the value by £20k? That would depend on what buyers are willing to pay. Maybe OP considers it critical to repair the chimney, but buyers who were going to install a heat pump don't care.
    – gerrit
    Commented Apr 26 at 6:55
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    @gerrit It's true that most home improvement projects will have a return on investment of less than 100%. But even if the £20k investment increases the home value by nothing at all, it would not be fair for the OP to make additional necessary investments in the property with no increase in their ownership stake. The fair price might be somewhere between the actual cost and the expected increase in value. Commented Apr 26 at 15:53
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    @gerrit This is the same as a company issuing and selling stock. The moment the shares are sold, this calculation is true. The company could use the new cash wisely, causing stock price to go up, or they could waste it all, and stock price goes down. Repairs on a house often have a multiplying effect, but they could do something that's out-of-style that new owners hate. You can't predict the future, but this split is fair, at least for a moment, in the present.
    – user71659
    Commented Apr 26 at 16:05
  • @gerrit Presumably the parents value the repairs at an amount higher than the costs, otherwise why is OP making them? Commented Apr 27 at 3:46
  • @Acccumulation It doesn't matter what the parents value it at. It matters what potential buyers value it at.
    – gerrit
    Commented Apr 27 at 13:58
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If you make them a loan, you would be expecting to recoup your investment through repayments, or through the sale of the house later - either when they move or through probate.

It is possible to put a charge on the property at Land Registry to register your financial interest; all co-owners must agree (but not any beneficiaries of a will, since the will has no force until somebody dies).

During probate, the value of the debt would be deducted from the value of the estate before it is divided according to the wishes of the deceased.

Some wrinkles:

  1. If the property is owned in joint names as 'joint tenants', each holder owns 100% of the property. It therefore passes to the other person irrespective of what any will says. If there is insufficient funds to pay off the debt from the other assets of the deceased, then I believe it's possible for the debtor to enforce repayment of the debt by forcing a sale or putting a charge on the property for the remaining tenant.

  2. If the property is owned as 'tenants in common' it means each party has a fixed share (eg 50%). Each party's share is theirs to leave to whom them wish in their will, and disposed of like other assets they own. If the debt is in one name then it is unaffected by the death of another party. I'm not sure but I'd guess you can put charges on the property on individual tenants.

  3. If you give cash as a gift, it will be added to the value of the estate. If the estate is over the threshold for inheritance tax then tax would be charged on the balance. For example, suppose the house in its current state is worth £1 million and you gave them £100k, and then they died before spending any of it. The tax would be due on £1.1million minus allowances. If you made a loan, the house would be worth £1million and they'd have £100k in the bank but they would owe £100k, so the estate would be taxable on £1million minus allowances. (Married/civil partnered couples are typically allowed to pool their allowances, so there is no tax due on the first death and the combined allowance applies on the second. This doesn't apply if unmarried/divorced)

  4. Possession of a substantial chunk of money in the bank may affect their circumstances in other ways, eg eligibility for state benefits. You would need to confirm how this interacts (eg people with a mortgage are still subject to those limits - 'savings' are counted, even if your outstanding mortgage balance is much greater than the savings balance)

IANAL or tax accountant, I would seek professional advice before proceeding, and in drawing up any loan contract.

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