Gift with reservation

No the brother will not get the house if his father still owns it when he dies. The value will be added to the estate and he will share that equitably with the other siblings. He will probably have to move out so that the house can be sold and the money shared out between him and his siblings.

If someone dies intestate their spouse is entitled to the first £250,000 of the value of the estate and personal belongings. The balance is shared equally between spouse and children.

AS you say the father is free to do what he likes with his assets, but if he doesn't have a will his estate will be distributes under the laws of intestacy, which may well not accord with his wishes, so if he has any sense he will make a will. If he doesn't he is a fool.

Thank you for fellow Gransnetters for all your comments and advice ( only just read them as Dh and I have had a much needed weekend away).
Apparently my DF went with niece to a solicitor and the Gift with Reservation was drawn up. Niece is currently purchasing her own property and has promised to pay DF some money as soon as she can afford it but this would be for half the market value of the house which my DF then proposed distributing to myself and siblings. I wouldn't feel so annoyed if said niece had just bought the blooming house from DF at market value. I couldn't believe that DF had been to a solicitor and not drawn up a will as some of you have pointed out, its very messy. I suppose my DH is annoyed as he feels that our DD the other grandchild has not been considered in all this and has taken it personally.
My DF plan is that he and DM will continue to live in the property rent free until the end of their days and my brother will stay in the other house my DF owns. I should add that neither of these two properties are in particularly good condition although habitable and unlike to meet the threshold for inheritance tax, however with some investment both would be valuable as resale or rental properties. Therefore my niece could end up with a nice little 'nest egg'.

Yes, she could, but again, you can invest the money you receive and increase your "share" that way, too. Also, Monica makes a good point, that brother probably won't be able to stay in the other house, once df is gone, unless df makes a will that says it goes to him.

But wait... the niece is YOUR niece? I thought she was HIS/your first cousin. So he's favoring one GC over the others? And dm is going along with this? I see why dh is angry. It's still their call but favoritism is still wrong, and this looks like favoritism to me. I don't blame you for being upset that she's only going to pay half the value (if she does that), but what can you do?

I couldn't imagine just abandoning my elderly parents, despite the favoritism. Perhaps cut back on contact, but keep up with them enough to make sure they're reasonable healthy and "ok."

Lilyflower, I'm sorry about what happened to you. But I'm not sureprised. Iv heard about stuff like this all my life. That's why I always say people with kids from a previous marriage should have a prenup, give their own kids their "inheritance" while still alive or leave money to them separately and directly. Some sps can be trusted to leave the sc the money they said they would but not all.

Why is your niece paying only half the market value? How will she afford it while also buying her own property?

I'm guessing this is an under the radar deal, whereby your DF feels he's getting one over on officialdom and your niece is getting a property on the cheap, or free, the gift with reservation having been set up to look like it isn't a sale, and DF letting the house go cheap as he thinks it saves him bother.

Yes farnorth. A form of money laundering really.

I'm amazed that any solicitor has condoned this arrangement.

The solicitor probably hasn't been told about the payment to be made.

If it ever is made.

Nobody should ever try to be too clever by half and try and trick either the law or the revenue, it will all catch up with you in the end and the result will be a very expensive mess.

A lot of family unpleasantness and rows could be saved if families would only just be prepared to pay for proper legal advice and make wills etc. It isn't that expensive, most families will pay much more for a holiday or a replacement car, without concern and then balk at £500 to sort out a will that ensures an equitable way to share out their assets at death. We first made our wills after the birth of our first child and have revised them roughly every 10 years ever since.

And as I have said the Gift with Reservations is entirely ineffective in saving the gentleman concerned either from the house being sold to meet care costs, or from inheritance tax because he is continuing to live in it and is not paying a market rent to his relation (hence the first para).

M0nica has written a good post. This is a website that may be helpful.

www.taxationweb.co.uk/tax-articles/inheritance-tax-iht-trusts-estates-capital-taxes/gifts-with-reservation-the-rules-explained.html

I wonder what your father thought he would achieve by giving your niece a gift with reservation.

This explanation seems to be clearer.

abbeytaxblog.co.uk/2013/11/19/inheritance-tax-gifts-with-reservation/

My grandfather was relatively well off and gave his house and business (run from the property) to his son-in-law with the proviso that he and granny could live in the house rent free until death. Nothing drawn up legally to cover this handshake agreement and no money changed hands.
A few years go by and son-in-law sells the house and business as a going concern and grandparents have no choice but to move out and into sheltered council housing.
Grandfather dies and granny has dementia and comes to live with my parents (her other daughter) as son-in-law and other daughter have moved to a luxury retirement bungalow and don't want to know.
My mum inherited nothing and had to give up work to look after granny until she died. I was a young teen at the time. We were not well off. Had outdoor loo and no central heating until I was about 16.
I loved my grandparents, but bloody hell, my granddad was stupidly trusting and naive.

Exactly Craicon! "Handshake agreements" are no good - things need to be written up legally.

But it seems the op's df did work with a solicitor. There do seem to be some loose ends though, like not knowing if niece will actually pay back the money. I don't get how the solicitor didn't catch that or maybe just didn't care.