Should my brother and I buy our 91-year-old mother’s house? Do we have to pay taxes on it?

I am looking for help or information on the topic of buying my mother’s house with my brother.

I have a 91-year-old mother who is doing very well at the moment.

Would there be any repercussions if my brother and I bought her house, which is worth about £180,000, and she has about £20,000 in the bank?

We’re just trying to think ahead in case he eventually has to go into a home.

I know that is well below the £325,000 he has to pay in inheritance tax.

But we are not sure if we would have to pay any taxes if we buy her house and let her live there for the rest of her life or if the decision is out of our hands and the authorities say she has to go to a nursing home.

Any information would be gratefully received as we don’t know who to ask.

This is Money’s Tanya Jefferies responds: The plan you and your brother have for relieving your elderly mother of the responsibilities of homeownership may seem simple and sensible at first glance.

However, there are several different tax issues to consider and also potential pitfalls if you buy your mother’s house for less than its full market value and she then needs funding from the local council for its care.

In the latter case, the council could decide that your family was deliberately trying to avoid care expenses and still count the full value of the house in any future financial assessment of your mother for care funding.

We asked an attorney with experience in this area to go over the various issues you need to consider before taking this step (see below for his answer to your question).

You would probably hire a lawyer yourself when purchasing a home, but as you can see from what you say, there are issues beyond the practicalities of transferring ownership that need to be considered on the legal front.

If your mother is in good health and of sound mind, she may need her own attorney to explain the implications of selling her home.

If you and your brother have power of attorney for your mother, the article below involves a very different family situation: in your case, you are clearly trying to act in your mother’s best interest, but it has some useful information about the duties of individuals when selling an elderly relative’s property.

Ben Tyer, partner at law firm SAS Daniels, responds: If you and your brother buy the property, your mother’s financial situation would remain the same because you are simply exchanging the value of the house for cash in the bank.

It would therefore be neutral on inheritance tax and nursing home fees, although it could spend the money more easily.

Your mother should understand that after selling the house, her housing security is at risk.

As the new owners, you and your brother could potentially evict her (although this is unlikely, families often fight).

The property would now be part of your and your brother’s estate, so if either of you were to die, get divorced, or file for bankruptcy, the property could be redirected elsewhere.

There may also be other possible tax consequences for purchasing the property.

For example, if you already own another home, then the purchase would not qualify for Transfer Tax relief and a surcharge of 3 per cent of the value of the property (£5,400) would apply.

Also, if you already own another home, it may mean that if you eventually sell this property for a profit you could incur a capital gains tax charge.

In terms of care home fees, your mother is over the £23,250 threshold (assuming she lives alone) and would therefore have to pay the full cost of any care home fees herself.

Buying the house would be neutral as mentioned above because you would have the money in your bank account instead.

If you and your brother purchased the property at a price lower than its actual value or if the property was transferred into your names free of charge, this would constitute a gift of part or all of the property from your mother.

If you were eventually to enter a care home and the local authority was asked to pay the fees, then they would carry out a financial assessment.

Upon discovering that the property had been given away (in whole or in part for less than its actual value) they can investigate the agreements.

And while your mother is fine, if they could establish that the property was donated for the purpose of avoiding the expense of a nursing home and that she had a reasonable expectation of needing care and support in the future, then they would most likely consider that a “deliberate deprivation of assets.”

This is where the local authority identifies circumstances where a person has reduced their general assets to reduce the level of contribution towards the cost of their care.

That way, they could treat it as if your mother still owned the property and charge you the full fees accordingly.

Or, as recipients of the property, the local authority may make you and your brother liable to pay any outstanding nursing home fees on the basis that your mother is the owner of the property.