As my parents get older, their savings are dwindling, and SS is not enough money to keep bills at bay. They have the equity of their home, though. Rather than taking out a reverse mortgage, I'm wondering how I could give them some of my income over time, like to slowly purchase the house from them. Is there a way that I can purchase the home over time, with it still remaining in their possession? How would someone structure this legally, and how does this effect a will situation.
There is no reason in principle you should not sign a contract saying that, for example, every year you will pay them £x, and in return another 2% of the house becomes yours. You will, however, absolutely need to consult a solicitor, as something unusual like this is full of potential traps. Two I can think of immediately;
- The value of the house may rise (or fall) over time. £x for 2% may be reasonable now, but in ten years time you could fall foul of money laundering regulations or be seen to take advantage of frail old people; transactions not for market value always draw unwelcome attention, and can occasionally be overturned by the courts.
- If you do not benefit from your share of the house, HMRC can and will treat this as the common "I'll give you half the house to reduce estate duty, but on condition that you do not do anything with it until I die" loophole, which has been comprehensively closed by legislation. In early years, it may be that your benefit is gaining an appreciating asset without paying your share of bills like council tax; but at some point you will have to charge your parents rent (nullifying some of the point of giving them additional money), or risk the taxman treating the transfer as void (which would presumably mean you had increased the amount in the estate, and the tax payable).
Do let us know what you decide: this is an interesting question.
You could have them sell the house to you, and have them provide vendor finance. (ie they would take the position a bank would take and provide you with a mortgage).
You would additionally (and make the sale contingent on) signing a rental agreement with them so that they had possession [ for, for example, 50 years or until they died or gave notice ].
In any way, @DaleM is absolutely correct, from a practical POV you would need to have a lawyer handle it (they are probably needed for conveying the property anyway), and an accountant is a good idea to as stucturing the deals will probably have tax implications depending on everyones circumstances.