Advise Required Please - Purchasing with Another

I would like to get some opinions on a structure set up of a property I would like to purchase.

My situation, I have a PPOR and two investment properties. All are mortgaged with the same lender. The two IP are in my name and the PPOR is in mine and my wife's name, in Tenants in Common (we purchased not long after getting together).

I would now like to purchase a property with a family member. I know the rules about business with friends and family and in this case I'm prepared to take the risk as this family member will be living in the property, is essence I would like to go halves with her in a villa. The villa's I'm looking at are about $500K, the family member will have half of the money in cash and I intend to borrow as much as I can towards this. We will come to an agreement and the family member will pay half of the normal rent.

The family member is elderly and when they become deceased they wish for their half of the property go to my wife and I. This is very important as unfortunately she is also connected to people who are oxygen thieves and welfare cheats and I can see things getting messy down the track.

I would like some advise how this should be structured. There are several options that I see how this could be structured.

1. Put the property in my name, my wife's name and her name and tenants in common. I will obtain a mortgage for our half of the property.

2. Set up a Family Discretionary Trust and have all three of us as the beneficiaries of the trust.

Can someone please give me some options as I'm probably on the wrong side of the garden path.

Thanks
 
You can't mortgage half a property so any loan will need to have all owners on it. Deductibility of interest generally is in proportion to ownership interest.

You don't say what state the property is in but you need to consider land tax.

There is also a chance that you or wife may predecease the other person too.
Generally if buying as joint tenants there is less chance that the property can be attacked on death, but not always and especially not in NSW.

Is anyone of you going to live in this property?
Without knowing all the circumstances a joint tenant arrangement may be worth considering.
 
You can't mortgage half a property so any loan will need to have all owners on it. Deductibility of interest generally is in proportion to ownership interest.

You don't say what state the property is in but you need to consider land tax.

There is also a chance that you or wife may predecease the other person too.
Generally if buying as joint tenants there is less chance that the property can be attacked on death, but not always and especially not in NSW.

Is anyone of you going to live in this property?
Without knowing all the circumstances a joint tenant arrangement may be worth considering.


Thanks for your quick replies.

Sorry property will be in WA.

I hope to god my wife and I (early 30's) don't predecease a 69 year old women....but as we well know disaster can strike tomorrow if not tonight.

Yes my family member (mother in law) will reside in the property until she can physically no longer manage which is hopefully many years away. She has the means to pay her share of the rent for the rest of her life.

And when she becomes deceased she wishes for her half of the property to go to her daughter, my wife.

She could purchase by herself but it would be to much of a stretch financially for her. Maybe I should take the other advise and run......

Regards,
 
Another option would be to purchase in mum's name only and then inherit. She could then get the main residence CGT exemption and land tax exemption.

You also need to consider social security - pensions.
 
If she has $250k cash can she compromise on getting the $500k place and buy something outright with her money to live in? Not ideal but a lot less messy that way.
 
Rule # 1 Never do business with family !!

OK, if you insist, my thoughts are

Is your wife the only child, if not, beware of bludgers and apply rule one.

If she is the only child then I would consider buying it in joint names, wife and MIL, when MIL dies your wife inherits. Loan to be in same names as title deed, wife to make the repayments.

As this could be a long term thing, average female age is in the 80s now so could be 15 years or more, have you factored in that you and the wife may split up?

If you are on the loan but not on the deed that is a problem, if you are on the deed then still more problems.

Always tricky these things.
 
Be aware MIL may have to access money if she requires nursing home entry. This may necessitate sale of the property unless she has other assets.
Marg
 
Firstly, as someone fast approaching mid 50s, calling someone who is 69 "elderly" kind of rankles :D.

Anyhoooo, I'm wondering who the no hopers are that are likely to cause problems down the track. I'm one of three children, two upstanding citizens, one dip$hit. My mother tried her darndest to look after him without allowing him to get his hands on an asset.

It backfired spectacularly, mainly due to the bad decisions made by their lawyer in drawing up the wills. Looooong story that doesn't need to be told here.

Anyway, dip$hit who couldnt work a day in his life, somehow managed to find a bulldog lawyer/barrister who really went for the jugular and played really dirty. We were faced with a long drawn out court battle, likely losing one third of the estate to the lawyers (even if we won, which was likely), or giving in and handing the dip$hit almost one third of the estate. We chose the latter. He is now quite wealthy, but it won't change that he is a sad, pathetic loser. He will more than likely pi$$ away the money and end up where he belongs, in the gutter.

What I guess I am saying is that you need to see a GOOD lawyer. I'd start with Terry_w.

If you can manage to look after your wife's interests at the sad time when her mother dies whilst giving her somewhere safe to live until that time, and if the "no hopers" are not your wife's siblings, and therefore probably have a good case to claim on the estate, you should at least see what you can do.

Are you wanting to do this to provide cheap housing for your MIL or to gain an IP down the track? I think this question is important. Marg's point is also very valid. Your wife's mother could give your wife money now (could be clawed back if contested?) and you allow her to live almost rent free. The deeming rules will mean she is deemed to still have the funds for a number of years in regards to a pension. But if she needs nursing home care, how is that paid for? Your wife could pay the bond and it would be returned to her (slightly depleted) at the time of her mother's death.

Sorry to talk about such things, but this is pretty much what the question is about. Planning an estate. You do need very good advice.
 
If she has $250k cash can she compromise on getting the $500k place and buy something outright with her money to live in? Not ideal but a lot less messy that way.

The diff3rence in quality of life in a 250k place vs a 500k one would be quite large.

Sure the situation being described here isn't entirely straightforward but it's hardly a big deal either, not sure why people get so freaked out when it comes to buying things with family members
 
Firstly, as someone fast approaching mid 50s, calling someone who is 69 "elderly" kind of rankles :D.

Anyhoooo, I'm wondering who the no hopers are that are likely to cause problems down the track. I'm one of three children, two upstanding citizens, one dip$hit. My mother tried her darndest to look after him without allowing him to get his hands on an asset.

It backfired spectacularly, mainly due to the bad decisions made by their lawyer in drawing up the wills. Looooong story that doesn't need to be told here.
Anyway, dip$hit who couldnt work a day in his life, somehow managed to find a bulldog lawyer/barrister who really went for the jugular and played really dirty. We were faced with a long drawn out court battle, likely losing one third of the estate to the lawyers (even if we won, which was likely), or giving in and handing the dip$hit almost one third of the estate. We chose the latter. He is now quite wealthy, but it won't change that he is a sad, pathetic loser. He will more than likely pi$$ away the money and end up where he belongs, in the gutter.

What I guess I am saying is that you need to see a GOOD lawyer. I'd start with Terry_w.

If you can manage to look after your wife's interests at the sad time when her mother dies whilst giving her somewhere safe to live until that time, and if the "no hopers" are not your wife's siblings, and therefore probably have a good case to claim on the estate, you should at least see what you can do.

Are you wanting to do this to provide cheap housing for your MIL or to gain an IP down the track? I think this question is important. Marg's point is also very valid. Your wife's mother could give your wife money now (could be clawed back if contested?) and you allow her to live almost rent free. The deeming rules will mean she is deemed to still have the funds for a number of years in regards to a pension. But if she needs nursing home care, how is that paid for? Your wife could pay the bond and it would be returned to her (slightly depleted) at the time of her mother's death.

Sorry to talk about such things, but this is pretty much what the question is about. Planning an estate. You do need very good advice.

PM me with details of his and your legal team if you want feedback!

That looong story is exactly what forumites want to hear. Start a new thread and change names to protect privacy.
 
It backfired spectacularly, mainly due to the bad decisions made by their lawyer in drawing up the wills. Looooong story that doesn't need to be told here.

Yes WYlie I would be keem to hear about how the will drafting effected things.
 
Gee I seem to put a lot of my information on this forum :D.

Having been bent over by the legal system, I will put my story down, send it to cu@thetop and Terry_w. I have nothing to hide but plenty to fear (possibly?)

I'd be keen that you both (being solicitors) read my story and remove anything that could see me risk being sued for defamation or libel (or anything like that). I won't name names obviously on the forum, but happy to put the story out there so others make better choices when estate planning.

Give me a day or two though as I'm working tomorrow and have a birthday party to attend tonight.
 
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