Can my retired parents own a house i bond?

[johnjm]

Can OP not guarantee the bond?

 

[Speedster]

Can OP not guarantee the bond?

If the parents are in a position to cover the bond payments this is also an option. Although, if they are advanced in years I would lean towards the trust route.

 

[Nerfherder]

Or they can pay rent, which he can set-off against the interest on the loan, municipal costs etc so there won't be any tax effect.

Its taxable as earning if its a second property - I assume the OP has a property already.

 

[Speedster]

Its taxable as earning if its a second property - I assume the OP has a property already.

Indeed. But the interest on the loan, municipal account and such costs should cover the rental income

 

[newby_investor]

Technically the trust will pay for the loan, but you can donate the funds for this to the trust (remembering your first R100k per year of donations is tax exempt). The bank will have the trustees sign surety on the bond, and will base their affordability calculations on the combined finances of the trustees.

It's pretty easy to go higher than R100k per year if you're "donating" bond payments though. R8,333.33 per month is your limit.

 

[Speedster]

It's pretty easy to go higher than R100k per year if you're "donating" bond payments though. R8,333.33 per month is your limit.

If he's married he can double that

 

[deweyzeph]

If the OP is going to pay the bond he might as well own the house outright and just let his parent's live there rent-free. Any other option is going to be a tax nightmare. Can't see the point of having the house in his parent's name.

 

[WollieVerstege]

Just be careful when using trust. SARS is placing many private trust under a lot of scrutiny.

 

[Speedster]

Just be careful when using trust. SARS is placing many private trust under a lot of scrutiny.

Nothing to be wary of if you're playing above board.

 

[WollieVerstege]

Nothing to be wary of if you're playing above board.

I know. The problem is SARS has changed the rules. So if you make a mistake in how you calculate the tax for a trust, which is more complicated, they can lock you up or impose huge fines. Especially in this circumstance with parents and donations etc.
Unless the property/ estate in question is worth R10m plus I think a trust just adds way to much complexity for little benefit.

 

[heartbroken]

Bit of a complicated solution but try this:

You buy and bond the property in your name and sign a 99 year lease "leashold" with your parents at Rx. Effectively the property is theirs for as long as they live. You charge either a monthly rent or once of payment for this. The rent or once off payment you recognise as a long term loan at x% interest per year (preferably prime or above to avoid additional hassle). You write off R100k per year of this loan as a donation and accrue interest on the balance for all eternity. In your personal will/testament you bestow the balance of the loan to them as inheritance. This way the burden is on you/your estate and your parents will be fine. You can bestow the actual property to them as well in the will provided you have enough collateral or insurance to cover the outstanding bond/costs/taxes

 

[Gozado]

If you have a spouse, siblings and/or children, think through the effects, on them, of each of the suggested scenarios. Make sure that each of your parents, and you, have drawn up proper wills.

 

[RedViking]

What would be the point of that?

Buy a house and put them in it. Why do they need to own it?

 

[*SynergyX*]

What would be the point of that?

Buy a house and put them in it. Why do they need to own it?

its a security thing - its becoming more and more common for parents to hand over houses to their kids and then later be kicked to the curb because they dont get along with daughter in law or kids or something.

so something in their name gives them a sense of security i guess...

 

[RedViking]

its a security thing - its becoming more and more common for parents to hand over houses to their kids and then later be kicked to the curb because they dont get along with daughter in law or kids or something.

so something in their name gives them a sense of security i guess...

So they had a house and gave it away? Where have they been staying up to now?

 

[deweyzeph]

its a security thing - its becoming more and more common for parents to hand over houses to their kids and then later be kicked to the curb because they dont get along with daughter in law or kids or something.

so something in their name gives them a sense of security i guess...

In this context it makes no sense though. If your child is paying for the bond then you're already in an insecure position anyway.

 

[*SynergyX*]

In this context it makes no sense though. If your child is paying for the bond then you're already in an insecure position anyway.

hypothetically the arrangement would be as follows

parents in 60's retired , no source of income - sell house , buy a new house with kid and wife and children so they all live together. so proceeds (or at least part) from the sale go into the purchase of new house where all can live together. parents keep abit of the proceeds for rainy days.

now 2-3 years on problems in marriage coz of parents. space, not getting along. so why dont parents move into own small place that kids bond to keep the peace. but they want security in terms of ownership.

complicated i guess but you can see where this is going....

 

[*SynergyX*]

So they had a house and gave it away? Where have they been staying up to now?

see above..

 

[hellfire]

hypothetically the arrangement would be as follows

parents in 60's retired , no source of income - sell house , buy a new house with kid and wife and children so they all live together. so proceeds (or at least part) from the sale go into the purchase of new house where all can live together. parents keep abit of the proceeds for rainy days.

now 2-3 years on problems in marriage coz of parents. space, not getting along. so why dont parents move into own small place that kids bond to keep the peace. but they want security in terms of ownership.

complicated i guess but you can see where this is going....

Build a cottage for them?

 

[RedViking]

hypothetically the arrangement would be as follows

parents in 60's retired , no source of income - sell house , buy a new house with kid and wife and children so they all live together. so proceeds (or at least part) from the sale go into the purchase of new house where all can live together. parents keep abit of the proceeds for rainy days.

now 2-3 years on problems in marriage coz of parents. space, not getting along. so why dont parents move into own small place that kids bond to keep the peace. but they want security in terms of ownership.

complicated i guess but you can see where this is going....

Sounds like just really bad choices and dysfunctional family.

I would strongly suggest they see someone to help them make good financial and estate decisions.