Latest news with #intergenerationalLiving
Daily Mail
28-05-2025
- Business
- Daily Mail
I'm 80 and want to move in with my son and his family, will it create a tax trap?
My wife and I are 80. What are the tax implications and pitfalls, if we sell our house and buy another jointly with my son and his family in order to live together? What can we do to mitigate these? A.S, via email SCROLL DOWN TO ASK YOUR FINANCIAL PLANNING QUESTION Harvey Dorset, of This is Money, replies: Moving in with family can help people see enjoy their later years in comfort, with the help they need along the way from loved ones. Having grandparents on hand can also be a vital help for working parents too. Intergenerational living won't be without its tricky moments but it is a great way to spend precious years together as a family and see more of your grandchildren. It also allows families to pool their financial resources and potentially get a home, space or location, that they might not be able to alone. You are right to check up on the tax implications though, as this kind of joint ownership can have an impact on everything from stamp duty to inheritance tax. You don't state how much your existing home is worth or what the new one will cost. The financial advisers we spoke to explained this will make a difference to whether you need to worry about inheritance tax and how complicated things may be. Ian Dyall, head of estate planning at Evelyn Partners, replies: The two taxes you need to be aware of are inheritance tax and a form of income tax called 'pre-owned asset tax', which was introduced in 2005 as an anti-avoidance measure to target people who were managing to sidestep the inheritance tax rules. Let's talk about the principles of inheritance tax first and then we can apply it to your case. If you reduce the value of your estate by making an outright gift, that will only be effective in reducing your inheritance tax liability if there is no 'reservation of benefit'. You also generally need to survive the gift by seven years before it ceases to be included in your estate unless it is covered by one of the exemptions. A reservation of benefit occurs where you continue to use or benefit from an asset that you have given away, for example giving away a property but continuing to live in it. In your case, whether there is a deemed lifetime gift for inheritance tax will depend on who pays for the new property and how it is owned. If you take the proceeds of your current home and use it to help purchase the new property, but the property is owned solely by your son and his wife, then a gift has happened for inheritance tax purposes. However, if you then live in that property rent-free, it is likely to be treated as a reservation of benefit for inheritance tax purposes. The value would remain in your estate and will be liable to IHT on death, irrespective of how long you live after making the gift. If the new property is co-owned with your son in proportion to how much each of you have contributed, then there would be no gift and only your share of the property would be liable to inheritance tax on your death. If the property were solely owned by your son and his wife, you could avoid the reservation of benefit by paying a market rent for your use of part of the property. You would need to get a professional to determine a fair rental value of your use of part of the property, and your son would be liable to income tax on the rent, but in some cases that may be worth paying if you think you are likely to live seven years but not an excessive period beyond that. If you no longer own a share of a property on death, you may be worried that you will lose the 'residence nil rate band', which is an inheritance tax allowance that can be used if you leave your home to your children and grandchildren on death. However, 'downsizing provisions' exist to allow people to downsize or sell their home later in life without losing the allowance, so you should not lose any of the allowance that you would have been entitled to. Make sure you get ownership set up properly Patrick Haines, partner at Partners Wealth Management, replies: There should be no tax issues (other than potentially stamp duty) on the planned move to the new 'family home'. For inheritance tax purposes, you may have available a tax-free nil rate band each of up to £325,000 and an additional tax-free residence nil rate band each of up to £175,000 (certain conditions apply to the latter). This can provide a tax-free estate of up to £1million. Where your estate is valued within the above limit, there may potentially be no inheritance tax due on your estate on the last to die and your son and family could ordinarily live with you in the meantime without any tax implications. A properly drafted will should be arranged. For larger estates, inheritance tax is usually payable at 40 per cent on your estate in excess of these allowances. In this case, there are further considerations and these relate to how the property is legally owned from outset and also your life expectancy. To meet your objectives, the ownership of the property in this case could be arranged as tenants-in-common where you will typically own 50 per cent and your son would own the other 50 per cent. We would recommend an equivalent sharing of the running costs as well. You could then take advantage of a co-ownership discount, which HMRC permits where the co-owner is not a spouse or civil partner. Your son can remain in occupancy for a discount to apply. On the successful application following the death of the 50 per cent co-owners, a discount of up to 15 per cent of the value of the deceased's share can be applied. The other 50 per cent owners would continue to own their share. In our example, if you as parents pass away within seven years, the 50 per cent share you have given to your son on the purchase of the new property would fall back into your estate. Where the total estate value exceeds the available nil rate bands, then inheritance tax may be due on the excess. The gift to your son of the 50 per cent share is called a potentially exempt transfer (PET) and this gift will fall outside your estate for inheritance tax if you survive a seven-year period. For 'failed PETs' where the 50 per cent gift to your son is in excess of the available nil rate bands of £325,000 each, taper relief may apply to the excess which can reduce the tax payable. Be mindful that the inheritance tax on any failed gifts might need to be met by the beneficiaries. Inheritance tax on jointly owned property is rarely straightforward and whether or not tax has to be paid will depend on several factors, including the status of the person inheriting and their relationship with the deceased, how the property was jointly owned, the type of the property concerned and details of occupancy. Caution: tax planning around the main residence and joint property ownership can be fraught with danger, particularly where circumstances change or relationships deteriorate so professional legal advice from a qualified solicitor is strongly recommended. Help with financial advice and planning Financial planning can help you grow your wealth, sort your pension, or make sure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement and inheritance tax planning. If you are looking for help sorting your finances and want to work out whether you need advice, planning, or coaching, the following links can help you understand more: >Do you need financial planning or financial advice - and is it worth it? > Financial advice: What to ask and how much it might cost > Are you retirement ready? Take our quiz and get financial planning help > Inheritance tax planning - what you need to know to protect your wealth What is pre-owned asset tax? Ian Dyall adds: If you sell your property and give the cash to your son who uses the money to buy a property in his name, which you then live in, there is an argument that the reservation of benefit rules do not apply. In this case you could be liable to pre-owned asset tax. This is an income tax charge paid annually on the perceived value of your occupation of the property. You can avoid it by electing to have your contribution towards the property treated as a reservation of benefit, or again by paying a market rent. Its application is complex and it is easy to unwittingly fall within the scope of the tax through actions driven by motives unrelated to tax planning. The bulk of UK wealth is held in people's homes, so successive governments have made it difficult to mitigate the inheritance tax liability on your main residence, introducing new legislation to block loopholes when necessary. If your share of the new property is worth less than the proceeds from your existing home, then planning with the funds you have released by downsizing may be the simplest approach to mitigating inheritance tax. Get your financial planning question answered Financial planning can help you grow your wealth and ensure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement, tax planning and inheritance. If you have a financial planning or advice question, our experts can help answer it. Email: financialplanning@ Please include as many details as possible in your question in order for us to respond in-depth.
Forbes
09-05-2025
- Business
- Forbes
Forbes Best Places to Retire in 2025 List - Top Cities For Retirees
After years spent enduring high taxes and four-hour-long round-trip commutes to his job in Los Angeles as an insurance adjuster for large commercial claims, Andy Costa wanted to escape in retirement from the costs and hectic pace of Southern California. And like many folks contemplating retirement, Andy and his wife, Doreen, a retired middle school teacher, also wanted to be near family. So last year, the Costas, both now 62, sold their home in Rancho Santa Margarita in Orange County and bought one on the outskirts of Greenville, South Carolina, that cost hundreds of thousands less and was 90% larger—big enough, in fact, that their daughter, son-in-law and two grandkids, age 4 and 2, moved in with them. How is intergenerational living going in this fast-growing area at the foot of the Blue Ridge Mountains? 'Terrific,' Andrew says. 'And there's no traffic.' Greenville is one of the 25 picks on Forbes' Best Places To Retire In 2025 list, which highlights locales offering a high quality of life in the U.S. at a comparatively affordable price. We compared more than 950 sites, with housing costs being a major factor. Since 2020, the median price of single-family homes nationwide has jumped 50% to $404,000, according to the National Association of Realtors. Greenville, for its part, has a median home price of just $317,000, 22% below the national median, contributing to an overall cost of living that's 9% below average. By design, 22 of the 25 places on our new list have median home prices at or below the national median and four—Iowa City, Iowa; Lincoln, Nebraska; Pittsburgh, Pennsylvania; and San Antonio, Texas—are under $300,000. Only three honorees have a median home price above the national one, with the most expensive being Raleigh, North Carolina, at $440,000, 9% above the national median. The next highest, college town and state capital Madison, Wisconsin, weighs in at $408,00, just 1% above the national median, while new-to-the-list Pasco, Washington, 225 miles southwest of Seattle, is $406,000. The median price in The Villages, our sole Florida pick, sits at $404,000, the national median. (You can read about the intriguing way one couple settled on The Villages here.) Overall, our new list features choices in 19 states and all four domestic time zones, with a roughly even split between colder and warmer climates. Chilly Fargo, North Dakota, is the only city appearing for all 15 years we're compiled this list. Pittsburgh, which also has frosty winters, is another of our perennial favorites—on the list for 13 of 15 years and for the eighth year in a row, despite its above-average crime rate. Besides basic costs, our selection process weighs such metrics as state taxes, prospects for the local economy, air quality, serious crime and the availability of primary care doctors, as well as whether a place encourages an active lifestyle by making biking or walking convenient. As we have since 2020, we screen for natural hazard and climate change risk, ruling out places with the very highest danger, as measured by the Federal Emergency Management Agency (FEMA) National Risk Index, which evaluates 18 natural hazards ranging from hurricanes and tornadoes to heat waves and extreme cold. Downtown Greenville is built along the banks of the Reedy River with a 32-acre park overlooking a natural waterfall. Between the Reedy and a network of creeks, parts of the area are prone to floods, particularly when events like last year's Hurricane Helene bring heavy rain. But the city is still 200 miles inland from the coast and has a favorable relatively moderate risk rating from FEMA. The Costas' method for picking a retirement spot was distinctly personal. In 2023, the whole family went to a wedding in Greenville and their daughter and son-in-law fell in love with it. While the city's population is just 75,000, it's part of a growing metropolitan area of 900,000, which offers urban amenities like restaurants and live performances, plus lots of parks and paths, as well as nearby mountain trails and kayaking. The young couple, who were living in a tiny condo they owned in Southern California and had work-from-home jobs, were frustrated that they'd never be able to afford a larger space in California and figured they could in Greenville. But before they could move, Andy and Doreen decided they'd retire to Greenville themselves and tap their considerable Baby Boomer housing wealth for a family-style solution. Natives of Long Island, New York, the Costas had moved to the West Coast in the 1980s and bought their smaller Rancho Santa Margarita house new in 1996, raising two kids there while it rose sixfold in value. With a big living space now a priority, they bought in Simpsonville, a Greenville suburb. Andy ticks off the benefits of their new life: They get to watch their grandkids grow up and will have help in old age. Their daughter's family has no mortgage payment (and so can save for the kids' college and their own retirement) and eventually will inherit the house, a tax-saving arrangement. Moreover, the new retirees can travel all they like, 'without having to worry about someone watching our house while we were away.' Upcoming: an Alaskan cruise. Our 25 best retirement picks are listed below in alphabetical order. A description of Forbes' full methodology and how to use it in your own retirement search, is here. Doug Geniesse/500px/Getty Images Rapidly growing outdoorsy suburban desert community of 41,000, 35 miles east of Phoenix up against the Superstition Mountains. Pros: Median home price of $382,000, 5% below national median. Scenic dry climate (but very hot in summer). Above-average ratio of primary care physicians per capita. Good retiree tax climate: flat state income tax of 2.5%, with Social Security exempt and no state estate/inheritance tax. Cons: Violent crime rate above national average, air quality a problem. Brian Jannsen/Alamy Traditional college town (University of Georgia) of 130,000, 70 miles east of Atlanta. Pros: Median home price of $333,000, 18% below national median. Agreeable climate. Above-average ratio of primary care physicians per capita. Good retiree tax climate. State income tax is a flat rate of 5.39%—with planned drops in future years—after $24,000 standard deduction for a couple, with Social Security plus up to $65,000 per person of retirement income exempt. Cons: Serious crime rate somewhat above national average. So-so economy. halbergman/Getty Images Rejuvenated former steel center of 80,000 and college town (Lehigh University, Moravian College) in Lehigh Valley, 75 miles north of Philadelphia and 85 miles west of New York City. Pros: Median home price of $334,000, 17% below national median. Above-average primary care physicians per capita. Good air quality. Very low serious crime rate. Good retiree income tax climate. State income tax is a flat rate of 3.07% with Social Security and most retirement income exempt. Cons: State inheritance tax hits entire estate and all heirs other than a spouse. Cold winters. City of College Station Proud home of Texas A&M University and a population of 128,000, 85 miles northwest of Houston. Pros: Median home price of $347,000, 14% below national median. Abundant doctors, good air quality, very bikeable. Very low serious crime rate. No state income or estate tax. Good economy. Cons: Not very walkable. Hot, humid summers. Sean Pavone/Alamy Multiple college town (University of Missouri, Stephens College, Columbia College) of 131,000, midway between St. Louis and Kansas City. Pros: Median home price of $306,000, 24% below national median. Excellent ratio of primary care doctors per capita, good air quality. Top state income tax rate, which covers most filers, just lowered to 4.70%, with no taxation of Social Security. No state estate or inheritance tax. Cons: Serious crime rate just above national average. Not very walkable. DenisNorth Dakota's largest city, population 138,000, touches Minnesota across the Red River of the North. Pros: Median home price of $305,000, 25% below national median. Good ratio of primary care doctors per capita. Good air quality. Very bikeable. Fairly good retiree tax climate; state income tax tops out at 2.30% for couple with taxable income above $275,100, after federal standard deduction. No state tax on Social Security or estates. Cons: Cold winters. Serious crime rate above national college town (Furman University, Bob Jones University) of 75,000 in South Carolina's Blue Ridge Mountains region, midway between Atlanta and Charlotte. Pros: Median home price $317,000, 22% below national median. Excellent ratio of primary care doctors per capita, agreeable climate, somewhat walkable and bikeable. Good air quality. No state estate/inheritance tax. Cons: Serious crime rate above national average. While dropping, state income tax is still a relatively high 6.2% for couples with taxable income about $17,830 after federal standard deduction (but no tax on Social Security and $10,000 per person of other retirement income).Esteemed college town (University of Iowa) of 76,000 in southeastern Iowa. Pros: Median home price $289,000, 28% below national average. Very good ratio of primary care physicians per capita. Good air quality. Very bikeable. Good state tax climate; state income tax is now a flat 3.8%, with no tax on Social Security or other retirement income, and no estate/inheritance tax. Con: Cold college town (University of Kansas) of 97,000, 40 miles west of Kansas City. Pros: Median home price of $318,000, 21% below national median. Good ratio of primary care physicians per capita. Good air quality. Comfortable climate. Very bikeable. Serious crime rate is considerably below national average. Con: So-so retiree state tax climate; marginal state income tax tops out at 5.58% for couples with taxable income above $46,000 (but is no longer levied on Social Security benefits).Celebrated "Horse Capital of the World" and college town (University of Kentucky, Transylvania University) of 320,000, in central Kentucky. Pros: Median home price of $316,000, 22% below national median. Excellent ratio of primary care physicians per capita. Good air quality. Low serious crime rate. Good retiree tax climate; flat state income tax of 4.0%, with Social Security, plus up to $31,100 per person of retirement-type income exempt. Cons: State inheritance tax, although money left to close relatives is exempt. Not that capital and college town (University of Nebraska) of 297,000, 50 miles southwest of Omaha. Pros: Median home price of $283,000, 30% below national median. Adequate ratio of primary care doctors per capita. Good air quality. Very bikeable, somewhat walkable. Cons: Retiree state tax climate still so-so, though improving. Marginal income tax rate is 5.01% for couples with taxable income above $48,250, and tops out at 5.2% for those over $77,730. Social Security still partially taxed. State inheritance tax hits anything left to relatives other than spouse, with partial capital and college town (University of Wisconsin) of 284,000, 150 miles northwest of Chicago. Pros: Median home price of $408,000, 1% above national median. Terrific ratio of physicians per capita. Good air quality. Very walkable and bikeable. Low serious crime rate. No state income tax on Social Security or government retirement plans. No state estate tax. Cons: Cold winters. State income tax marginal rate is 5.3% on couples with taxable income above $39,150 and hits 7.65% for incomes above $431, town (University of Delaware) of 30,000, midway between Philadelphia and Baltimore. Pros: Median home price of $351,000, 13% below national median. Good number of physicians per capita, good air quality. Serious crime rate below national average. No state sales tax, no state estate/inheritance tax, no state income tax on Social Security, state income tax breaks on pension income. Con: Marginal state income tax reaches 6.6% for a couple with taxable income of just $60, city of 82,000 on the sweeping Columbia River in the Tri-Cities area, 225 miles southeast of Seattle. Pros: Median home price of $406,000, 1% above national media. Good number of primary care physicians per capita. Good air quality. Very comfortable climate. Serious crime rate below national average. No state income tax. Cons: State has an estate tax and a 7% 'excise tax' on certain investment gains above $270,000. Not very walkable or guard western Pennsylvania city of 304,000 full of rivers (Allegheny, Monongahela, Ohio) and colleges (Carnegie Mellon University, University of Pittsburgh, Duquesne University, Chatham University). Pros: Median home price of $231,000, 43% below national median. Excellent ratio of primary care doctors per capita. Very bikeable and walkable. Good retiree tax climate: State has flat 3.07% income tax and excludes Social Security benefits and most retirement income. Cons: State inheritance tax hits entire estate and all heirs other than a spouse. Serious crime rate above national average. View of downtown Raleigh, North Carolina with blue sky background. State capital and college town (North Carolina State University, Shaw University) of 494,000 in the famous Research Triangle of eastern North Carolina. Pros: Median home price of $440,000, 9% above national median. Good ratio of primary care doctors to patients. Good air quality, comfortable climate. Very bikeable. Good state tax climate for retirees; state income tax just lowered to a flat 4.25% (and is scheduled to drop to 3.99% in 2026) with Social Security benefits exempt. Cons: Not very walkable. Serious crime rate above national of celebrated Mayo Clinic and 123,000 people, 85 miles southeast of Minneapolis on the Zumbro River. Pros: Median home price of $328,000, 19% below national median. Truly outstanding ratio of primary care doctors per capita. Good air quality. Low serious crime rate. Very bikeable. Cons: Cold winters. Difficult retiree tax climate: Depending on income, Social Security is taxed as part of progressive state income tax that hits 9.85% for taxable income above $330,410 for a couple, with a 1% surcharge on investment income over $1 South Texas city of 1.5 million, country's seventh-largest city by population. Pros: Median home price of $252,000, 38% below national median. Ratio of primary care physicians to population near national average. Somewhat bikeable. No state income or estate tax. Cons: Serious crime rate above national average. Not very river city of 148,000, 30 miles inland from Atlantic Ocean, noted for its historic city squares. Pros: Median home price of $322,000, 20% below national median. Comfortable climate, mild winters. Good air quality. Good ratio of primary care physicians per capita. Very bikeable. Good retiree tax climate: State income tax is a flat 5.49% after $18,000 standard deduction for couple and exemption for Social Security plus up to $65,000 per person of retirement income. Con: Relatively high (but not very high) rating on FEMA National Risk Index. Sioux Falls waterfalls in downtown South Dakota's largest city, population 220,000, along scenic Big Sioux River, 240 miles southwest of Minneapolis. Pros: Median home price $326,000, 19% below national median. Excellent ratio of primary care physicians per capita. Good air quality. Very bikeable. No state income or estate/inheritance tax. Relatively moderate vulnerability to natural hazards. Cons: Cold winters. Not very river city of 230,000, 280 miles east of Seattle. Pros: Median home price of $390,000, 3% below national median. Good ratio of primary care physicians per capita. Very bikeable, pretty walkable. No state income tax. Cons: State has an estate tax and a 7% "excise tax" on certain investment gains above $270,000. Cold winters. Davel5957/Getty Images Vibrant sunny Sonoran Desert city of 550,000 with major college (University of Arizona), 65 miles north of Mexican border. Pros: Median home price of $329,000, 19% below national median. Good ratio of primary care doctors per capita. Very bikeable. Flat state income tax of 2.5%, with Social Security exempt and no state estate/inheritance tax. Cons: Very warm summers. Serious crime rate above national average. halbergman/Getty Images Rapidly growing senior-citizen-oriented town of 155,000, 50 miles northwest of Orlando. Pros: Median home price of $404,000, at national median. Mild winters, good air quality. Low serious crime rate. Primary care physicians per capita near national average. No state income or estate tax. Con: Not very largest city, population 457,000, on the Atlantic Ocean at the mouth of Chesapeake Bay, 200 miles south of Washington, D.C. Pros: Median home price of $404,000, at national median. Good air quality, comfortable climate. Very low serious crime rate. Adequate ratio of primary care physicians per population. State income tax rate tops out at 5.75% for couples with taxable income at just $17,000, but no state tax on Social Security, estates or inheritances. Con: Not very walkable. Frederick County Tourism Outdoorsy Shenandoah Valley city of 27,000, 75 miles northwest of Washington D.C. Pros: Median home price of $382,000, 5% below national median. Outstanding ratio of doctors per capita. Serious crime rate below national average. Very walkable. State income tax rate tops out at 5.75% for couples with taxable income at just $17,000, but no state tax on Social Security, estates or inheritances. Con: Only somewhat bikeable.
