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  • FIRST POST
    ozpom
    Implications of buying my parents house?
    • #1
    • 15th Feb 11, 7:41 PM
    Implications of buying my parents house? 15th Feb 11 at 7:41 PM
    Hi, i'm not sure if i have posted in the right section, but here goes, sorry but its a bit long winded...!

    My father owns his property outright (81 years old), i am the only child. He has recently indicated that he would like to consider in moving to a residential care home, and although not immeniment certainly something to consider for the near future.

    Can I purchase his property at a value less than the current market, then rent the property? The income from the rent, the money from the house sale and his current pensions should cover the costs of the care home, and this would be paid direct to the home on a monthly basis.

    Unfortuantely he is not in good health and we anticipate that the funds should last approximately 5 years.

    Can this be done,and what are the implications for tax purposes now and when we later sell the property?

    I'm assuming that as long as the care home is paid direct each month they will have little interest in how it is funded?

    Any advice etc is much apprecaited.
Page 1
  • Lokolo
    • #2
    • 15th Feb 11, 7:48 PM
    • #2
    • 15th Feb 11, 7:48 PM
    This is what I think.

    If he sells the house and uses the money from that to pay for his care, then that is fine. What he cannot do is give the house away and then claim benefits (which I know you aren't doing but it's just for clarification!).

    However, not sure what the implications of selling the house below market value are.....
  • zarazara
    • #3
    • 15th Feb 11, 8:06 PM
    • #3
    • 15th Feb 11, 8:06 PM
    As far as I am aware there are implications about selling the house to you very cheaply if he goes into care and this requires funding. It could be seen as trying to avoid fees and getting the state to pick up the bill I think. A friend sold his property to his daughter some years ago now and what he did was to get 3 estate agents to value the property and get a value from each of them in writing which he kept if ever proof of this was needed. He then sold to his daughter at the lowest valuation less a reasonable % that you would expect any one to offer. So if houses are changing hands at the moment for average 10% less than asking price then I expect the lowest valuation minus 10% would be acceptable but a 50% discount would not be. Another way is to auction the property. In my experience auction values are somewhat less than private sales.
    "The purpose of Life is to spread and create Happiness"
  • ozpom
    • #4
    • 15th Feb 11, 9:26 PM
    • #4
    • 15th Feb 11, 9:26 PM
    thanks for your help and input, most appreciated.

    it is not our intention to shirk responsibilities in paying for his care, its really is a case of working out the best possible options when taking into account tax implications, legality etc

    the alternative option is just to sell the house as is, which currently would fund 5 years care alone and then he would still keep all pension funds. Or as mentioned, we buy it, rent it, and with the sale, rental income and pensions that would also last 5 years. However, if at the end of 5 years we sold the property as it now belonged to us, we would obvioulsy have some inheritance. (this is something that is very important to him having worked hard all his life, as an only child, he wants to leave something to his child and grand children).

    This fact is detriment as to whether he will actutally move into a residential home!

    So really trying to look at all feasible/possible options.
  • kidmugsy
    • #5
    • 15th Feb 11, 9:43 PM
    • #5
    • 15th Feb 11, 9:43 PM
    You might investigate an "immediate care annuity". Your father would spend some capital (perhaps released by sale of his house) to get an income to pay part of his fees - an income that will last until his death. As I understand it (i) he can arrange that the annuity income increases each year, and (ii) if he specifies that the income is paid direct to the Care Home, it is tax-free.
  • kidmugsy
    • #6
    • 15th Feb 11, 9:56 PM
    • #6
    • 15th Feb 11, 9:56 PM
    It's also known as an "immediate needs annuity".
  • Loughton Monkey
    • #7
    • 16th Feb 11, 10:29 AM
    • #7
    • 16th Feb 11, 10:29 AM
    Maybe I'm not fully grasping the position, but my own instinct is to break this down into logical steps.

    1. There is a tendancy (pehaps understandably) for people to get very emotional about the concept of 'big bad council' coming along and forcing the sale of the house to fund care home fees. In many cases, this is a wrong interpretation. Simply think of it as it is. Does he have 'means'? If so then care home fees must be paid. End of story. No degree of selling (at or below market price). No degree of renting> Neither of these will detract from the black/white. He pays!

    2. So the issue now turns into a very seperate and unemotional consideration of how he pays for those care home fees. I am making an assumption that you would be his 'sole heir' in any case. Hence between the two of you the care home fees must be paid. Selling his house to you neither adds to, nor detracts from your joint wealth. It simply transfers deeds and cash between the two of you. Net result zero other than a bit of solicitor cost outlay.

    3. I think you have established sell the house - even at a 'low' price - will not avoid fees. I am guessing, but I expect whatever 'test' were applied to valuation in the case of determining his ability to pay for care would be similar to the test used in Inheritance tax.

    So don't over-analyse it. Perhaps talk it over with him. But just plan in advance what you are going to do if/when it happens. A lot depends upon your own current resources, cash flow, and wealth. But basically he would go into care, leaving an empty house. You have obvious choices. Sell it. Rent it out. Leave it unattended but to rise in value. Move into it and sell yours.... It's an entirely individual and seperate decision. As long as you have factored in the need to pay X00 a month to the care home.
  • ozpom
    • #8
    • 16th Feb 11, 8:17 PM
    • #8
    • 16th Feb 11, 8:17 PM
    Maybe I'm not fully grasping the position, but my own instinct is to break this down into logical steps.

    1. There is a tendancy (pehaps understandably) for people to get very emotional about the concept of 'big bad council' coming along and forcing the sale of the house to fund care home fees. In many cases, this is a wrong interpretation. Simply think of it as it is. Does he have 'means'? If so then care home fees must be paid. End of story. No degree of selling (at or below market price). No degree of renting> Neither of these will detract from the black/white. He pays!

    2. So the issue now turns into a very seperate and unemotional consideration of how he pays for those care home fees. I am making an assumption that you would be his 'sole heir' in any case. Hence between the two of you the care home fees must be paid. Selling his house to you neither adds to, nor detracts from your joint wealth. It simply transfers deeds and cash between the two of you. Net result zero other than a bit of solicitor cost outlay.

    3. I think you have established sell the house - even at a 'low' price - will not avoid fees. I am guessing, but I expect whatever 'test' were applied to valuation in the case of determining his ability to pay for care would be similar to the test used in Inheritance tax.

    So don't over-analyse it. Perhaps talk it over with him. But just plan in advance what you are going to do if/when it happens. A lot depends upon your own current resources, cash flow, and wealth. But basically he would go into care, leaving an empty house. You have obvious choices. Sell it. Rent it out. Leave it unattended but to rise in value. Move into it and sell yours.... It's an entirely individual and seperate decision. As long as you have factored in the need to pay X00 a month to the care home.
    Originally posted by Loughton Monkey
    thanks for your comments, all welcome and helpful.

    As mentioned in previous post we certainly dont intend to shirk our responsibilities in paying for his care, just looking into the various and feasible options. If at the end of the day all assets are used then so be it. Have had a quick glance at the "immediate needs annuity" and that too is worth looking into further.

    Just need to look further into various options, the implications if he rents the property out, we buy and rent etc etc.

    Thanks again
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