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Buying house with elderly relative.

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Netts71
Netts71 Posts: 10 Forumite
in House buying, renting & selling
I'm looking for some advice.

We're thinking of selling our family home along with my mother in laws property (she owns a share of the flat she lives in) to enable us to purchase a property that we can all live in.

She's in her 80's, registered as disabled & is very depressed being so far away from us and her grandchildren.

She is happy to 'gift' us the proceeds of her sale in order to purchase the home (we are the sole beneficiaries of her will) but we're a bit concerned that should we be unable to care for her at home in the future would we be liable for care costs.

Also would the fact that she has 'given' away her cash assets affect her eligibility for assistance (she currently has a carer visit twice a day - partly paid for by the local authority).

Can anyone advice us of the best way to proceed?

Many thanks!
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Comments

  • sparky130a
    sparky130a Posts: 660 Forumite
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    Very sad.

    Can i suggest you also post on the tax / benefits boards to get a fuller answer.
  • Netts71
    Netts71 Posts: 10 Forumite
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    Will do - thank you :)
  • AdrianC
    AdrianC Posts: 42,189 Forumite
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    Netts71 wrote: »
    She is happy to 'gift' us the proceeds of her sale in order to purchase the home (we are the sole beneficiaries of her will) but we're a bit concerned that should we be unable to care for her at home in the future would we be liable for care costs.

    No, but she would be.
    Also would the fact that she has 'given' away her cash assets affect her eligibility for assistance

    Absolutely.
  • xylophone
    xylophone Posts: 44,413 Forumite
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    http://www.which.co.uk/elderly-care/financing-care/gifting-assets-and-property/343063-what-are-the-rules-for-gifting-assets
  • Keep_pedalling
    Keep_pedalling Posts: 16,626 Forumite
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    The fact that she would be living with her family should actually greatly reduce her chances of ever needing residential care but the risk still exists so deprivation of assets is an issue.

    If on the other hand you buy a house together in which she owns a portion, then depending on your circumstances the house may be disregarded as far as care costs are concerned. If for instance either of you is 60 or over then I believe that would be the case.
  • teddysmum
    teddysmum Posts: 9,471 Forumite
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    Who owns the other share of her present home, as if the other party doesn't want to sell that could be a problem ?
  • booksurr
    booksurr Posts: 3,700 Forumite
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    you ought to take professional advice because the situation you outline is precisely the one where exposure to POAT can easily arise. The Pre Owned Asset Tax rules apply where the person has sold an asset, given the money they got from the sale to someone else, and that someone else then buys a property in their name but the giver then lives in it but is not its owner.

    In other words the giver continues to benefit from their own money as it has paid for a house they don't own, but have the use of and have therefore passed money over without being taxed on it. A POAT would, for example, apply if the rental value of the new property would be more than £5,000 per year, in which case MIL would have to pay you full market rent for living there or else MIL will be liable to income tax herself on the value of the rent for as long as she lives there.

    A POAT can easily be avoided by MIL being a co-owner of the new property and therefore her share remains part of her estate upon death and also exposed to care home costs if she needs them. Hence the need for detailed advice as there are several issues underlying your plan.
  • Netts71
    Netts71 Posts: 10 Forumite
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    teddysmum wrote: »
    Who owns the other share of her present home, as if the other party doesn't want to sell that could be a problem ?

    The other share is owned by a housing association so there wouldn't be any problem regarding the sale.
  • Netts71
    Netts71 Posts: 10 Forumite
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    booksurr wrote: »
    you ought to take professional advice because the situation you outline is precisely the one where exposure to POAT can easily arise. The Pre Owned Asset Tax rules apply where the person has sold an asset, given the money they got from the sale to someone else, and that someone else then buys a property in their name but the giver then lives in it but is not its owner.

    In other words the giver continues to benefit from their own money as it has paid for a house they don't own, but have the use of and have therefore passed money over without being taxed on it. A POAT would, for example, apply if the rental value of the new property would be more than £5,000 per year, in which case MIL would have to pay you full market rent for living there or else MIL will be liable to income tax herself on the value of the rent for as long as she lives there.

    A POAT can easily be avoided by MIL being a co-owner of the new property and therefore her share remains part of her estate upon death and also exposed to care home costs if she needs them. Hence the need for detailed advice as there are several issues underlying your plan.

    Thank you, I will take your advice & seek professional advice.

    I've read somewhere that 'cash gifts' from a parent to a child are exempt from tax providing they are under a certain value... it's all very confusing though, so rather than steam ahead & possibly end up in a mess we'll take advice - not sure if we need a solicitor or an accountant though?!

    Neither of us are over 60 but we do have children under the age of 7 if that makes any difference?
  • Mojisola
    Mojisola Posts: 35,557 Forumite
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    Netts71 wrote: »
    I've read somewhere that 'cash gifts' from a parent to a child are exempt from tax providing they are under a certain value...

    There is no tax on gifts in the UK.

    If the person who gifts the money or asset dies and their estate is liable for inheritance tax, then the value of gifts given in the previous seven years will be taken into account.

    Unless your MIL has an estate of over £325k (or potentially double that if she can carry forward any of her husband's allowance), then inheritance tax won't be an issue.
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