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    • Netts71
    • By Netts71 12th Mar 17, 12:48 PM
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    Netts71
    Buying house with elderly relative.
    • #1
    • 12th Mar 17, 12:48 PM
    Buying house with elderly relative. 12th Mar 17 at 12:48 PM
    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!
Page 1
    • sparky130a
    • By sparky130a 12th Mar 17, 1:29 PM
    • 442 Posts
    • 596 Thanks
    sparky130a
    • #2
    • 12th Mar 17, 1:29 PM
    • #2
    • 12th Mar 17, 1:29 PM
    Very sad.

    Can i suggest you also post on the tax / benefits boards to get a fuller answer.
    • Netts71
    • By Netts71 12th Mar 17, 1:52 PM
    • 10 Posts
    • 1 Thanks
    Netts71
    • #3
    • 12th Mar 17, 1:52 PM
    • #3
    • 12th Mar 17, 1:52 PM
    Will do - thank you
    • AdrianC
    • By AdrianC 12th Mar 17, 2:24 PM
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    AdrianC
    • #4
    • 12th Mar 17, 2:24 PM
    • #4
    • 12th Mar 17, 2:24 PM
    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.
    Originally posted by Netts71
    No, but she would be.

    Also would the fact that she has 'given' away her cash assets affect her eligibility for assistance
    Absolutely.
    • xylophone
    • By xylophone 12th Mar 17, 3:23 PM
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    xylophone
    • #5
    • 12th Mar 17, 3:23 PM
    • #5
    • 12th Mar 17, 3:23 PM
    http://www.which.co.uk/elderly-care/financing-care/gifting-assets-and-property/343063-what-are-the-rules-for-gifting-assets
    • Keep pedalling
    • By Keep pedalling 12th Mar 17, 3:24 PM
    • 2,904 Posts
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    Keep pedalling
    • #6
    • 12th Mar 17, 3:24 PM
    • #6
    • 12th Mar 17, 3:24 PM
    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
    • By teddysmum 12th Mar 17, 4:11 PM
    • 7,145 Posts
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    teddysmum
    • #7
    • 12th Mar 17, 4:11 PM
    • #7
    • 12th Mar 17, 4:11 PM
    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
    • By booksurr 12th Mar 17, 5:07 PM
    • 3,614 Posts
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    booksurr
    • #8
    • 12th Mar 17, 5:07 PM
    • #8
    • 12th Mar 17, 5:07 PM
    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
    • By Netts71 13th Mar 17, 7:29 PM
    • 10 Posts
    • 1 Thanks
    Netts71
    • #9
    • 13th Mar 17, 7:29 PM
    • #9
    • 13th Mar 17, 7:29 PM
    Who owns the other share of her present home, as if the other party doesn't want to sell that could be a problem ?
    Originally posted by teddysmum
    The other share is owned by a housing association so there wouldn't be any problem regarding the sale.
    • Netts71
    • By Netts71 13th Mar 17, 7:35 PM
    • 10 Posts
    • 1 Thanks
    Netts71
    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.
    Originally posted by booksurr
    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
    • By Mojisola 13th Mar 17, 9:24 PM
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    Mojisola
    I've read somewhere that 'cash gifts' from a parent to a child are exempt from tax providing they are under a certain value...
    Originally posted by Netts71
    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.
    • booksurr
    • By booksurr 13th Mar 17, 10:04 PM
    • 3,614 Posts
    • 3,991 Thanks
    booksurr
    I've read somewhere that 'cash gifts' from a parent to a child are exempt from tax providing they are under a certain value...
    Originally posted by Netts71
    as explained above by mojisola, for the purposes of Inheritance tax yes cash gifts are "not" taxed unless you trigger the thresholds he explains

    however, what your MIL is proposing to do with her "gift" is a classic way of avoiding IHT because she has "given" the money to you but she continues to benefit from it because she lives in the property she has effectively purchased with her own money. Normally that is caught by the Gift with Reservation of benefit rules so it is not actually exempt from IHT as explained by mojisola. There are however certain circumstances where a GWR will not apply and it is in that very niche case where your MIL could be caught by a POAT

    given your age and that of your MIL plus young age of your kids it sounds like you all need to do some serious thinking about inheritance and how to plan for it.

    on that basis (although expensive) the "best" professional adviser to see would be a member of STEP as they are specifically qualified to advise on inheritance planning
    http://www.step.org/for-the-public

    Neither of us are over 60 but we do have children under the age of 7 if that makes any difference?
    Originally posted by Netts71
    they cannot be registered as the legal owners of a property until they reach age 18. If you make them owners before that age you must do so via a Trust. That introduces a whole new world of complexity and tax related issues...
    • Mojisola
    • By Mojisola 14th Mar 17, 9:24 AM
    • 27,048 Posts
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    Mojisola
    however, what your MIL is proposing to do with her "gift" is a classic way of avoiding IHT because she has "given" the money to you but she continues to benefit from it because she lives in the property she has effectively purchased with her own money.

    Normally that is caught by the Gift with Reservation of benefit rules so it is not actually exempt from IHT as explained by mojisola.
    Originally posted by booksurr
    In this particular case, the lady concerned already has carers paid for by the council (so obviously doesn't have much capital) and, property-wise, only has a shared-ownership HA flat - it's not likely that inheritance tax will be an issue.
    • TBagpuss
    • By TBagpuss 14th Mar 17, 12:17 PM
    • 5,407 Posts
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    TBagpuss
    One option would be for her to gift you the money and then for her to have a charge ovber the new property reflecting her interest. The charge would be an asset which would then fall to you on her death, as her beneficiary. This may be better than her having an interet in the property itself in terms of your ability to get a mortgage, etc.

    If she neded care then the charge would be an asset which could be taken into account. I think it would probably be possibl t arrange things so that you would not have to pay until her death but you might at that point, if you were not able to remortgage to pay off what was owed, have to downsize at that point.

    A STEP solicitor is proably the best place to start. I think that if you can show that she has an interest in the porperty, rather than having made a gift, there is less concern about deprivation of assets, but you do ned proper advice about how to arrange it to ensure that neither she nor you is disadvantaged
    • Mojisola
    • By Mojisola 14th Mar 17, 1:01 PM
    • 27,048 Posts
    • 68,975 Thanks
    Mojisola
    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.
    Originally posted by Netts71
    A STEP solicitor is proably the best place to start. I think that if you can show that she has an interest in the porperty, rather than having made a gift, there is less concern about deprivation of assets, but you do ned proper advice about how to arrange it to ensure that neither she nor you is disadvantaged
    Originally posted by TBagpuss
    I'm not sure that combining the two lots of money would count as deliberate deprivation. Usually, the council has to show that the money has been given away in order to become able to claim benefits.

    In this case, there is a good clear reason other than wanting to claim benefits.

    I second getting good quality advice from someone experienced in these issues.
    • Pricivius
    • By Pricivius 14th Mar 17, 1:29 PM
    • 568 Posts
    • 941 Thanks
    Pricivius
    I'll leave everyone else to focus on tax and finance issues as they are far more knowledgeable than I am.

    One point I would make is to be sure that you have all thought through the practicalities of living with Granny. As someone who was brought up in a house with my grandma, and my great-grandma for the first 4 years of my life, there are some amazing benefits, but also some significant downsides.

    Downsides such as:
    how we do things - sounds ridiculous, but when Granny shrinks your favourite cashmere jumper in the wash, loads the dishwasher "wrongly" or insists everyone eats tea at 6pm, patience begins to run thin.

    going out - family nights out may become harder if it means Granny staying at home alone while you all head out (presuming either she physically cannot come, or there is no room in the car). Guilt-trip time. Same goes for holidays - can you leave Granny home alone (both for safety and loneliness)?

    decorating - Granny will own part of your home (even if she is not listed as owning it, she has paid towards it) and may want a say in style of decor. Is everyone okay with Laura Ashley chintz?

    quiet time - Granny will not be used to a house with young kids and whilst she is lonely now and wishes she could see you all, this may wear thin when you are a 24/7 presence, waking her with Peppa Pig at 6.30am and in years to come, teenage shouting wars at 11.30pm over staying out late.

    guests - my Granny (bless her) did not like house guests and would hide away until they had left. This makes life very difficult for everyone.

    Just a few things to flag up - there are huge upsides, but please think about the possible trigger points...
    • Netts71
    • By Netts71 14th Mar 17, 8:17 PM
    • 10 Posts
    • 1 Thanks
    Netts71
    Thank you all very much for your input - we will certainly seek advice from a STEP solicitor before going any further!

    And thank you Pricivius - we have thought very long & hard about how this move would impact every member of the family (even our dog!!).

    We're hoping to buy a property large enough for MIL to have her own downstairs bedroom, living room & bathroom so that she can have privacy and quiet time when she needs it.
    I would do all the cooking etc as she already finds this difficult to manage.

    I know we will all be 'sacrificing' quite a lot in terms of freedom & privacy, but it's something myself & husband have been weighing up for many years - we just want her to spend the rest of her life around people who love her & want to care for her rather than over 200 miles away.

    Her depression is worsened by the fact that she has another grown up child & 5 grown up grandchildren who live 10 minutes away from her but have had nothing to do with her for years - even when she was recently rushed into hospital... it's so sad - we need her to be close to us & want her to be happy xx
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