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    • Hutch100uk
    • By Hutch100uk 8th Jan 18, 10:20 AM
    • 327Posts
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    Hutch100uk
    Deprivation of assets
    • #1
    • 8th Jan 18, 10:20 AM
    Deprivation of assets 8th Jan 18 at 10:20 AM
    Apologies if this is the wrong section for this.

    My parents would like to put their house in my name (and my siblings) in order to protect their assets from being used should they go into a care home.

    They have taken legal advice but I'm not convinced its the right advice.

    I keep reading about 'deprivation of assets' and would be interested to know how likely this is. In some articles I read that the local authority would be likely to seize the asset anyway if they thought it had been done deliberately. Other articles say that if its done while they are still in perfect health with no immediate need for care, it should be fine.

    I'm not 100% sure they should go ahead as I understand there will be tax implications if I was to purchase another home (I rent at the moment). This all seems like a minefield.

    Any advice?
Page 2
    • StumpyPumpy
    • By StumpyPumpy 8th Jan 18, 1:31 PM
    • 1,191 Posts
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    StumpyPumpy
    My sibling and I were very hesitant about it and my parents got a bit annoyed with us.
    Originally posted by Hutch100uk
    As you and your sibling appear to think this is a bad idea, how about this for a suggestion: Arrange for your parents to take a couple of tours of care homes in the area. Make sure you include at least one of each of privately and publicly funded homes. Then ask them which they would like to be placed in should the need arise, they might well come around to the thinking that maybe they should use some of their assets to ensure their personal well being* rather than, eg. paying off a child's mortgage.

    Don't think I'm having a dig at state funded care homes, I'm not. They do a great job, but their resources are much more limited and you get what you pay for (or don't). With your own money you get to pick and choose where you go, with the state's money it is Hobson's choice.

    *As an aside, this can be a useful exercise to give family an idea of where they would be most comfortable well ahead of the time where it might be needed.

    SP
    Come on people, it's not difficult: lose means to be unable to find, loose means not being fixed in place. So if you have a hole in your pocket you might lose your loose change.
    • Keep pedalling
    • By Keep pedalling 8th Jan 18, 1:44 PM
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    Keep pedalling
    If it a transaction is done for a justifiable reason and at the time their health suggests no reason why they would need care, then it is not a problem. However, if it is done with the intention to qualify under a means test then it can be included as a deprivation of assets.

    It has to be a happy coincidence. For example, if the transaction was justified under tax planning. Then that would be fine. So, unless there is a justifiable alternative reason for doing the transaction, it will be at risk of deprivation of assets.
    Originally posted by dunstonh
    Although I canít think of any other reason for giving your home away. Even if they have an IHT issue, a gift with reservation, as this would be, would not help.

    Whatever the morals of this, the parents would be nuts to give away their major asset. So many things to go horribly wrong. The death, divorce or bankruptcy of a child could end up with them losing their home.
    • dunstonh
    • By dunstonh 8th Jan 18, 1:52 PM
    • 90,450 Posts
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    dunstonh
    Although I can’t think of any other reason for giving your home away. Even if they have an IHT issue, a gift with reservation, as this would be, would not help.
    I cant either. However, I suspect the solicitor (if it is even a solicitor - could well be one of those non-qualified will writers who also do trusts and estate handling) will be looking to use a discretionary trust. However, even those are pretty pointless nowadays for most people and you lose the new IHT allowance for primary residence if you do that.

    All that cost for something that statistically is highly unlikely to ever happen.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Hutch100uk
    • By Hutch100uk 8th Jan 18, 2:27 PM
    • 327 Posts
    • 79 Thanks
    Hutch100uk
    ......... and they will have to pay you rent.
    ......... and you will have to pay tax on it.
    ......... and their motives are a disgrace.
    Originally posted by le loup
    I'm not interested in your opinions on their motives.
    • Hutch100uk
    • By Hutch100uk 8th Jan 18, 2:29 PM
    • 327 Posts
    • 79 Thanks
    Hutch100uk
    As you and your sibling appear to think this is a bad idea, how about this for a suggestion: Arrange for your parents to take a couple of tours of care homes in the area. Make sure you include at least one of each of privately and publicly funded homes. Then ask them which they would like to be placed in should the need arise, they might well come around to the thinking that maybe they should use some of their assets to ensure their personal well being* rather than, eg. paying off a child's mortgage.

    Don't think I'm having a dig at state funded care homes, I'm not. They do a great job, but their resources are much more limited and you get what you pay for (or don't). With your own money you get to pick and choose where you go, with the state's money it is Hobson's choice.

    *As an aside, this can be a useful exercise to give family an idea of where they would be most comfortable well ahead of the time where it might be needed.

    SP
    Originally posted by StumpyPumpy
    My parents know all about the care home system. My grandmother was in one for a short time so they are well aware of all this.
    My grandmother ended up in state funded one locally and was perfectly fine.

    I'm sure my solicitor will come up with more practical reasons to convince them this isn't a good idea.
    • Hutch100uk
    • By Hutch100uk 8th Jan 18, 2:31 PM
    • 327 Posts
    • 79 Thanks
    Hutch100uk
    I appreciate all the advice I've been given so far and just reinforces this isn't a good plan of action.

    I do realise this topic would raise some 'moral issues' and indignation with many but, just to re-iterate, I'm not looking for people's personal opinions on that side of it. Although I'm sure some can't help but give them regardless.
    • badmemory
    • By badmemory 8th Jan 18, 3:10 PM
    • 1,232 Posts
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    badmemory
    Maybe you could suggest that your parents look at some of the CQC's more recent reports. The situation would appear to be deteriorating.
    • Linton
    • By Linton 8th Jan 18, 3:49 PM
    • 8,870 Posts
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    Linton
    It is not just the cost of care homes. Most people dont go into care homes. If you can pay for modifications to your house and for care at home you could avoid going into a care home for a significant amount of time. Councils can only offer a restricted number of hours/day from a visiting carer. Even a good care home could be a nightmare compared with continuing to live in you own home. Being sat in a communal sitting room in front of daytime TV turned to high volume seems like torture to me.

    For parents to give their home away to a child whilst they still live in it can be very risky - what happens if the child dies, divorces, goes bankrupt and the house needs to be sold? Ok it's unlikely but it is still a risk and could happen. Why take the risk when there is no need?

    Why is it that people are so keen on parents or themselves avoiding paying for their old age but would be shocked if a younger relation announced they were giving up work and giving away their assets to live off the state? What is the difference?
    • Mojisola
    • By Mojisola 8th Jan 18, 3:51 PM
    • 28,753 Posts
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    Mojisola
    I cant either. However, I suspect the solicitor (if it is even a solicitor - could well be one of those non-qualified will writers who also do trusts and estate handling) will be looking to use a discretionary trust.
    Originally posted by dunstonh
    It could well be that their legal advisor had an eye on how much he/she could make out of the scheme.

    Hutch - did your parents get any details about how much they would have to pay?
    • xylophone
    • By xylophone 8th Jan 18, 4:44 PM
    • 24,059 Posts
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    xylophone
    My parents would like to put their house in my name (and my siblings) in order to protect their assets from being used should they go into a care home.
    http://sayermoore.co.uk/Transfer may be of interest.

    Your parents' (admitted?)"significant operative purpose" for the gift is to avoid paying for care if such care should be needed?


    They are

    aware of the possibility that they might be provided with accommodation and that they might be liable to pay for it.

    The LA might be minded to take a robust view of the case.....

    Apart from this, there is your situation should you want to buy a property of your own, the problems that might arise in the event of divorce or family quarrel/dispute ... you are right to be cautious.
    • zagfles
    • By zagfles 8th Jan 18, 7:09 PM
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    zagfles
    I think your parents would be unwise to take such an action.

    You could ask your parent's local authority about how they would view this scenario. That should give you a clearer idea than you would get anywhere else.

    You could also try asking a solicitor to guarantee they will make good any future care fees that the local authority claim under such circumstances. I suspect you won't get far though.

    Though there are many articles claiming that a local authority could not claim deprivation of assets if the parents were in good health when the property was given away, all of them come with very, very large caveats. Mainly saying that such courses of action are untested in law.

    Other concerns:
    (i) It does not help with IHT planning.
    (ii) You and your siblings may face a CGT liability when your parent's house is eventually sold.
    (iii) If any of you or your siblings get divorced, a share of your parent's house will form part of the marital assets.
    (iv) If any of you or your siblings hit financial difficulties, your parents house will be counted as an asset.
    (v) You may need to pay stamp duty when you acquire your parent's home.
    (vi) As you will own a property, you will suffer the enhanced rate of stamp duty should you ever purchase your own home.
    Originally posted by HappyHarry
    Yes and as well as all this, there's a little known tax called Pre-owned Asset Tax (POAT) which applies where someone continues to live in a property which they've given away. This is like income tax on the rental value! See https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44001

    My parents wanted to do the same. I talked them out of it.
    • enthusiasticsaver
    • By enthusiasticsaver 8th Jan 18, 8:39 PM
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    enthusiasticsaver
    I haven't got a clue why your parents would want to do this as it effectively takes away their largest asset in most cases which could help them fund their old age. Certainly state run homes in our area are not great and there is so much potential for things to go wrong if they fall out with the family for some reason or as others have said, divorce or death.

    We have helped our children considerably through education, university and their first homes. If there is money and assets left at the end of the day obviously we want as much as possible to go to them but not at the expense of our comfort in our old age and I do not think they would want us to compromise that. Same goes for my mums assets, her home is there as a safety net to provide for her hopefully in a private care home if she needs residential care. Some people don't.

    As others have said there is such a thing as deprivation of assets so if the reason for passing the house over to children now while still living there is to avoid paying for care home fees if needed that may be examined further should they have to go into care relatively shortly after disposing of their home. I think they also cannot benefit from the gift so I fail to see how they can continue living in the house in the meantime without paying you rent.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • enthusiasticsaver
    • By enthusiasticsaver 8th Jan 18, 8:43 PM
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    enthusiasticsaver
    From your point of view you will be a property owner so you will gain no benefits from HTB ISA or first time buyer stamp duty exemption when you come to buy your own home and even some mortgage products will not be available to you. If for any reason you need to claim benefits you may be exempt due to owning assets.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • pensionpawn
    • By pensionpawn 8th Jan 18, 9:08 PM
    • 26 Posts
    • 1 Thanks
    pensionpawn
    Only a small percentage of people end up in care homes.

    The average stay is only a couple of years.

    While one spouse continues to live in the house, its value is not included in the financial assessment.

    If your parents own their home as 'tenants in common', they can leave their share to the children rather than the spouse (with the usual lifetime conditions, etc). That will preserve half of the value of the property.

    If your parents do need care and are relying on the council to pay for it, they may not like the places they are put.

    I would love to leave our children some money but I'm not going to do it in a way that might mean my last few years are spent in a miserable, poorly-financed care home.
    Originally posted by Mojisola
    We updated our will last year to do this. My wife and I wish to protect and pass on at least half of the value of our house to our children.
    • zagfles
    • By zagfles 8th Jan 18, 9:36 PM
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    zagfles
    Originally Posted by Mojisola
    Only a small percentage of people end up in care homes.

    The average stay is only a couple of years.

    While one spouse continues to live in the house, its value is not included in the financial assessment.

    If your parents own their home as 'tenants in common', they can leave their share to the children rather than the spouse (with the usual lifetime conditions, etc). That will preserve half of the value of the property.

    If your parents do need care and are relying on the council to pay for it, they may not like the places they are put.

    I would love to leave our children some money but I'm not going to do it in a way that might mean my last few years are spent in a miserable, poorly-financed care home.
    We updated our will last year to do this. My wife and I wish to protect and pass on at least half of the value of our house to our children.
    Originally posted by pensionpawn
    You still end up with a lot of the problems mentioned in this thread. Such as possible CGT, extra stamp duty if any of the children move house, losing part in a divorce, getting denied means tested benefits if they fall on hard times and possibly being forced to sell their share.

    Eg see this thread where someone who part owned an inherited property is faced with a massive stamp duty bill because of it http://forums.moneysavingexpert.com/showthread.php?t=5762406
    Last edited by zagfles; 08-01-2018 at 9:40 PM.
    • pensionpawn
    • By pensionpawn 8th Jan 18, 10:02 PM
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    pensionpawn
    You still end up with a lot of the problems mentioned in this thread. Such as possible CGT, extra stamp duty if any of the children move house, losing part in a divorce, getting denied means tested benefits if they fall on hard times and possibly being forced to sell their share.

    Eg see this thread where someone who part owned an inherited property is faced with a massive stamp duty bill because of it
    Originally posted by zagfles
    There are no financial implications to our children of the trust element of our Will until both parents are deceased. At that point a minimum of half of the value of the house is transferred to the children as per any other Will. If no care fee debt is due from the second parent, on their death, then our Will is executed no differently to any other Will and the whole estate will pass on as specified, minus the usual costs.
    • zagfles
    • By zagfles 9th Jan 18, 10:55 AM
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    zagfles
    There are no financial implications to our children of the trust element of our Will until both parents are deceased. At that point a minimum of half of the value of the house is transferred to the children as per any other Will. If no care fee debt is due from the second parent, on their death, then our Will is executed no differently to any other Will and the whole estate will pass on as specified, minus the usual costs.
    Originally posted by pensionpawn
    OK so you're using some sort of trust - that might avoid some of the problems.
    • Browntoa
    • By Browntoa 9th Jan 18, 11:01 AM
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    Browntoa
    Council can still challenge a trust if it's believed to have been done to avoid care home fees

    http://www.bbc.co.uk/news/business-39589083
    I'm the Board Guide of the Referrers ,Telephones, Pensions , Shop Don't drop ,over 50's and Discount Code boards which means I volunteer to help get your forum questions answered and keep the forum runnning smoothly .However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to forumteam@moneysavingexpert.com Any views are mine and not the official line of MoneySavingExpert.
    • Browntoa
    • By Browntoa 9th Jan 18, 11:05 AM
    • 32,255 Posts
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    Browntoa
    http://dailym.ai/2mpZMmQ
    I'm the Board Guide of the Referrers ,Telephones, Pensions , Shop Don't drop ,over 50's and Discount Code boards which means I volunteer to help get your forum questions answered and keep the forum runnning smoothly .However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to forumteam@moneysavingexpert.com Any views are mine and not the official line of MoneySavingExpert.
    • Clifford_Pope
    • By Clifford_Pope 9th Jan 18, 12:11 PM
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    Clifford_Pope
    "My parents would like to put their house in my name (and my siblings) in order to protect their assets from being used should they go into a care home."

    This suggests they are already fairly well-advanced in years to even be thinking about it, in which case it is very probably too late for such moves to appear plausible for any other reason.
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