Signing house over to children?

johnyvonne

My mum owns here own house mortgage free.
She is 65 years young.
She has ask me the son to find out if she should sign the house over to me to stop the goverment getting any money if she has to go in a home or into care.
Not the nicest of questions to ask you but need to find out what the law is on this?
The house is worth about £170,000.
She just has a state pension of about £130.00 pw i think.
I've heard that you can, but you have to wait 5-6 year before the goverment cannot get any money from the house.
Any advice would be very very helpfull
And you all have a very nice christmas and dont spend too much now....

Acdarlin

Hi there,

I think what you've heard is slightly mixed up between two different subject matters:

1) payment of Inheritance tax
2) means testing for care provision for the elderly

1) Inheritance tax (IHT) - IHT is the tax that's paid by your estate on your possessions when you die. Should your mother choose to gift away her home (in what is referred to as a potentially exempt transfer), the amount of tax suffered by the estate is linked to how long has passed since the gift. It takes 7 years for a gift to be effectively tax free.

However each individual has a nil-rate band of £325,000 on which no IHT is paid . Therefore, in general circumstances, unless your mother has £155,000 in other savings/assets, no IHT would be due if she failed to gift the house away.

2) I believe this is probably what your mother is referring to. For the State to meet the costs of your mother's potential care home accomodation and provision she must not have have assets of over £23,000 for 2009/10. Therefore she would have to sell the home and use the proceeds first (down to a level of £23,000) before the State step in.

She could gift the home away, however therefore there are anti-avoidance procedures in place for this. If it is deemed that it was done to obtain assistance more quickly than would otherwise be the case, she may be assessed as still in possession of the transferred property and therefore have to pay her own way.

Although this isn't my area of expertise, there appears to be little you can do to avoid it beyond taking out a long-term care insurance policy, or gifting the maximum you are allowed to each year and hoping for the best. For IHT purposes the max annual gift is £3,000 per year (over and above that through surplus income), although I appreciate this is quite difficult to achieve when you have most of your capital tied up in a residence.

Rob_Marx

if she needs the care she should pay for it. why the hell should i pay for it you leech

johnyvonne

Because some people pay tax all there life's thank you.
merry xmas
plus when i was a child i was told that "if you havent got something nice to say then dont say anything.

Ian_W

At 65 the chances are good (unless her health is already impaired) she'll live for 30yrs or more.

If she gives you and your siblings her house you can allow her to live in it free of charge BUT it's YOURS not hers. So if one of you dies, divorces or gets made bankrupt in the next 30yrs she could be out on her ear with no say in the matter as the house no longer belongs to her. Given that it probably won't achieve what she thinks it will - seems a big risk for a small prospect of it working.

If none of those things happen, subject to the tax law when you come to sell, you may well have to pay Capital Gains Tax.

There is a lengthy discussion on this THREAD.

Also duplicate thread on pensions board, suggest replies are left on that one.

johnyvonne

thanks for the tread very helpfull indeed.

GDB2222

There's also Capital Gains Tax. That's not a problem for your mum, as it's her home and so exempt from CGT. If she gives it to you, there's no CGT exemption.

So you would end up paying 18% on any gain in value over the next 30 years (or however long mum lives). You need to balance that against a possible charge for care home costs that may never even materialise.

By the way, Shakespeare wrote a very good play about this particular tax-planning dodge. Get your mum to read King Lear before she goes any further.

Errata

The chance of your mum needing residential care at the moment is about 1 in 5. If she needs it, renting her house out would go some way to paying her fees and the value of the property would with luck continue to increase.

captainhaggis

Rob_Marx wrote: »

if she needs the care she should pay for it. why the hell should i pay for it you leech

Because someone without their own home would get it for free. Why shoudl the OP's mother have to pay for her care because she's invested wisely when others get it all for free having squandered every penny they've ever made? :rolleyes:

bristol_pilot

If she signs over the house but continues to live in it, this will not work.

Radiantsoul

captainhaggis wrote: »

Because someone without their own home would get it for free. Why shoudl the OP's mother have to pay for her care because she's invested wisely when others get it all for free having squandered every penny they've ever made? :rolleyes:

It seems this is always an emotive issue. On the one hand it seems harsh that those named in a will should be preferred to tax payers, on the other hand it is harsh that someone who has saved all their life should be stripped of their assets.