Signing over house from elderly relation

funkey_monkey

Hi,

My aunt has decided to leave me her house in her will. Her solicitor has told her to sign it over to me now and then rent it back from me in order to avoid losing it if she was to go into a nursing home in old age.


Will this leave me exposed to paying tax on the rent she would pay and would the rent be a nominal amount or must it be market value?

Is there any other way this property could be signed over to me without incurring any income taxes?

Thanks.

dgl1001

funkey_monkey wrote: »

Hi,

My aunt has decided to leave me her house in her will. Her solicitor has told her to sign it over to me now and then rent it back from me in order to avoid losing it if she was to go into a nursing home in old age.


Will this leave me exposed to paying tax on the rent she would pay and would the rent be a nominal amount or must it be market value?

Is there any other way this property could be signed over to me without incurring any income taxes?

Thanks.

You can set the rent at what you like - it will be your house.

jockosjungle

If she dies within seven years it could be subject to IHT

Patr100

funkey_monkey wrote: »

Hi,

My aunt has decided to leave me her house in her will. Her solicitor has told her to sign it over to me now and then rent it back from me in order to avoid losing it if she was to go into a nursing home in old age.

Will this leave me exposed to paying tax on the rent she would pay and would the rent be a nominal amount or must it be market value?

Is there any other way this property could be signed over to me without incurring any income taxes?

Thanks.

It should be market value for the rest of her life, otherwise it will obviously be seen by the authorities , as an attempt to avoid paying care home fees and/or inheritance tax.
If you later sold the house you would have Capital Gains tax to pay on any increased value of the house.(minus any allowance) which may be changed in the budget later this month.,

funkey_monkey

Is there a cut off point on rental income which is not taxed? i.e. is the first £x not taxed?

getmore4less

funkey_monkey wrote: »

Hi,

My aunt has decided to leave me her house in her will. Her solicitor has told her to sign it over to me now and then rent it back from me in order to avoid losing it if she was to go into a nursing home in old age.

Will this leave me exposed to paying tax on the rent she would pay and would the rent be a nominal amount or must it be market value?

Is there any other way this property could be signed over to me without incurring any income taxes?

Thanks.

Ask the solicitor if he will indemnify you should this not work and if not why not.

ILW

If she gives the house away and needs long term care, the council will probably try to take out a charge on the property to reclaim the costs. It is known as deprivation of assets.

Jowo_2

Is your relative aware of the rules around deprivation of capital? Namely that if she goes into a care home in England/Wales and the local council detect that she has given away her property to maximise means tested benefit entitlement, they'll treat her as if she still has it (notional capital)?

Get her to speak to Age Concern or CAB to understand the fact that she is potentially performing a drastic action that will not have the outcome she expects.

ILW

Sorry, mistake.

00ec25

funkey_monkey wrote: »

Is there a cut off point on rental income which is not taxed? i.e. is the first £x not taxed?

No - you will pay income tax on every penny of NET profit you make. Obviously net profit is what is left after you have deducted eligible costs from the (gross) rent you receive.

(BTW as a LL you would be required to comply with all the legislation applicable to you, just because it’s a relative does not mean you can escape from this)

As others have said, the solicitor needs to carefully address the deprivation of assets rules. There was a post on here recently from someone who had set up a trust and had (apparently) succeeded in inheriting a house after death of a relative who was, by then, in care

it is market rent (to avoid IHT - if of course the estate is big enough to have IHT worries) but you will certainly be liable for CGT from the date of transfer

ILW

Councils have now got wise to most of these trusts and anything that was set up with the prime purpose of avoiding care fees are getting deemed null and void. Trusts set up many years ago seem to be OK.