Can parents gift or sell house to their children and receive pension credit?

RGJ57

Hello,
Is it possible for elderly parents to gift or sell (for a nominal sum) their house (worth about £130,000 and which is owned outright) to their children and still receive pension credit?
Thank you very much for any replies.

MrsManda

I think that would be seen as deprivation of capital.
How far from retirement are they?
Is it their primary residence?
Is the idea that their children get a house worth £170,000 but only pay for instance £70,000 and the parents continue to live there?

RGJ57

Thanks, they are both 80

RAS

It would be deprivation of assets for care home purposes and benefit purposes.

Why do they need cash?

MrsManda

I don't think there are any hard and fast rules for what counts as deprivation of capital. But I would have thought that being 80years old and unable to claim pension credit due to capital then disposing of that capital and putting in a PC claim would be seen by the Decision Maker as deprivation of capital.

The factors which the DM have to take into consideration can be found in this document:
http://www.dwp.gov.uk/docs/vol14.pdf

They include whether a person:
Is mentally capable
Has the choice
Is aware that deprivation of capital affects the amount of PC they can get
(for instance has previously claimed and been denied)

and also,
When they deprived themselves of capital
Where they are going to live after they've deprived themselves of capital

RGJ57

It's their primary residence and they would continue to live there. They are living on the state pension and pension credit. The idea was that the house would be gifted but it looks like this can't be done. Thank you for your replies.

RGJ57

MrsManda wrote: »

But I would have thought that being 80years old and unable to claim pension credit due to capital then disposing of that capital and putting in a PC claim would be seen by the Decision Maker as deprivation of capital.

No, they are able to claim pension credit at the moment.

zagfles

I don't see how this could be deprivation of capital for benefits purposes? (I take the point about care home costs etc).

The "capital" is their home and primary residence which is not counted for means tested benefits purposes, so "disposing" of it would make no difference to their pension credit eligibility.

Obviously any cash they receive for the house would count as capital, and that could disqualify them, but if the nominal sum was £1 then it wouldn't. They were entitled to PC before and will be after the transaction so their PC entitlement hasn't changed. The "capital" they have disposed of (ie the equity in their house) wasn't capital which affects means tested benefits.

rogerblack

On the other side of it - I would wonder about the tax implications.
Is real value of the gift taxable?

Mojisola

If they ended up with capital, they would lose their entitlement to means tested benefits. There may be problems with paying for care home places.

Google "deprivation of assets" and "gifts with reservation".

Consider the effects on the new owners - they may not be able to claim means tested benefits as they own a property that isn't their primary residence, there may be CGT to pay eventually and if any of them divorce their part of the house would be included in the settlement. What would happen if any of your siblings died before your parents?

Make sure you get really good advice before going ahead with this.

zagfles

rogerblack wrote: »

On the other side of it - I would wonder about the tax implications.
Is real value of the gift taxable?

There's all sorts of complicated issues along those lines - it would definitely count for inhertiance tax if they died within 7 years, and it would probably count afterwards as well if it's a "gift with reservation" ie they continued to live in the house rent free having gifted it to their kids.

Not sure what they're trying to achieve but if it's avoiding inhertiance tax or care home fees it probably won't work.