Signing house over to children before care

Savvy_Sue

RAS is correct that minimum wage x 24/7 care comes out to just under £45,000, BUT

a) if you're directly employing anyone, you need to add on extra National Insurance (employer's contributions).

b) PLUS you presumably need to add on holiday cover (4 weeks per year) for which you'd need to pay someone else for each person you employ.

c) PLUS you might need to pay more than minimum wage for the antisocial hours

d) PLUS you do also have to ask what skill level of care you'd get if you're only paying the minimum wage. If it's just someone there, then fine, but if you want skilled care, you would expect to pay accordingly.

I think the scheme RAS is thinking of is called Homeshare.

glenstan

Lots of older people are entitled to direct payments, we did it for late parent, had a team of carers looking after her in her own home. An initial assessment
is given by social worker on number of hours needed to help person stay safe in their own home. We recruited our own staff , for very small fee, local council worked out wages and sent payslips through to us. We went the direct payment route because parent was paying 1500 a month and not getting looked after properly.

Goldeneye_3

My parents are considering signing their house over to my brother and I and have seen a solicitor. The solicitor has advised them of the pitfalls mentioned in the other posts however he also said that my brother and I may have to pay some sort of tax on the gift. Has anyone any knwoledge of this and how much it is or what % it is. Apologies if this has been covered already - I could only see tax being mentioned against parents paying rent to children once house signed over.
Thanks

RAS

Basically, if your parents continue to live in the house, the situation regarding Capital gains tax, and Inheritance Tax is fiendishly complicated.

If your parents own the house they can both use their IHT allowances in their wills. If the house is worth more than that, you will have to pay IHT at 40% on the extra.

If they sign it over, since they would still be living there, there is no escaping the IHT when they die as it is a gift with reservation, unless they pay you the market rent. You will be taxed on the rental.

If you want to sell the house before they die, you would be liable to 40% CGT because it is not your main residence, which would not be an issue if you had left the property in their names.

If they are living there and need care home fees paying, the council will take into account the transfer of the house to your names and put a charge against the property for the value of the fees, unless you can prove that the transfer was not aimed at avoiding the fees.

Generally not a good idea.

wisbech_lad

woodside61 wrote: »

I am planning the following

1. We are buying a house with no mortgage to live in
2 Putting the house in 5 names ie kids as well who are 12 to 8 yrs old
3. In 6 years time getting the oldest one to sell his portion of the house back to us and then loaning us the money we pay him for his portion which he can then claim back against the estate when we die and so on for each of the other 2 children when they hit 16 or the month beforehand to avoid issues of control etc

This way we can avoid a hefty portion of IHT in the future as well as safeguarding our house against spouses who marry into the family and then separate.

has anyone else thought of this or is it nonsense?

chris:beer:

Hmm, thinking through this. Say house is 250,000. You then buy the portion back from the kid at 50,000, which they then turn around and lend back to you (with a covenant that loan is only repayable on your deaths I guess?)

(1) You do not avoid IHT. Say that when you die, your estate is worth 600,000, less the 100,000 that needs to be repaid to your children. That is still 500,000, and so need to pay IHT. (remember your kids sell you back the portion of the house, so it is all your estate)

(2) Your children each have an asset of 50,000 (the loan they have made to you) This makes them ineligable for just about any government benefits. Plus, if they get married and divorced, it is very likely that they now need to find an extra 25,000 (splitting the assets...)

(3) There may be tax rules on interest free loans - I am not sure. You will need to check.

I know that my parents have done something like this (in reverse) - they gave a large loan to one of my sisters, that will be repaid to the other surviving siblings on my parents' death. It is at 4% interest rate to be "fair" to the rest of us. I.e. they gave her a big "advance" on the inheritance. The interest is rolled up.

080897

Hi,

We are a retired couple and need to take some of the equity from our home that we currenty own out right. We have explored equity release but due to the property being a concrete structure (reema conclad) toomuch money was required to have a structual servey without any gurantee of getting the money. We are now exploring the option of signing the property over to our daughter and she will take out a small mortgage. What would be your advise on this or do you have any other suggestions.

Rikki

080897 wrote: »

Hi,

We are a retired couple and need to take some of the equity from our home that we currenty own out right. We have explored equity release but due to the property being a concrete structure (reema conclad) toomuch money was required to have a structual servey without any gurantee of getting the money. We are now exploring the option of signing the property over to our daughter and she will take out a small mortgage. What would be your advise on this or do you have any other suggestions.

She would be unlikely to get a mortgage on a house made of this type of material.

Plus all the other tax implications. :rolleyes:

wylderocks

The issue is simply this. My grandmother went into a care home 5 years ago with dementia. My dad had to sell her house, use her savings and use her pension to pay for her care costs. Before the money ran out she was paying over a thousand pounds a month in care bills. Once all of her money ran out she was liable for care costs, leaving her the grand sum of £5 a week to live on. "Why would she need money," you ask? "She was fed, clothed and kept warm, what more do you want?" Well what about new clothes, slippers which she needed, her hair done!

She eventually died in Feb of this year and the care home chased my dad for care bills outstanding. Even when she had died at the beginning of the month and was up to date with her payments. :mad:

So to those who think that the money should be spent on the elderly person to make them comfortable, I ask you how can anyone be comfortable on £5 a week!!!!?????

Also, as there were people in that care home who had no assets to sell, how can they be getting the same level of care? It seems highly unfair and hypocritical that someone who has saved all their life, been careful with money have that taken by the greedy and selfish "care" authorities, whilst people with no assets get this paid for.

Yet again a sign of our so called classless society!!!

monkeyspanner

wylderocks wrote: »

The issue is simply this. My grandmother went into a care home 5 years ago with dementia. My dad had to sell her house, use her savings and use her pension to pay for her care costs. Before the money ran out she was paying over a thousand pounds a month in care bills. Once all of her money ran out she was liable for care costs, leaving her the grand sum of £5 a week to live on. "Why would she need money," you ask? "She was fed, clothed and kept warm, what more do you want?" Well what about new clothes, slippers which she needed, her hair done!

She eventually died in Feb of this year and the care home chased my dad for care bills outstanding. Even when she had died at the beginning of the month and was up to date with her payments. :mad:

So to those who think that the money should be spent on the elderly person to make them comfortable, I ask you how can anyone be comfortable on £5 a week!!!!?????

Also, as there were people in that care home who had no assets to sell, how can they be getting the same level of care? It seems highly unfair and hypocritical that someone who has saved all their life, been careful with money have that taken by the greedy and selfish "care" authorities, whilst people with no assets get this paid for.

Yet again a sign of our so called classless society!!!

I understand your points completely.
A couple of practical points. When your Grandmothers savings reached the lower savings limit of aroud £20000 the social services should have assisted with care fees. At that time a weekly allowance of around £20 from her income (state pension etc.) should have been disregarded by the council in their financial assessment to allow for out of pocket expenses.

If your grandmothers primary need was medical at any time during her care home residence the NHS should have picked up the entire cost of her care under the Continuing healthcare funding arrangements. If your Dad believes this was the case he could investigate a retrospective claim although this funding is difficult to obtain particularly retrospectively.

Oldernotwiser

wylderocks wrote: »

Also, as there were people in that care home who had no assets to sell, how can they be getting the same level of care? It seems highly unfair and hypocritical that someone who has saved all their life, been careful with money have that taken by the greedy and selfish "care" authorities, whilst people with no assets get this paid for.

Yet again a sign of our so called classless society!!!

Your grandmother (and her family) had the choice of which care home to go in and could be fairly sure that she would be secure there, unlike those who were funded by the state.

I don't really see how you could view this as a question of class, it's simply a question of money and home ownership.