Signing house over to children before care

lamb7994

If you need any further advice you can call:

Help The Aged senior line which is a free confidential advice service for older people and their carers:
0808-800-6565 open monday to friday 10am - 4pm.

They are able to advise people on a variety of subjects such as selling houses to pay for care
James

theloopholekid

Hi, have read the posts with great interest.

However, does anyone know any actual way of stopping the local councils from selling someones house (or taking a charge etc) to pay for someones full time nursing care in a home?

And this is not for my own inheritance, I would sell my shoes to see my grandfather had good care, its simply him that wouldnt! He feels he has worked all his life and paid his 'stamp' was born and lived in his ohouse all his life and doesnt want it sold.

If there is no way of doing this, what would be the best way to avoid paying IHT as much as possible or CGT?

He has 1 son, and 1 grandson and 1 grandaughter (all married)


thanks

wayne
The loopholekid.

theloopholekid

Hi, have read the posts with great interest.

However, does anyone know any actual way of stopping the local councils from selling someones house (or taking a charge etc) to pay for someones full time nursing care in a home?

And this is not for my own inheritance, I would sell my shoes to see my grandfather had good care, its simply him that wouldnt! He feels he has worked all his life and paid his 'stamp' was born and lived in his ohouse all his life and doesnt want it sold.

If there is no way of doing this, what would be the best way to avoid paying IHT as much as possible or CGT?

He has 1 son, and 1 grandson and 1 grandaughter (all married)


thanks

wayne
The loopholekid.

Cardew

Obviously I agree with all the reservations people have about giving away a house to children to avoid IHT and continuing to live in it; however if you are confident enough on this aspect, there are other ways of looking at the problem.

As giving away a house in this manner constitutes a ‘gift with reservation’ the parents will be required to pay a ‘fair market rent’ to their children who will be required to pay income tax on that rent.

Everyone seems aghast at the very idea of paying a rent for your ‘own house’ but in economic terms is it so silly?

As IHT doesn’t apply to assets over £300k(next year) and a couple can very easily get double that allowance by simple planning, we are talking about people with substantial assets and presumably a high value house.

I don’t know what would be considered a ‘fair market rent’ for say a £300,000 house; but I wouldn’t think the authorities would baulk at £1,000 a month(£12,000pa). Bearing in mind the allowances you can set against rental income – repairs, replacements, servicing contracts etc a standard rate tax payer could probably reduce their liability to, say, £1,500pa.

Live for 7 years and you(sorry your children)will have paid a tiny fraction in Income Tax of the potential IHT on a house that will probably be worth well in excess of £300,000.

The children will have a CGT bill to consider if the house price has risen, but that would also apply if IHT were to be paid.

Can’t afford to pay £1000 a month rent? Perhaps your children can help you out!

Let me say again the reservations about giving away your house are valid!

margaretclare

theloopholekid wrote:

However, does anyone know any actual way of stopping the local councils from selling someones house (or taking a charge etc) to pay for someone's full time nursing care in a home?

And this is not for my own inheritance, I would sell my shoes to see my grandfather had good care, its simply him that wouldnt! He feels he has worked all his life and paid his 'stamp' was born and lived in his house all his life and doesn't want it sold.

This is a common objection, one hears it all the time - 'I paid in all my life'.

However, it's not the way the system works/has worked. What your grandad was paying for was for people who needed help from the system at that time. It has never worked like a 'savings bank' or an investment fund, for help in the future for those who were paying in at the time. Many people are under this misapprehension.

Can one ask - is it likely or probable that your Grandad will need this full-time nursing care in a home, or is he just looking at a worst-case scenario? Because it is still only a minority of people who end their days in this way. Most people will be able to live at home even if they have to pay for help coming in - a lot cheaper option than living in a house provided by someone else, with meals, laundry, bed-and-board etc. As in holiday hotels, B&Bs etc, quality varies a lot, and the permanently cash-strapped councils will obviously go for bottom-of-the-range. In addition, if qualified nursing care is really what's required (as opposed to 'care' and meals/laundry/bed-and-board) nursing should actually come out of the NHS budget. Ted Hutchinson is the recognised expert on this, and he has written extensively, with relevant links, on this site.

Best wishes

Margaret

patm62

Hmmm, this kinda relates to me, i posted in the mortgage forum and now must go to a solicitor as what i thought was pretty straightforward apparently is anything but. I had decided to sell house to daughter who works abroad for £70,000, house worth £180,000, which wld give me some cash and clear the £21000 mortgage i'm paying. i've done all margaretclare suggested before when i posted about this, claiming everything, got a lodger. it wouldn't matter is she had pay all this IHT etc when i died, she'd still get a lump. I completely trust her, and she has no partner. tho of course that may well change. with all the negative replies, i wondered if i'd be better looking at my earlier option of making her joint owner and she can just pay me summat. opinions welcome
cheers pat

EdInvestor

Let's say Patm62 sells say one third of her house to her daughter for 60k, thus ending up with no mortgage and 40k cash to invest for income.Daughter will have to get 60k mortgage (presumably not a problem?)

They would own as tenants in common one third/two thirds.No stamp duty on sale as under threshhold.

Daughter would be liable for capital gains tax on a later sale BUT, if on her return to the UK she moved in with patm so the house became her main residence, then she should be able to avoid that, and anyway it is subject to various reliefs and would only be payable on the profit between now and any sale.

If the daughter went bankrupt or there was a forced sale of the house for other daughter-related reasons ( eg divorce), then patm would still have 120k's worth of equity - which should be enough to buy another place to live?

Property is well under the IHT threshhold and there's no intention of avoiding care costs - this is just a way of increasing patm's income.

Doesn't seem to be much of a problem to me, but perhaps I'm missing something?

patm62

http://forums.moneysavingexpert.com/showthread.html?t=395904

please read here and you'll see why i've got worried. opinions please. i really thought this was a good idea!
cheers pat

Bossyboots

EdInvestor wrote: »

Let's say Patm62 sells say one third of her house to her daughter for 60k, thus ending up with no mortgage and 40k cash to invest for income.Daughter will have to get 60k mortgage (presumably not a problem?)

They would own as tenants in common one third/two thirds.No stamp duty on sale as under threshhold.

Daughter would be liable for capital gains tax on a later sale BUT, if on her return to the UK she moved in with patm so the house became her main residence, then she should be able to avoid that, and anyway it is subject to various reliefs and would only be payable on the profit between now and any sale.

If the daughter went bankrupt or there was a forced sale of the house for other daughter-related reasons ( eg divorce), then patm would still have 120k's worth of equity - which should be enough to buy another place to live?

Property is well under the IHT threshhold and there's no intention of avoiding care costs - this is just a way of increasing patm's income.

Doesn't seem to be much of a problem to me, but perhaps I'm missing something?

There is not quite so much problem with that plan, but the original plan outlined was fraught with potential hazards. However, maybe I live in an expensive area but you won't get a property of any sort round here for £120 k

patm62

if i ran into any huge difficulties unforeseen at the moment, i wld be eligible for a pensioners council house or warden care flat, which aren't too hard to get here.
cheers pat