inheritance tax and signing over the house

superdream

Hi all,

Bit of a strange question this and was unsure where to put it but here goes.

My grandmother signed over her house to my uncle 6 years ago and since then has got dementia and my uncle had been caring for her in the home for the last 3 years.
Last week my uncle suddenly died and his Will states that his 2 sons are to inherit his esate equally. My grandmother has since been shipped off into care.
My question is will the house (estimated worth £200k) have to be sold to pay for her care or will the mercenary cousins inherit the lot?

alanq

Complicated!

If Grandmother continued to live in the house after gifting it to Uncle then, unless she was paying him rent at market rate, it may still be considered hers for inheritance tax purposes.

"If you don't pay a market rent, the gift will be considered a 'gift with reservation of benefit' and the house may be subject to Inheritance Tax."
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm#3

If she gifted the house when she knew that her health was deteriorating and she was likely to need residential care then it could be deemed intentional deprivation of assets and the value of the house may be taken into account when assessing her assets.
http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

One for legal advisers to sort out I fear.

paddedjohn

why do you say the cousins are mercenary? their father died and the house is in his name, therefore its one of his assets that presumably pass to his children (as long as its not found to be deprivation of capital). Do i sense a hint of jealousy?

Biggles

It looks as though IHT may not be a feature here. So it's a matter of how much the local authority investigate the ownership of the house, and what they find out about your grandmother's state of health at the time she signed it over.

pollypenny

How are they 'mercenary cousins' when the house was signed over to avoid tax - somewhat mercenary, eh?

chesky369

Maybe the OP means that the grandmother who was in the house being looked after by the uncle, has, since his death, been shipped off to a home by the two sons who don't fancy looking after her. Tricky one this, can see both sides. The OP and the two sons are all the same relationship to the grandmother and perhaps the understanding was that she would never have to go into care but stay in her own place. The uncle wasn't supposed to die before his mother.

superdream

chesky369 wrote: »

Maybe the OP means that the grandmother who was in the house being looked after by the uncle, has, since his death, been shipped off to a home by the two sons who don't fancy looking after her. .

That's exactly what I mean: my uncle hadn't been dead 24 hours and my gran was in a grotty care home. The 2 sons, 1 in particular had not a lot to do with their father and certainly not with their gran.
Any monies should be spent on my grandmother in as best a care home as possible not financing emigrations to far of places so no paddedjohn no jealousy.


What of the fact that my uncle has only had the house signed over to him for 6 years not 7 plus wouldn't there be no inheritance tax to pay anyway since the estate is worth less than the £325000 threshold?

dzug1

superdream wrote: »

What of the fact that my uncle has only had the house signed over to him for 6 years not 7 plus wouldn't there be no inheritance tax to pay anyway since the estate is worth less than the £325000 threshold?

If the house was signed over and the old lady continued to live in the property then for IHT purposes the transfer never took place.

But yes - if the house doesn't push the estate into IHT territory then none is payable.

There's still the deliberate deprivation of assets angle for care home fees.

Biggles

superdream wrote: »

That's exactly what I mean: my uncle hadn't been dead 24 hours and my gran was in a grotty care home.

To be fair, they might not have had any other option if her carer had died suddenly.

monkeyspanner

superdream wrote: »

That's exactly what I mean: my uncle hadn't been dead 24 hours and my gran was in a grotty care home. The 2 sons, 1 in particular had not a lot to do with their father and certainly not with their gran.
Any monies should be spent on my grandmother in as best a care home as possible not financing emigrations to far of places so no paddedjohn no jealousy.


What of the fact that my uncle has only had the house signed over to him for 6 years not 7 plus wouldn't there be no inheritance tax to pay anyway since the estate is worth less than the £325000 threshold?

If the estate plus the value of the house is less than the IHT threshold then the IHT issue can be ignored.

Sadly there is absolutely no obligation on the 2 sons to spend any money on the care as the asset was transfered to their father. The subject of transfering houses to children to avoid care home fees is often asked on this forum and this circumstance is an excellent reason for not transtering the house without making provision in the will of the recipient for the transferor.

Assuming that your gran has less than the lower savings limit and her care home fees are being supported by the council then there is an outside chance that the council might view the transfer as a delierate deprivation of assets and take action to put a financial charge on the house. The key point is if your Grans health at the time of the transfer indicated that there was a need for care in the near future. The council can search for transfers of this type as far back as they like they are not time limited as in the IHT 7 year limit. If the council were persuaded to look at this it is unlikely that this would improve your Grans situation as the capital value of the house would not be recovered for her, would cause a complicated financial situation and could cause family problems for anyone who prompted the council to investigate.

It is possible for any 3rd party to contribute to care home fees in order to secure a better care home placement. This 3rd party could be any relative, friend or charity. Any chance of the sons being persuaded to be charitable?

Trebor16

From CRAG, on the subject of deprivation of assets:-

The timing of the disposal should be taken into account when considering the purpose of the disposal. It would be unreasonable to decide that a resident had disposed of an asset in order to reduce his charge for accommodation when the disposal took place at a time when he was fit and healthy and could not have foreseen the need for a move to residential accommodation. CRAG, paragraphs 6.062 and 6.064

And also

Powers of recovery

Under section 21 of the Health and Social Services and Social Security Adjudications (HASSASSA) Act 1983, where a resident has deliberately deprived himself or herself of an asset the local authority can recover any sums it consequently has to pay towards the resident’s care costs from the person who the asset was transferred to, as long as the deliberate deprivation occurred within six months of the resident approaching the local authority for funding. If the transfer was made more than six months before the local authority cannot use this section.

However, the six-month limit only applies to that particular power of recovery. There is no set time limit beyond which the local authority has to ignore transfers of assets. If a transfer occurred more than six months before the resident applies for assistance the local authority can still treat him or her as having deliberately deprived themselves of that capital under the charging regulations. They may initially refuse to fund the resident, necessitating a challenge or if they do provide funding in these circumstances they may treat the assistance provided as an accruing debt owed by the resident to the local authority.

So it looks like they will use CRAG in most cases, but that is clear that if a person was fit and healthy at the time of the transfer of assets that to consider it deprivation would be unreasonable.