Sharing a house with Grandma instead of a care home - Inheritance tax.

fracturedsun

Hi all
My first post here, I'm hoping you can help work out the potential options for my Mum to help my Grandmother.

My Grandmother (who is in her 90s) got quite sick last month and now needs someone to help her get up in mornings and to prepare her meals. At the moment my Mum is commuting from her house to work to look after her but this is a 2 hour commute and she just can not afford this in the longterm. (I'm over the other side of the country and thus little help day to day). The care she is getting at home through social services isn't really covering what she needs. Mum has considered moving my Grandmother into her house but it really isn't big enough or the stairs suitable for someone with limited mobility.

This really leaves two options 1.) Moving her into a care home or 2.) Moving into a new house with her. She would prefer to do the second but doesn't think she will be able to afford it. She still has a large mortgage on her house and as she is 60 next year and her husband 65 she has been advised that no one will underwrite a new mortgage for them. My Grandmother owns her house (though she released some of the equity a few years ago so would have to pay a finance company a percentage if she were to sell it). If they were to pool their equity they could (just about) buy a suitable house outright together. However my Mum is worried she and her husband could end up homeless if my Grandmother later needs full time care and they need to move her into a care home or when she dies.

Would this be the case if they had moved into a new house together would they then be liable for inheritance tax on my Grandmother's share when she dies or have it taken for care home fees?

Savvy_Sue

Welcome. Lots of questions there, most of which I can't answer, but I can point you to Counsel and Care and Age UK, who will have factsheets which should help you work out some of what you need to consider.

However, a few things I may be able to help with:

If your mum is over 60 and living with your grandmother, I don't think your parents can be made homeless should a new house need to be sold.

If the new house is jointly owned, then only 'grandma's' share would be taken into account, AFAIK.

Also the house doesn't have to be sold, even if your grandmother has to fund her own care, and even if the council decides that there was some 'deprivation of assets' going on: they can put a charge on the house so that their fees are recovered when the house is sold.

Again, for inheritance tax purposes only your grandmother's share of the house would be counted within her estate. But for inheritance tax planning talk to someone qualified, because they will ask all the right questions: you may well find that grandma's estate won't be liable for IHT.

Couple of things to bear in mind: while Grandma may make a good recovery eventually, she's likely to become less rather than more independent as time goes on. What if she does move in with your parents, but then it becomes clear that your mum can't keep on caring for her - will moving into a home at that stage be completely traumatic, or would it make more sense to really consider care homes now while Grandma is in a better state to cope with a move, make new friends etc? And what about sheltered housing, or is Grandma beyond that too?

getmore4less

IHT kicks in at £325k so is the house+ everything else worth that much.
If there was a spouce that passed without giving anything away that will double the amount to £650k.

There is the risk here that your parents move and end up in a house that is too big and have to move again.

carefull choice needed.

The plan sounds good if they can become mortgage free because that is a significant issue for them.

When does the current mortgage finish? and how much will they need to raise

selling two houses and buying a new one is not going to be a quick process.

What about them moving into grans house.

missile

Have you considered a live in carer? This might be a better cheaper option.

fracturedsun

Thank you everyone for the suggestions lots to think about. Not easy to work out the best thing to do but it's good to have more information on the different options.

Newly_retired

Sorry to be blunt but as Grandma is in her 90ies and not at all well, is it going to be worth all the hassle of buying and selling houses as it may not be for long?

Savvy_Sue

Newly_retired wrote: »

Sorry to be blunt but as Grandma is in her 90ies and not at all well, is it going to be worth all the hassle of buying and selling houses as it may not be for long?

A good point, but you could be talking 10+ years. Which also needs to be thought about.

Trebor16

There shouldn't be an issue with the deprivation of assets issue if you decide to sell both houses and buy one jointly. Just make sure that it is all drawn up properly by the solicitor. If you nan then had to go into a care home in the future if this was done then your parents could not be forced out as they are over 60 and also acting as carer for your nan. The local authority would only be able to look at your nans share of the property when assessing for care home costs and with a house that is jointly owned it is a situation that they hate. They wouldn't even be able to put a charge on it because of the joint ownership.