Putting home into family trust to avoid nursing home fees

dzug1

The seven year rule relates to Inheritance Tax - not the local authority. There is no set period after which they cannot come after assets that have been given away to avoid fees - though obviously the longer it is, the less likely it is that such a claim can be upheld.

And even for inheritance tax, if your mum gives you the house, continues to live in it and doesn't pay you a market rent then it's still part of her estate for IHT. You meanwhile may be running yourself up income tax and CGT traps.

It's not at all a simple area

Mojisola

punchyuk wrote: »

If my mum was to sign her house over to me if in the event she ended up in a home before the seven years could I just rent the house out and use the proceeds to go towards funding a private care home and then add to the rest out of my own pocket?
How about if after the seven years, could I not just use the rental income to top up the fees that she would get from for state funded care home to place her in a perhaps better quality care?

If your mother signed the house over to you, it would be considered deprivation of capital. As dzug1 says, there is no seven year rule for DOC. The DWP would have to show that the house was signed over in order to avoid fees so, if there was some other legitimate reason, you might have an argument against them.

If someone is self-funding then they keep all their income - pensions, benefits, income from savings or rents, etc. It's worth adding all this up and see how it compares to the cost of the kind of home your mother would like to live in. If a property has to be sold, then the capital would reduce as the residential home was paid for. The lump sum from a house is not taken off a resident as some people seem to think.

Most older people don't need residential care. Many who do go into care go towards the end and their stay isn't very long. I think the average stay is under two years. Of course, that means some people may be there a month and other people might be in a home for years.

punchyuk

I went to the solicitors with my mum this morning straight after I wrote my post. We were discussing wills, I`m 43 and she is 67 and my mothers will is years out of date(my dad was still alive then) and I have not got one.
I now realise after dealing with my dad's probate (as his business and certain things were not in joint names) could be a potential minefield for anyone I left behind if I were to get run over by a bus tomorrow.
Dzug1 is indeed correct regarding the seven year "itch" as the solicitor called it. That is for inheritance tax, neitherme or mum dont come into that bracket.
She mentioned that our local authority dont go back more than a year or two regarding assets and care home stuff.
She said she deals with gifting houses to sons/daughters regularly.
She said there is no problem providing you do it above board.
You can draw up an agreement so as mum can live there all her natural' and I do not have to charge rent and she is of the opinion that the tax man wont have a problem with me not charging my mum.

One thing that I would like to find out in more detail is if the care home payments are like housing benefit in as much as if you are a single person needing accomodation the local council will give you a set amount per month and you choose your accomodation and pay any top up that arises.
EG council single rate is £450 p/m but you find a place at £600 you have to pay the £150.
If the same thing applies to care costs. Again over simplifying it, I wonder if say the LA would pay around £2000 a month for a standard care home could I top up the extra amount a month that might get her in a better standard of home?
I know some of you out there might think of me as mercenery but I am only being honest with you. Like many on here have already intimated, saving for your old age means pretty much nothing these days. If you get the same care if your skint or rich it does make me think what was the point?
I`ve told my mum to cash her premium bonds and other savings and carry on with her holidays and passion for golf until such time as her knees, heart, hips or anything else gives way.
Hopefully she has a few year left before she starts dribbling in her tea and I wouldn`t like the thought of her either having her savings dwindle away at over a monkey a week by being in a home or dying with money left in the bank that she could have enjoyed.

Dunroamin

punchyuk wrote: »

I`ve told my mum to cash her premium bonds and other savings and carry on with her holidays and passion for golf until such time as her knees, heart, hips or anything else gives way.
Hopefully she has a few year left before she starts dribbling in her tea and I wouldn`t like the thought of her either having her savings dwindle away at over a monkey a week by being in a home or dying with money left in the bank that she could have enjoyed.

Thank goodness you aren't my offspring or I'd tell you exactly where to go trying to organise my life and finances and speaking about older people in such a disrespectful way.:mad:

I hope she makes a will and leaves the lot to the cats' home!

Mojisola

punchyuk wrote: »

I went to the solicitors with my mum this morning straight after I wrote my post. We were discussing wills, I`m 43 and she is 67

67 is not old! Your mother could live for another quarter of a century and still not be "dribbling in her tea".

If she gave you her home, are you really sure that you could provide her with a home for the next 25-30 years?

If you own the house you're living in, you'll have the expense of maintenance for two properties. If you go through a divorce, your mother's home would be taken into account in any financial settlement. If you needed to claim means tested benefits, you could be turned down because you own a second home. You will need a well-written will in case you die before your mother. Have you looked at capital gains tax issues when you come to sell?

I hope my children don't suggest something like this to me any time soon. They'll get short shrift if they do!

margaretclare

OMG! What an appalling post by punchyuk. I hardly know where to start in response.

For myself, I was newly remarried at Mum's age, that was in 2002. I didn't regard life as over. 10 years later I am still not 'dribbling in my tea' and I hope not to do so for a considerable time yet, if ever.

Life re-started for me after widowhood in 1992. In 1997 I fell in love all over again.

What I am trying to illustrate is that life has possibilities that we just cannot foresee. Some of them are awful, like my daughter's sudden death at end of 2002, but some of them are wonderful. Don't tell your Mum what to do with her premium bonds or anything else - that's her business, not yours. At age 67 your mum can easily live another 30-40 years. I hope that she does, and that she continues to enjoy her golf and anything else that appeals to her. Maybe she might find another life partner down at the golf club? Why ever not?

Having said that, I am glad she has rewritten her will. Everyone should have a will and everyone should make sure they are up-to-date, revising them where necessary.

ticktack_2

punchyuk wrote: »

I went to the solicitors with my mum this morning straight after I wrote my post. We were discussing wills, I`m 43 and she is 67 and my mothers will is years out of date(my dad was still alive then) and I have not got one.
I now realise after dealing with my dad's probate (as his business and certain things were not in joint names) could be a potential minefield for anyone I left behind if I were to get run over by a bus tomorrow.

On the other hand, your mother would then be free to organize her finances in the manner that best suits her, rather than the manner that best suits you. And it doesn't have to be a bus. If you're a 43-year-old male, you may have certain health risks which aren't shared by your mother at age 67.

One thing that I would like to find out in more detail is if the care home payments are like housing benefit in as much as if you are a single person needing accomodation the local council will give you a set amount per month and you choose your accomodation and pay any top up that arises.
EG council single rate is £450 p/m but you find a place at £600 you have to pay the £150.
If the same thing applies to care costs. Again over simplifying it, I wonder if say the LA would pay around £2000 a month for a standard care home could I top up the extra amount a month that might get her in a better standard of home?

Mightn't such an arrangment risk the patient being dumped in the cheapest possible home so the extra cash could go in the pocket of the relative?

I know some of you out there might think of me as mercenery but I am only being honest with you. Like many on here have already intimated, saving for your old age means pretty much nothing these days. If you get the same care if your skint or rich it does make me think what was the point?

But if you make arrangements to control your mother's finances, when she's only 67 years old, so that she ends up dependent on the state, it seems as if your mother is effectively the one who has saved for your old age.

Pollycat

punchyuk wrote: »

Dzug1 is indeed correct regarding the seven year "itch" as the solicitor called it. That is for inheritance tax, neitherme or mum dont come into that bracket.
She mentioned that our local authority dont go back more than a year or two regarding assets and care home stuff.
She said she deals with gifting houses to sons/daughters regularly.
She said there is no problem providing you do it above board.
You can draw up an agreement so as mum can live there all her natural' and I do not have to charge rent and she is of the opinion that the tax man wont have a problem with me not charging my mum.

I think you need to be really careful here.

Maybe your local authority don't currently go back more than a couple of years - but who knows what their policy will be when (if) your mum needs a care home.....
With central government squeezing LAs financially, I'd not bank on that for future years

She (your solicitor) is 'of the opinion'.....
Really?

I'd want a hell of a lot more than somebody's opinion (even if that somebody was in the legal profession) before doing anything.

punchyuk wrote: »

One thing that I would like to find out in more detail is if the care home payments are like housing benefit in as much as if you are a single person needing accomodation the local council will give you a set amount per month and you choose your accomodation and pay any top up that arises.
EG council single rate is £450 p/m but you find a place at £600 you have to pay the £150.
If the same thing applies to care costs. Again over simplifying it, I wonder if say the LA would pay around £2000 a month for a standard care home could I top up the extra amount a month that might get her in a better standard of home?

Do your own homework.

Lots of info on this website, including 3rd party top-ups:

http://www.counselandcare.org.uk/finding-and-paying-for-a-care-home

margaretclare

It's worth repeating - although it has been said before - that only a minority of people end their days in care homes. The vast majority continue to live in their own homes, even if they need help to do so. A lot of hot air is expressed on these threads, mainly by younger folk who are anxious to organise their parent's life to suit themselves. For myself and DH, we are still busy enjoying the time that is left to us and we haven't wasted a moment's thought on 'what will happen when we go into a care home'. The likelihood is that we will not.

dzug1

ticktack wrote: »

But if you make arrangements to control your mother's finances, when she's only 67 years old, so that she ends up dependent on the state, it seems as if your mother is effectively the one who has saved for your old age.

And in any case in 30 years or so's time there may be NO state funding for care homes. If the present government achieves its Big Society ideals (extemely doubtful I know) then that's an expectation. Certainly it's what their more rabid right wing advisors will tell them - and quite a few posters in some areas of this site tell us that's what ought to be. No money, no care.