Gran in carehome, solution rent her house out to pay towards fees

claire21

My Gran had alzhiemers and im her next of kin. Shes 90.

She was having a small amount of care at home but she had to go to hospital and we quickly found a carehome for her to move from hospital to go into for 10 days respite. It was going to be a struggle to find a care agency that could give more hours at home. The care home is so nice and she seems to be having a lovely time there.

It was a hard discission to make but have told the carehome she will stay full time now. I didnt want to bring her home and then six months down the line be in this position again and not be able to get a room back in this carehome.

Anyway Gran has a large house, I have power of attorney and I thought my best option would be to rent her house out and that income could go towards her fees with additional income/ savings she has topping up the balance.

I know she will be taxed on the renatl income she gets for her old home but are there any other things I need to consider. She will be over the Inhertance Tax threshold when her final days come but am I missing something else that will effect things from renting out her house?

custardy

claire21 wrote: »

My Gran had alzhiemers and im her next of kin. Shes 90.

She was having a small amount of care at home but she had to go to hospital and we quickly found a carehome for her to move from hospital to go into for 10 days respite. It was going to be a struggle to find a care agency that could give more hours at home. The care home is so nice and she seems to be having a lovely time there.

It was a hard discission to make but have told the carehome she will stay full time now. I didnt want to bring her home and then six months down the line be in this position again and not be able to get a room back in this carehome.

Anyway Gran has a large house, I have power of attorney and I thought my best option would be to rent her house out and that income could go towards her fees with additional income/ savings she has topping up the balance.

I know she will be taxed on the renatl income she gets for her old home but are there any other things I need to consider. She will be over the Inhertance Tax threshold when her final days come but am I missing something else that will effect things from renting out her house?

no idea on the technicalities.
However I like your solution!
great to see a practical option allowing the home to be retained,whilst covering costs

Fire_Fox

Best option for whom? Don't confuse the Power of Attorney which is solely you doing what is best for the vulnerable person with doing what is best for the beneficiaries especially if you are also a beneficiary. Do you have any idea of the reams of legislation a landlord has to comply with or how much work it is to do it professionally? Presumably you as PoA will have to take all this on.

For a start you need to consider if the property meets all the legal requirements, for example if it's large you may need to apply to the council for an HMO license unless you let to a single family. You also need to demonstrate the gas and electrics are safe in the prescribed manner. What will you do if the tenants trash the place or simply don't pay rent and you have to evict through the courts, how long can you still fund your gran's care?
http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

Mallotum_X

Once social services get involved chances are you will have to sell the house to pay for care. Unless house is going to rent for a significant amount then carehome fees will be higher. Does gran have other savings assets to make up shortfall?

claire21

I could fund my Grans care a lifetime over again.

i already have 3 rental properties and she also has one.

My granmother and I are business partners in industrial property lettings so I am well aware of what a landlord has to do.

It seems the most logical thing to do at this present time with the market.

It would be let to one family.

claire21

Mallotum_X wrote: »

Once social services get involved chances are you will have to sell the house to pay for care. Unless house is going to rent for a significant amount then carehome fees will be higher. Does gran have other savings assets to make up shortfall?

My Gran will be self funded for the rest of her life.

Fire_Fox

I don't understand why you are asking basic questions then revealing you are already a landlord many times over. If this is purely a tax issue the HMRC website is packed with information or run an advanced search on the Cutting Tax board http://forums.moneysavingexpert.com/forumdisplay.php?f=22

Different legislation covers residential and commercial lettings.

claire21

Fire_Fox wrote: »

I don't understand why you are asking basic questions then revealing you are already a landlord many times over. If this is purely a tax issue the HMRC website is packed with information or run an advanced search on the Cutting Tax board http://forums.moneysavingexpert.com/forumdisplay.php?f=22

I am asking as I have never rented out a primary residence and was unsure if there was anything different with the way that would be treated if the time comes when it is sold either when she was alive or for IHT purposes.

Edit, i replied whilst you edited your post.

lessonlearned

Given your circumstances I would say go ahead with the rental. There's no point selling an asset in the current market unless you are absolutely forced to.

There is no need for Social Services to get their finger in any pies if you are self-funding. If they are not funding then what your grandmother (or you if you have POA) does with her property is none of their business.

(It's alright my OH is in care and initially I was on a very steep learning curve).

Do be aware that self-funders do subsidise rates for those whose placements are funded by SS. They pay far more for their room than SS do.

I personally find that grossly unfair to self funders but SS and the care homes get away with it. It's perfectly legal.

Is it too late to ring fence any of her assets so that they are not included in the eventual IHT bill - either trusts or taking out an insurance policy to cover the bill.

Hopefully your Gran will have many happy years in her new home - you may still have time to do some IHT planning.

Yes there is the 7 year rule, but don't forget the "taper facility" which can lower the bill.

JimmyTheWig

claire21 wrote: »

My Gran will be self funded for the rest of her life.

Then I'm not convinced that letting out her house will provide her with any benefits.
The only advantage would be that there would be more inherritance when her time comes. Which, while a nice passing thought, isn't necessarily important to her.

So I guess the question is are there any disadvantages to your gran of letting out the property?
Presumably you are saying that there is no chance of her coming out of the care home and living back at home? Obviously if this was a possibility then it wouldn't be good to have it rented out!
Would she have to do any of the work (even if just signing papers) or would that all be handled by you as her power of attourney?
Would the house be let furnished? How does she like the idea of strangers "going through her things"?

And obviously it only works if you are prepared to put in the effort. You already know about the hassle of being a landlord, so should be easy for you to make that decission.
I do think it is worth looking into how expensive care homes can be. Obviously it would be wonderful if your Gran lived another 20 years, but in that case the costs may well mean that the house is sold anyway. All this would mean is that you would have gone through the effort of letting the place out for no personal gain. Not a reason not to do it, but something worth thinking about.

Fire_Fox

claire21 wrote: »

I am asking as I have never rented out a primary residence and was unsure if there was anything different with the way that would be treated if the time comes when it is sold either when she was alive or for IHT purposes.

Edit, i replied whilst you edited your post.

Different in terms of what? Your OP gave an impression you were looking at the general implications of residential letting which is covered by this board, summarised in G_M's excellent post that I linked to back in post 3.

Now you seem to be suggesting you are only interested in taxation issues which is not really our 'jurisdiction' as an isolated topic. As well as the Cutting Tax board there is Deaths Funerals and Probate http://forums.moneysavingexpert.com/forumdisplay.php?f=217

Again don't confuse your responsibilities as Power of Attorney which are quite stringent with your wishes as a beneficiary. These can easily be polar opposites.