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

G_M

claire21 wrote: »

Yes, as POA I have to find a way to pay care home fees.

I thought you said "I could fund my Grans care a lifetime over again.

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

In reply to your original questions:

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?

Firefox has referred you to my post here which covers the rental side, and also advised on the inheritance tax issue.

claire21

JimmyTheWig wrote: »

While I _think_ I agree with you that your Gran has no further need for this property and may as well get the glimmer of enjoyment knowing that she will be able to pass more down as inherritance this way, you have said that either way she can afford the care home fees so I'm not sure that this is a valid point.

The house somewhere has to be in the equation for her to fund the carehome fees, her income leaves a shortfall in the monthly fees, so it is either topped up by generating more income from renting the house or using the capital from the sale to top up.

Mojisola

claire21 wrote: »

The house somewhere has to be in the equation for her to fund the carehome fees, her income leaves a shortfall in the monthly fees, so it is either topped up by generating more income from renting the house or using the capital from the sale to top up.

I am considering this with my father's house. When I know how much his care home will cost and what the house could be sold/rented for, I'll do the sums and see whether it's worth while.

claire21

G_M wrote: »

I thought you said "I could fund my Grans care a lifetime over again.

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

In reply to your original questions:

Firefox has referred you to my post here which covers the rental side, and also advised on the inheritance tax issue.

Yes I could fund her fees but logically what would be the point when she can fund them herself. All that means is if I pay them she keeps an assets she no longer needs that goes into the pot for IHT.

rpc

So either:

- rent the house, she pays her fees and keep a capital asset
- sell the house, pay for fees from the proceeds and keep them invested somewhere else in the meantime

If the house is worth £x then, as her attorney, the question is "If she had £x in the bank, how would I invest it in her best interests bearing in mind the need to pay for care home fees?"

If that answer is to buy the house then job done, rent it out. If the answer is something different then you should probably sell the house and do the something different. There is the emotional issue others have alluded to, but you suggest that won't be a problem so it is purely a financial question.

LEJC

Ive not read all the posts so if I am stepping on what others have said and repeating it I appologise...

Have been in this situation and yes you can use the house to generate rental income or indeed the rental income from any other property that she may own....

Social services do not question you regarding finances until you reach the lower thresholds...providing the rental income can support the care home fees then she will remain self funded Social services and the finance departments will only need to be involved regularly once the disposable assets of your gran reach £23000,at that point she will qualify for a partial funding for her care.Above that point it is up to her or her representative to make payment to the care home and therefore she is self funded.

In our case the care home fees were £725 per week and that money was paid from the rental income generated so providing you can match the fees with the rental you achieve and or/existing savings she has then the house can be rented without having to be sold.

Most people are not in the position to sustain the level of care home fees with any income they have and that is where the asset of the house is then taken into account,but whilst you can match the fees with the income generated then it all ticks along so to speak....

chewmylegoff

lessonlearned wrote: »

My understanding is because it is/was your grandmother's primary residence there will be no CGT. It will form part of her estate and will therefore fall under normal IHT rules.

indeed - this would actually apply whether it is her primary residence or not. if the estate on death is:

Principle residence £1,000,000 (Cost £500,000)
Rental portfolio £1,000,000 (Cost £500,000)
Total £2,000,000
IHT threshold (£325,000)
Taxable to IHT £1,675,000

Then you pay IHT at 40% on the £1,675,000 estate above the IHT threshold. You do not also pay CGT on the £500,000 gain on the rental properties.

So there is no need to worry about CGT if the intention is to hold the property and never sell.

JimmyTheWig

claire21 wrote: »

The house somewhere has to be in the equation for her to fund the carehome fees, her income leaves a shortfall in the monthly fees, so it is either topped up by generating more income from renting the house or using the capital from the sale to top up.

I think the point is that the house wouldn't have to be sold until after she had departed, wouldn't it?
Is that not how it normally works? That the care home fees are paid for out of the estate? I may be wrong.

In which case in one scenario she has the use of the house while alive and in the other she doesn't.
So I still think the question becomes does your gran get any benefit from having use of the house from this point on?

It sounds like she doesn't get any benefit from it, though there might be psychological benefits (e.g. the knowledge that it is there if she does want to "go home", that her house isn't being lived in by strangers). Psychological factors work both ways, however - I would hate it if my house, that I was never going to use again, was sat empty when it could be used to house a family who were currently overcrowded or homeless.

Don't worry too much about convincing us which is the best for your gran, OP. Doesn't actually matter what we think.
More important that you make the decision that you are happy with, that your gran is happy with and that anybody questioning your actions as power of attourney is happy with.
I'm just trying to pose questions that may help you come to that decision.

LEJC

JimmyTheWig wrote: »

I think the point is that the house wouldn't have to be sold until after she had departed, wouldn't it?
Is that not how it normally works? That the care home fees are paid for out of the estate? I may be wrong.

In which case in one scenario she has the use of the house while alive and in the other she doesn't.
So I still think the question becomes does your gran get any benefit from having use of the house from this point on?

.

While there is money via income and savings to cover the cost of the care then the house need not figure in the equation....the care home fees can be paid from the money available and the person is self funded.

If the person lives with someone in the house ie spouse/partner,the partner has the authority to remain in the house and it will not be sold to fund ongoing care fees,they can be sorted out at a later date....but if the person lives alone they will be expected to sell the home to continue funding the care home..it is only when the total assets,property and cash fall below £23000 that you can apply for a partial funding from social services and assets and savings need to fall below £13000 to become fully funded.

It is actually quite expensive to maintain an empty property,you still need to pay certain bills etc so realistically renting it out does become an option....although its not one that is considered that much purely because the care home fees are usually far more per month than the rental income you could achieve from an average house. In order for it to work reasonably well the person would probably need 3 maybe 4 or even 5 rental properties to support their care fees...

In our case care home fees totalled £3100 per month and the income generated from the property £850 so the shortfall was covered by cash savings....hence the property did not need to be sold.But its fair to say that longterm its not easy to cover such large costs and if the situation were to go on over many years then it probably means that the property will need to be sold.

Mallotum_X

Given everything else you have mentioned and assuming you are happy to take on the work involved then it sounds a sensible solution.