Selling two houses to buy one with elderly parent

bingers_2

I hope that I am posting this in the right place.

My father sadly passed away a month ago and my mother is elderly and not able to stay in the property that she shared with my father.

We have been debating the idea of selling Mum's house, and selling my house and then buying somewhere together - ideally with an annexe for Mum to live in so that we would be on hand to look after her as and when she needed.

The problem is that I don't know where to start and was hoping someone might be able to give me some advice.

We currently have a mortgage on our house and Mum has no mortgage.

The plan would be that we would put in whatever our house is worth and not increase the mortgage. Mum would then put in the rest of the money needed to buy a suitable house.

I know there are rules about gifting money and rules around capital gains tax and inheritance tax but don't know the best way of setting everything up so both Mum and my family are protected.

There are lots of unanswered questions such as - presumably to protect both parties, the new house should be in joint names but does that have any implications on the mortgage? What happens if Mum needs to go into care -would we have to sell the house? What happens when she passes away, again, will we have to sell the house.

I would be grateful for any advice.

pmlindyloo

Have you any brothers and sisters who are expecting to inherit when your mum dies? (sorry to put it like that)

What sums of money are we talking about? There is a threshold of £325000 before you pay inheritance tax, I believe.

People will be along to tell you about deprivation of capital as regards care home fees and whether to put the house into tenants in cpmmon or whatever.

For the moment I will address one option that you might be able to consider (depending on the sums involved and your ability to get a larger mortgage) This might be a consideration if you have brothers/sisters.

Your mum could sell her house and you could sell yours. You then buy a larger house with an annex already or possible conversion to annex.

You then rent the annex to your mum and the amount she pays makes up the difference between your current mortgage payment and the future one.

Now I do not know if this is a possibility or if the sums involved would work.

The benefits of doing this is that your mum could retain a cash sum which could be used to adapt the annex to make her life comfortable ( I'm thinking bath rails etc etc), also retain money to fund a care home if needed or leave to anyone on her passing. Of course if she did need care then you might have to sell the house or possibly take in a new lodger (depending on whether you had restrictions on the planning permission docs for the annex) to fund your larger mortgage.

If you go down the route of tenants in common then if she needed future care then her share of the property might prove a complication in her financial assessment (you would need professional advice if you decided to do this)

I hope this makes some sense to you!

Fire_Fox

Loads of threads on this if you run an advanced search.

You (and your partner?) could be named on the mortgage and title as owners, your mother could have a Deed of Trust to protect her capital input. The lender could not touch the money protected by the deed, so the amount of equity you put in would need to be enough for the lender to think the deal is a good risk, say 10% of the value of the property.

If you have siblings that might inherit you would need an arrangement for releasing that capital or a will to state that it is to be held in trust until you sell or whatever your mother agrees with her solicitor.

If your mother 'gifts' you the money to purchase the house that could be deemed deprivation of assets if she needs care, the state may then refuse to pay. They don't generally force a sale of a property that is still being occupied by relatives, they could get some sort of 'charge' against the house so they get their money back at a later stage. Obviously this means your mother would have less choice about where she goes that if she had capital sat in the bank OR her own property to sell.

One other option for a self contained annexe could be to let it separately to release cash for your mother's care, even sell it separately. Obviously that depends on the lender, on planning permission etc.

Would be worth you and your mother (separately!) seeking legal advice on the pros and cons, how best to set up the ownership, how best to address wills, Power of Attorney etc. I say separately because it needs to be clear to the solicitors your mother is making her own decisions, is competent no coercion. Ideally don't make any appointments on her behalf, don't drive her to the office or sit in the waiting room. If she needs physical support try to have someone independent be her 'chaffeur'. That is to protect all of you from any stress or worry of accusations, not because in any way I think you are being anything other than a caring child.

bingers_2

pmlindyloo wrote: »

Have you any brothers and sisters who are expecting to inherit when your mum dies? (sorry to put it like that)

What sums of money are we talking about? There is a threshold of £325000 before you pay inheritance tax, I believe.

People will be along to tell you about deprivation of capital as regards care home fees and whether to put the house into tenants in cpmmon or whatever.

For the moment I will address one option that you might be able to consider (depending on the sums involved and your ability to get a larger mortgage) This might be a consideration if you have brothers/sisters.

Your mum could sell her house and you could sell yours. You then buy a larger house with an annex already or possible conversion to annex.

You then rent the annex to your mum and the amount she pays makes up the difference between your current mortgage payment and the future one.

Now I do not know if this is a possibility or if the sums involved would work.

The benefits of doing this is that your mum could retain a cash sum which could be used to adapt the annex to make her life comfortable ( I'm thinking bath rails etc etc), also retain money to fund a care home if needed or leave to anyone on her passing. Of course if she did need care then you might have to sell the house or possibly take in a new lodger (depending on whether you had restrictions on the planning permission docs for the annex) to fund your larger mortgage.

If you go down the route of tenants in common then if she needed future care then her share of the property might prove a complication in her financial assessment (you would need professional advice if you decided to do this)

I hope this makes some sense to you!

Thank you for your reply - it is helpful.

Yes I do have a sibling although he hardly seems my mum or takes any interest for that matter. However saying that they are in the will so I will have to discuss with Mum what her intentions are regarding her intention if there is money to inherit.

I hadn't thought about renting the annexe - although I don't really want to be forced to sell when she is no longer with us and if we can't find someone else to take over the rent then we may be forced to.

bingers_2

Fire_Fox wrote: »

Loads of threads on this if you run an advanced search.

You (and your partner?) could be named on the mortgage and title as owners, your mother could have a Deed of Trust to protect her capital input. The lender could not touch the money protected by the deed, so the amount of equity you put in would need to be enough for the lender to think the deal is a good risk, say 10% of the value of the property.

If you have siblings that might inherit you would need an arrangement for releasing that capital or a will to state that it is to be held in trust until you sell or whatever your mother agrees with her solicitor.

If your mother 'gifts' you the money to purchase the house that could be deemed deprivation of assets if she needs care, the state may then refuse to pay. They don't generally force a sale of a property that is still being occupied by relatives, they could get some sort of 'charge' against the house so they get their money back at a later stage. Obviously this means your mother would have less choice about where she goes that if she had capital sat in the bank OR her own property to sell.

One other option for a self contained annexe could be to let it separately to release cash for your mother's care, even sell it separately. Obviously that depends on the lender, on planning permission etc.

Would be worth you and your mother (separately!) seeking legal advice on the pros and cons, how best to set up the ownership, how best to address wills, Power of Attorney etc. I say separately because it needs to be clear to the solicitors your mother is making her own decisions, is competent no coercion. Ideally don't make any appointments on her behalf, don't drive her to the office or sit in the waiting room. If she needs physical support try to have someone independent be her 'chaffeur'. That is to protect all of you from any stress or worry of accusations, not because in any way I think you are being anything other than a caring child.

Yes my partner and I have quite a bit of equity in our property so I would hope my lender would think it was a good risk. I will arrange an appointment to discuss it with them.

Yes I think legal advice is the way to go for both of us. Thank you for the advice about getting my mum to arrange her own appointments and go with someone else as I hadn't thought of that. I am keen that both mum and us are protected and that we do everything entirely above board.

I will go and do an advanced search and see what others have said on other threads

holly_hobby

Main question to establish how to set the property and its ownership up, is to ascertain if Mums net estate on death will exceed nil rate IHT threshold (currently) 325k per person (or upto 650k if there is unused spousal nil rate band available for tsf on her passing).

DOA could be cited if she needs care within 6 mths of disposing of any of her estate, if care was needed after 6 mths, the LA would need to prove that it was reasonable to assume she was aware at the time of gifting of a future LTC need. If they are unable to prove DOA, the tsf can not be reversed for assessment purposes.

Hope this helps

Holly

zzzLazyDaisy

Here is some advice on deprivation of assets

http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

holly_hobby

Lifted from a recent thread I've commented on ...https://forums.moneysavingexpert.com/discussion/comment/60813637#Comment_60813637


"HOWEVER ....... we are back to motivation ..... IF the LA can prove the OPs motivation for this exercise was to deliberately deprive themselves of assets to avoid self funding of LTC fees, the LA can effectively reverse the tsf under DOA regs.

If the OPs entry into LTC was within 6 mths of the event and deliberate deprevation proven, the reversal would be done so under the NHS and Community Care Act 1990.

If entry into LTC occured in excess of 6 mths passing, the LA is unable to utilise the above Act in any DOA case, BUT instead they will take the investigation along insolvency investigation practices (ie investigation into finances, pattern, motivation, etc, etc) - either way if they smell a rat (or even the faint whiff !), be sure they'll dig and it won't matter how its been wrapped for view, if DOA is proven the transaction will be effectively reversed."

bingers_2

holly_hobby wrote: »

Main question to establish how to set the property and its ownership up, is to ascertain if Mums net estate on death will exceed nil rate IHT threshold (currently) 325k per person (or upto 650k if there is unused spousal nil rate band available for tsf on her passing).

DOA could be cited if she needs care within 6 mths of disposing of any of her estate, if care was needed after 6 mths, the LA would need to prove that it was reasonable to assume she was aware at the time of gifting of a future LTC need. If they are unable to prove DOA, the tsf can not be reversed for assessment purposes.

Hope this helps

Holly

Thank you. It all sounds very scary to be honest. The reason behind what we want to do is not because we want to escape care home fees but simply because she doesn't want to stay where she is as the house is too big and she doesn't want to be on her own. The idea also is that we may be able to look after herself for far longer if she is with us where as if she lives alone then it may be likely that she has to go into care sooner.

I am slightly confused about the IHT limit. My fathers assets were around 300k so under the limit. Does that mean that it is just 25k (the unused part) transfers to my Mum or because it is all passing to a spouse are there other rules?

holly_hobby

bingers wrote: »

Thank you. It all sounds very scary to be honest.

There is lots of helpers here, so don't be worried ... but before you actually act on anything please ensure that you have discussed it with your own adviser.

bingers wrote: »

The reason behind what we want to do is not because we want to escape care home fees but simply because she doesn't want to stay where she is as the house is too big and she doesn't want to be on her own. The idea also is that we may be able to look after herself for far longer if she is with us where as if she lives alone then it may be likely that she has to go into care sooner.

Thats fine .... DOA is where the individual disposes of assets that puts them (intentionally or not) into position to qualify their application for LA assistance. This is where the LA will conduct an audit into the indiviudals motivation etc.

Mum selling her house and part purchasing another one, isn't deprevation of assets if she retains extra captial (eg doesn't give it away to others)

bingers wrote: »

I am slightly confused about the IHT limit. My fathers assets were around 300k so under the limit. Does that mean that it is just 25k (the unused part) transfers to my Mum or because it is all passing to a spouse are there other rules?

If Dad left everything to Mum, and didnt' make any non-exempt transfers pre death, as there is no IHT between spouses, he retained his full 325k nil rate exemption.

This means that on Mums death her administrators may aply to tsf Dads unused relief to add to Mums, which if she also made no non-exempt gifts during her lifetime, her administrators will have 650k nil rate threshold to apply against her net estate. (if Dad did make any non exempt tsfs, his unused nil rate band is applied to mums as a % of the remainer his estate held).

Hope this helps

Holly

bingers_2

holly_hobby wrote: »

There is lots of helpers here, so don't be worried ... but before you actually act on anything please ensure that you have discussed it with your own adviser.



Thats fine .... DOA is where the individual disposes of assets that puts them (intentionally or not) into position to qualify their application for LA assistance. This is where the LA will conduct an audit into the indiviudals motivation etc.

Mum selling her house and part purchasing another one, isn't deprevation of assets if she retains extra captial (eg doesn't give it away to others)



If Dad left everything to Mum, and didnt' make any non-exempt transfers pre death, as there is no IHT between spouses, he retained his full 325k nil rate exemption.

This means that on Mums death her administrators may aply to tsf Dads unused relief to add to Mums, which if she also made no non-exempt gifts during her lifetime, her administrators will have 650k nil rate threshold to apply against her net estate. (if Dad did make any non exempt tsfs, his unused nil rate band is applied to mums as a % of the remainer his estate held).

Hope this helps

Holly

Thank you! It all seems a bit clearer now. Yes Dad left everything to Mum and didn't make any gifts so all of his nil rate band should pass to Mum. I guess that makes things easier in terms of IHT so we just need to work out what will happen if she does need care.