Occupation switch and benefits

nexstarneil

My wife J owns a small bungalow which she could rent out. Her parents own a small house of similar value. There are no mortgages. Parents receive pension credits. J's parents would like to live in the bungalow.

If J granted a license for them to live in the bungalow rent free and they grant a license to her to occupy the house rent free can J sub let the house without any of this affecting their pension credits/council tax reduction etc?

Thanks

tomtom256

I think it will affect the pension credit, as her parents house would no longer be disregarded for benefit purposes and would be treated as capital and thus take them over the capital threshold limit.

nexstarneil

thanks. What if they gifted their house to their daughter?

elmer

Its the same problem of deprivation of capital, if they dont need their house to live in, then the capital value is taken into account for pension credit, whether they give it away or let it out.

pmlindyloo

The simplest thing to do is the parents to buy the bungalow and J to buy their house. (for the same price?). Then their benefits would not be affected and there would be no question of deprivation of capital for future care home fees.

I am not sure why you want to do it the way you are suggesting.

If there is a reason then I suggest you get some legal/professional advice. The things to consider are: deprivation of capital for both benefits and possible future care home fees, Capital Gains Tax and Inheritance Tax.