Protecting your Asset

Rockman

Hi

We are a married couple in our 50s who own our own house and want to leave it to our children. The house is the only real asset we have and we worked hard (and still do thankfully) all our life to pay for it.

Can anyone advise now what we should be doing to ensure that our children inherit the house? I know we can write a will leaving it to them but is there anything we should be doing now to ensure that they actually get someting and not have it going to the tax man or have it ate up by nursing/care home costs.

Thanks

saverbuyer

You should google "deprivation of assets".

Basically you can’t just gift someone your house to avoid care home fees (and rightly so). When it comes to assessment, you will be assed as if you still owned the house.

Inheritance tax is only paid on you estate over £325,000. So if you die and your total estate is worth below 325k, you avoid paying inheritance tax.

Milko

Why not "sell" them your house at an agreed fee (obviously a ridiculously low one) then "rent" it back form them for the rest of your days (your own children or not though, get a water tight contract drawn up in case they try to evict you over a silly family feud lol).
They could effectively form a landlord company & use it as a business venture.

saverbuyer

Below market sales are covered by deprivation of assets

irishjohn

You could of course just sign the house over to your children as a gift, as you are unlikely to need nursing home care until you are in your 80s - probably 25 yrs from now.

You will need to ensure that your children then take on the responsibility for all the maintenance of the house as the owners - just to make sure that the gift is officially recognised as a gift. It will of course be down to your children what to do with the property, or indeed their heirs should any of your children die before you. Quite a responsibility but to achieve the reward of state funded nursing home care you have to take some risks.

But before you do - reflect back 25 years - and look at how much has changed - did you think 25 years ago that endowment insurance policies would turn out to be such a waste of money, did you think for one moment that the retirement age for women would be 70+ ?

Then ask yourself what will care for the elderly be like 25 years from now. All elderly residential care will be privately owned - not state owned, and the likelihood is that the state will not be able to fully fund anyone's stay in a private home, so there will be a need to pay a top up fee for everyone - or choose a basic nursing home where the accommodation will be more Travel Lodge with sausage and mash than Merchant Hotel with Roast beef dinners.

The best way to avoid contributing to your care in old age is to own nothing. I accept that you have worked hard to achieve what you have but if you add it all up, what you have paid in taxes over the years have not necessarily been sufficient to cover the cost of life with education, health care, child benefits, security, lighting, roads, water, and all the other things in life which are paid for out of these taxes.

Personally I think you need to take a reality check and recognise that it is your responsibility to look after your own needs first - and as and when your needs have been met, if there is anything left to pass on to the children, its a bonus. I guess you chose to buy a house to live somewhere nice rather than living in rented property. I would also then guess that you would like to be cared for somewhere nice, as opposed to somewhere basic, when you need care in old age. If not they will still manage to survive and thrive like most do on their own efforts and hard work.

Finally, the last option is to adopt an extended family approach, where your entire family could sell all your homes and buy a residence big enough for you all. Your children could not be forced to sell up to fund future care as it is also their primary residence. And of course, with so much help at home your family could provide most of your care needs at home without having to depend on state care.

Rockman

I don't mind paying a fair whack to meet future nursing/care home costs. What I don't want is for something I have paid for and saved for all my life to be eaten up by nursing/care home costs. I pay my taxes and rates like everyone else and have no problem doing so as the benefits I receive when I need them are excellent.

I just think the govenment is penalising those who save. I think it is terrible that when someone becomes unemployed their savings are counted against them when they apply for benefits even though their savings have already been already taxed. What is the incentive for anyone to save for the future when all you are actually doing is saving money for the Government to take off you again? The message coming from the government is spend, spend, spend today and forget about tomorrow.

irishjohn

As a single person with no children, who was in the 40% tax bracket for one third of my career, I like you have paid taxes in abundance.

As a dedicated MSE reader I also minimise the tax I pay today by grabbing ISAs every year and looking for bargains at bargain prices to keep my VAT on purchases as low as possible.

If I were to add up my taxes and try to work out what I have received back from the system I may find I have paid more than my whack.

Like you I get cross when I see handouts going to others and not to me. Child benefit for planned and unplanned children, working tax credits, housing benefits, etc etc. But I accept that that's all part of being in the big family called society.

I am probably more fortunate than you though - as I have no children - I have no need to concern myself with leaving anything for anyone. When I need elderly care, I will use my assets to get me the best care I can, and hope to live in comfort and with high level care for the latter stages of life. I won't waste time and energy feeling hard done by because I have not had my fair share from the state because they are spending too much on the people less fortunate than me with disabilities and needs, the unemployed, the people who have chosen the benefits lifestyle instead of working, the ones who spent all they had, and the ones who had children and got the child benefit etc.

You must make your own decision about your assets and the funding of your care in the future, but what you see as a penalty for working hard and saving, others see as society working to help those who have not been able to work and save. Life never seems fair to everyone - there will always be folks who feel hard done by.

I applaud parents wanting to pass on their assets to their children, but I applaud more the child who thanks the parent for the care and upbringing and the setting of a good example. That child is more likely to tell the parent to use their assets for their own welfare and don't worry about the children.

Mojisola

Rockman wrote: »

I don't mind paying a fair whack to meet future nursing/care home costs. What I don't want is for something I have paid for and saved for all my life to be eaten up by nursing/care home costs. I pay my taxes and rates like everyone else and have no problem doing so as the benefits I receive when I need them are excellent.

My Dad's now in a care home and I am so glad that we have the capital from his house to use to pay for his care.

We were able to choose where he would go instead of going into the only one in our area that accepts council funded residents.