Renting his home to pay care home fees

grazzzz

My girlfriends dad needs to go in to care because of dementia she is thinking of renting his house out can you set up a trust so you don't pay tax on the proceeds of the rent as it will be income taxable ?

Dunroamin

Are you sure that renting the house out will be enough to cover the care home fees? Unless he has other income, that may well not be the case.

grazzzz

Dunroamin wrote: »

Are you sure that renting the house out will be enough to cover the care home fees? Unless he has other income, that may well not be the case.

Yes with his pensions and benefits the rental will cover the balance

GwylimT

No you can't set up a trust to avoid paying your taxes, by the way the person being taxed will be the person/persons receiving the rent into their bank account. Some things are tax free, such as interest on the mortgage (if there is a mortgage, in which case the lenders permission must be sought) and some associated costs.

Even if the rental income is below the tax threshold you must still do a tax assessment for HMRC each year.

Things you need.
Landlords insurance, certificates for boiler etc, seriously thing what you are leaving, for example if you are leaving his washing machine and it breaks are you going to repair/replace or say tough luck tenants.

If using an estate agent see everything in person for each tenant, tenancy agreement, itinerary, credit check, reference etc. You need to get a good tenancy agreement and be very clear about what you want as landlords, but don't be unreasonable.

Remember this will no longer be your father in laws home so she cannot just pop in to get something, or be unreasonable about her expectation of the tenants because she may have an emotional attachment to the property.

You also need a contingency fund to pay his fees when tenants aren't present/if tenants do not pay their rent.

harrys_dad

grazzzz wrote: »

My girlfriends dad needs to go in to care because of dementia she is thinking of renting his house out can you set up a trust so you don't pay tax on the proceeds of the rent as it will be income taxable ?

If he is going into a home because of dementia then regrettably he is unlikel;y ever to come out. Why not just sell the house to pay the fees? I believe you have some grace time whilst the house is "on the market". I am assuming she wants to rent the house out to pay the fees? Do you or your girlfriend have power of attorney?

Errata

grazzzz wrote: »

My girlfriends dad needs to go in to care because of dementia she is thinking of renting his house out can you set up a trust so you don't pay tax on the proceeds of the rent as it will be income taxable ?

In the light of his dementia will he be capable of acting as a landlord? Your GF can't do it for him unless she has his Power of Attorney.

sulphate

harrys_dad wrote: »

If he is going into a home because of dementia then regrettably he is unlikel;y ever to come out. Why not just sell the house to pay the fees? I believe you have some grace time whilst the house is "on the market". I am assuming she wants to rent the house out to pay the fees? Do you or your girlfriend have power of attorney?

Because if the money from the house sale runs out whilst the care home fees still need paying, social services have to step in and pay for care fees. However many care homes charge more than social services can pay, so OP's girlfriend will be faced with the option of either "topping up" from her own funds or having to move her dad to another care home. If the house is rented and this (along with any other income) covers the bills, this will not happen. With this option, OP's girlfriend also gets an inheritance.

Grace periods may be at the discretion of the care home. When my OH's nan went into a home, the grace period was not long at all. The house did sell, but in a less desirable area it could have become tricky if it didn't.

OP, power of attorney will be required if the house is to be sold.

grazzzz

harrys_dad wrote: »

If he is going into a home because of dementia then regrettably he is unlikel;y ever to come out. Why not just sell the house to pay the fees? I believe you have some grace time whilst the house is "on the market". I am assuming she wants to rent the house out to pay the fees? Do you or your girlfriend have power of attorney?

Power of attorney is being arranged there are 4 siblings so renting the house is currently the best option as the assets are safe he has cash too plus pensions but can get around £1200 a month rent and gets another £1200 from his pensions and attendance allowance so renting seems a good way of paying the fees and protecting his assets

sandsni

I'm not sure of the details, but you might need to check out how long your GF's father will continue to get all his benefits and allowances after he goes into full-time care. I think there may be something where state pensions etc. are cut or stopped after 26 weeks (or something like that), the same might apply for his attendance allowance. Hopefully I'm wrong, but make sure you have all the relevant facts before you make any long-term decisions. If the house is let and your GF's family suddenly realise they DO need to sell it, it might create problems if there are tenants in situ.

Errata

Care home self funders continue to receive their state pension and attendance allowance. Additionally they may also be eligible for the NHS nursing care contribution which is around £100 a week.

sandsni

Errata wrote: »

Care home self funders continue to receive their state pension and attendance allowance. Additionally they may also be eligible for the NHS nursing care contribution which is around £100 a week.

Good to know :j