Signing Over Home to Children

HotChoc

My Mum wants to sign over her house to me, I will then pay off the remaining mortgage, and refurbish the house, she will then stay in the home. Would my brother (who has nothing to do with the family) be able to make a claim against the house, when she dies? If so, how do I make sure this doesn't happen and if I can't how can I ensure that what I have spent on the home, which will be considerable, is paid back to me first. The home and contents are below IHT threshold. I would appreciate any help.

Savvy_Sue

Welcome.

First question, why does your mum want to do this? If it's so she can avoid paying care home fees or being forced to sell the house to pay for care home fees, please think again.

How old is she, and is she in good health? Is your father dead?

Will you be living there with her?

How will you be paying off the mortgage? outright, or with another?

Will your mum be paying a fair market rent? If not it's a 'gift with reservation' and can cause complications.

Has your mum made a will? If not I'd say that was the first thing she should do. Unless she lives in Scotland it is perfectly possible to exclude your brother completely.

HotChoc

Why does your mum want to do this? So that the home is refurbed and I get something for my investment.

How old is she? 63

Is she in good health? Yes

Is your father dead? Divorced 25 years ago

Will you be living there with her? No

How will you be paying off the mortgage? Outright

Will your mum be paying a fair market rent? If not it's a 'gift with reservation' and can cause complications. No Rent

Has your mum made a will? No - But then should go and change this and leave it to a dogs home! Want to protect myself.

zygurat789

HotChoc wrote: »

Why does your mum want to do this? So that the home is refurbed and I get something for my investment.

How old is she? 63

Is she in good health? Yes

Is your father dead? Divorced 25 years ago

Will you be living there with her? No

How will you be paying off the mortgage? Outright

Will your mum be paying a fair market rent? If not it's a 'gift with reservation' and can cause complications. No Rent

Has your mum made a will? No - But then should go and change this and leave it to a dogs home! Want to protect myself.

You are going to voluntarily pay CGT.

Trebor16

Deprivation of assets is a grey area, but generally if a person is in good health and they decide to sign over a property to their children then it is much more difficult to prove deprivation of assets should a person need residential care many years into the future. In theory a local authority has no time limit on how far they can go back to try and prove deprivation of assets, but in practice if there is a big gap between when a property was signed over to when a person needs residential care then it is much harder to prove.

It is much easier for local authorities to prove deprivation of assets if it has been identified a person needs to go into residential care and then attempts are made to pass on assets to children or other persons.

margaretclare

So mum wants to give away her main asset and continue to live in a house which is no longer her own?

There has been a huge amount written on Martin's site around this very question. I can't see why anyone would want to do this, but there are people who do. Millions of words have been written on this topic over time.

Savvy_Sue

I would strongly advise that you each get proper advice on this. This may look attractive now, but anything could happen to either of you ...

A well-written loan agreement might be simpler and altogether safer, even if you don't require repayment until death. But this is well outside my area of expertise (if indeed I have one ...)

monkeyspanner

IHT - No consequences as under threshold.
CGT - You woud be liable for CGT as it would not be your primary residence.
Brother - Should be fine as long as transfer done properly.
Deprivation of assets - Shoud be ok as your mum is fairly young and in good health but theoretically the council can review capital transfers back as far as they like.

However several additional issues would be of concern.
- What would happen if you predecease your mum?
- What would happen if your marital status changes eg divorce, asset split etc.?
- Would your mum be happy accepting whatever care home the council provided if she needed care rather than having anasset to use to buy better care?

Savvy_Sue

I'd add to the issues for hotchoc to consider:
-What would happen if you became unwell or unemployed and needed to claim benefits? Owning a house you didn't live in would rule you ineligible for any of the means-tested ones, even if you weren't receiving any income and couldn't realise the capital.

Errata

It's being reported this week that local authorities are starting to dig very deeply to ascertain that no deprivation of assets has taken place.

Trebor16

Errata wrote: »

It's being reported this week that local authorities are starting to dig very deeply to ascertain that no deprivation of assets has taken place.

They can dig as deep as they like but they know damn well that if a person is in good health when they sign assets over that proving it was deliberate deprivation of assets is not easy.

The Charging for Residential Accomodation Guide (CRAG) is very clear on this and states:-

"The timing of the disposal should be taken into account when considering the purpose of the disposal. It would be unreasonable to decide that a resident had disposed of an asset in order to reduce his charge for accommodation when the disposal took place at a time when he was fit and healthy and could not have foreseen the need for a move to residential accommodation" (Para 6.070)

Section 21 of the Health and Social Services and Social Security Adjudications Act 1983 limits the time that a local authority can recover an asset from the person it was transferred to. The deliberate deprivation has to have occurred within six months of the resident approaching the local authority for funding and if this is the case then the person who received the asset can be pursued by the local authority. But if the transfer took place more than six months before the resident approached the LA then the local authority cannot use this section of the act.