Can an elderly mother sell her house and give her son some/all of the money?

Savvy_Sue

newan wrote: »

I wonder if she kept enough of the money back for herself to pay for some care home fee's should the need arise, would they still chase any gift payments made in the past once that money runs out?

They could, and AFAIK there is no limit on the time they could go back to.

newan wrote: »

I think in an ideal world she just wants to give her son all the money, or most of it at least, and receive help with care home charges should she need it in the future.

Wouldn't we all? But that's not the way it works. And also, leaving herself CHOICE is quite important, IMO.

We don't know why she wants to give her son this money. If it's because for good reasons he's not been able to get himself 'settled' then it may be lovely, but NOT at the expense of her own well being. If it's because he's a spendthrift who's never learned to manage his money, maybe a gambler or addict who spends money like water, then it's a really bad idea, because he'll only need more, soon enough ...

newan wrote: »

Tbh, I think the trust she has in place is a good idea, that way her son will get the house eventually, but it's not what she wants anymore.

Which is why she needs to take that agreement to the solicitor who drew it up and discuss the options.

One possibility - and it may or may not be a good one - would be to use some of the money to buy an annuity which would pay out until her death.

dandelionclock30

newan wrote: »

Tbh I don't want to involve myself that far, she has a solicitor and has spoken with them but she doesn't trust them for various reasons. I think the solicitor said she could come out of the trust, sell her house and give her son the money, then a family friend told her it might cause problems in the future with care home charges, so she feels the solicitor didn't tell her the whole story. I'd not feel comfortable finding her another solicitor in case that didn't work out and she'd paid out even more money. I'd rather just offer her some advice with regards to how the care home charges system works, and anything else she isn't sure about. She just wants piece of mind, to know what she can and can't do with her money, and we've certainly not involved ourselves, wouldn't dream of it.

Well, take her to the CAB then its free, I would'nt go just with what people say on here as its not always right or upto date. Its free as well. Then she can get a definate answer.

securityguy

dancingfairy wrote: »

If she needed to move into a care home and had a financial assessment my understanding is that the council would assume she had access to the money she had given away so would be likely to refuse to fund.

Deprivation of assets has a higher threshold than that. There has to be evidence that the donor gave the money away with the intent to avoid care home fees, knowing that it was likely they would need it, and that the transaction is in some sense artificial. That's a very subjective test, and it's for the council to prove.

For example, suppose a sixty year old receives a legacy from their mother, and, feeling flush at the time, uses a deed of variation to pass the money along to their son so that he can buy a house. Then thirty years later needs to go into care, and doesn't have sufficient money to pay for the fees having eroded their savings during twenty-five years of retirement. Is that gift to their son thirty years ago deprivation of assets? Not in any reasonable world. OK, what about if they had been sixty one? Sixty two? Seventy? When?

I'm planning to fund any post-graduate education my children can't get funding for by simply writing them a cheque. That will represent, in the worst case, perhaps 40% of our lifetime savings. I will be retiring at around the same time. I do not lie awake at nights worrying that this "gift" to my children will later impinge on my ability to claim benefits if I so need.

To hear some people speak, the council can demand sight of your supermarket receipts to prove that you didn't spend your retirement wasting your savings on cheap sherry, or to reduce your care funding by the cost of that cruise you took ten years ago. The council has to prove you entered into a transaction whose main purpose was the evasion of payment of care costs, knowing or suspecting that you would need to pay care fees, a transaction you would not have entered into otherwise. That's a very high threshold.

thorsoak

Regardless of deprivation of assets, any sum given to a relative in excess of £5,000 would be subject to inheritance tax if the donor dies within 7 years of the gift.

Savvy_Sue

securityguy wrote: »

That's a very high threshold.

You are right, but in this case Mother is planning to raise the money by selling her house and going into sheltered housing, so if she gives away large amounts of money and then claims she has no money you'd be hard pressed to say she did NOT

securityguy wrote: »

entered into a transaction whose main purpose was the evasion of payment of care costs, knowing or suspecting that you would need to pay care fees, a transaction you would not have entered into otherwise.

Mattygroves2

thorsoak wrote: »

Regardless of deprivation of assets, any sum given to a relative in excess of £5,000 would be subject to inheritance tax if the donor dies within 7 years of the gift.

The £5,000 limit only applies to gifts on marriage. The normal limit is £3,000 a year to any one person although if no gifts have been made in the previous year that allowance can be used as well giving £6,000. If the gifts are made from income rather than capital then any sum is allowable but the form to prove it is horrible to complete.

Even if the donor dies within 7 years inheritance tax is only due if the gifts plus other estate exceeds the IHT threshold which is £325,000 or £650,000 if there is the second spouse to die and the first passed everything to their spouse. Even if it is counted for IHT the tax will be paid from the Estate (in most cases) so won't fall on the person who received the gift.

Mojisola

Mattygroves2 wrote: »

The normal limit is £3,000 a year to any one person although if no gifts have been made in the previous year that allowance can be used as well giving £6,000.

It's not £3k a year to any one person; it's £3k a year, full stop.

That could be to one person or split into smaller amounts and given to several people.

securityguy

Savvy_Sue wrote: »

You are right, but in this case Mother is planning to raise the money by selling her house and going into sheltered housing, so if she gives away large amounts of money and then claims she has no money you'd be hard pressed to say she did NOT

"Her pension will comfortably cover her rent in a sheltered flat and other living costs,"

So she gave away cash leaving herself with an income sufficient to fund her current living costs? Where's the problem with that? She isn't claiming benefits. She might, at some indeterminate point in the future, need to claim benefits, but at the moment, her income is greater than her outgoings. You cannot be expected to retain capital on the offchance that you might need it later, even if you currently don't and might never. If you were, then no one could ever take a holiday, for fear of it compromising a benefits claim twenty years later.

Savvy_Sue

I'm not saying there will be a problem, but if she rapidly moves from a need for sheltered housing to a need for specialised residential care, then that 'comfortable' level of cover may not be enough.

It's a general point: apologies if I'm labouring it, but I do think it's worth thinking through the issues.

g6jns_2

securityguy wrote: »

"Her pension will comfortably cover her rent in a sheltered flat and other living costs,"

So she gave away cash leaving herself with an income sufficient to fund her current living costs? Where's the problem with that? She isn't claiming benefits. She might, at some indeterminate point in the future, need to claim benefits, but at the moment, her income is greater than her outgoings. You cannot be expected to retain capital on the offchance that you might need it later, even if you currently don't and might never. If you were, then no one could ever take a holiday, for fear of it compromising a benefits claim twenty years later.

It is not as simple as that. The original post said that she plans to go into sheltered accommodation so there is at least some likelihood that she might need case in the next five years. If she does then giving away large suns now is very likely to be regarded as deprivation of assets. The longer between the gift and the need for care the less likely it will be regarded as DPOA.