Parents putting house in our names

missbiggles1

patchwork_cat wrote: »

We are not paying for their care, they have already paid for it via taxes and NI. The NHS was supposed to be cradle to the grave, however that has gone by the way! If they had lived in social housing all their life ( at a seriously reduced cost) they would be entitled to free care, but because they own their own home they don't qualify - how is that fair?

I've only just noticed this bit!

Lots of people live in social housing who would have enough capital behind them that this would be used to fund their care, even if they didn't own their own property. There is no link whatsoever between social housing and free residential care.

I'm afraid that you don't really seem to understand much about how these things work, although you're by no means the only one.

patchwork_cat

leveller2911 wrote: »

It doesn't work like that Patchwork.We don't have and never have had a self funding system that you mention. The taxes you and I pay now will pay for the care of the current elderly population and my/your children will be paying for our care. The NI we pay contributes to a very small percentage of the cost of care,health service,state Pension etc.

QUOTE]



Semantics, as to who pays for whose care! I said taxes and NI, I didn't differentiate! They have paid in to the cradle to grave NHS and deserve that although I know it won't happen.


If you are unable to care for yourself then it should not be Part III accommodation.

booksurr

freeisgood wrote: »

But what about the seven year rule guys? I thought that anyone could gift their property and as long as they don't die within 7 yrs, no inheritance tax need be paid. This is what we were told by a solicitor friend. Nothing illegal or immoral about it. Not cheating in any way! They are still alive and can move their assets around as they see fit.

your understanding is somewhat limited...
if they continue to live in the house after gifting it then it is a gift with reservation (of benefit) and so the 7 year rules does not apply, however, legally they would no longer be the owner and so the owner would be liable to CGT unless the owner also lived in the house

since OP is not planning on living with the parents yet (may be later when they need care but that is a different issue) the parents plans at the moment are poor:
- it will be a gift with reservation so remains liable to IHT

- Op will be owner of a house they do not live in so will be liable to CGT on the increase in value between date of gift and date of eventual sale , OP has used 80k as the example figure so they would owe CGT on 80k less the 11k personal allowance, CGT is payable at 18% and/or 28% so would be £19k worst case on an 80k gain , still leaves OP with 60K in cash

- unless parents intend to lie on the form when they claim means tested care costs, then they are intentionally giving away the house to avoid paying for their own care. That is cast iron deprivation of capital and would equally apply to the 60 k left if they downsized and gave away the cash surplus

OP acting a financial guardian of mental health sibling is a nightmare since OP has not mentioned any legal framework and would therefore be wide open to being sued for maladministration. OP's parents need legal advice on either setting up a trust or how to appoint a power of attorney to act for their mental health child

OP needs better legal advice....

Mojisola

freeisgood wrote: »

But what about the seven year rule guys? I thought that anyone could gift their property and as long as they don't die within 7 yrs, no inheritance tax need be paid. This is what we were told by a solicitor friend. Nothing illegal or immoral about it. Not cheating in any way! They are still alive and can move their assets around as they see fit.

Off topic - but it's not that simple -
If they continue to live in the property without paying rent to the new owners, the value of the house will still be included in their estates.

Also, the new owners will need to comply with all the landlord legislation and may be liable for capital gains tax when the property is eventually sold (depending on the increase in value).

getmore4less

freeisgood wrote: »

But what about the seven year rule guys? I thought that anyone could gift their property and as long as they don't die within 7 yrs, no inheritance tax need be paid. This is what we were told by a solicitor friend. Nothing illegal or immoral about it. Not cheating in any way! They are still alive and can move their assets around as they see fit.

For a couple there is no IHT if the asset base(assets and gifts in previous 7 years) being assessed is below £650k.


The number of people that fret over inheritance tax when they will never pay it must be quite high.


They piddle about with £3k gift and £250 gifts when they can give away what ever they like without it making a difference


About 1/2 million people die each year only about 3% pay any inheritance tax.

getmore4less

The thing is as in this case unless the parents are seriously wealthy with other assets it it would be very hard to claim this was anything other than a deprivation.


They still live in the place, there is no financial tax planning benefit.

harrys_dad

There are an awful lot of incompetent solicitors about it seems, giving rubbish advice and being paid for it.

ChumpusRex

gillykms wrote: »

Thanks for your replies. I'm a bit confused as the solicitor did say he does this for other people all the time so I assumed it was the norm. My mum also has heard from people that this can be done. The house is in Northern Ireland so I'm not sure if there's any difference to the rules there?

It is frequently done and it DOES work sometimes. The point is that it is a gamble (on how long it takes to need care), and the government can, and will, change the goalposts when it suits them.

There is legislation about "deprivation of assets". Essentially, if a person requires social care, but they are found to have deliberately disposed of assets (such as a house) by giving them away or selling them for a bargain, then their finances can be treated as if they still have the asset, and in some cases, the beneficiary of the gift can become liable for the costs.

However, it has to be proven that the deprivation of assets was done deliberately to avoid care costs. If your parents are in excellent health for their age, generally wealthy with lots of savings and a healthy pension. They then live a lavish lifestyle of their investments for 20 years, at which point they are frail and need care. In this case it will be difficult for anyone to argue that the transfer was done deliberately to avoid care costs; as even with the house disposed of, they would still be liable for care costs due to their investments; and there's nothing wrong with spending your money in your old age, especially if you've got 20 years to spend it in.

If, however, both are frail for their age, or have medical problems, and own no assets except their home, and then go into care 12 months down the line, then it's an open and shut case that there was an intention to avoid care fees.

Just remember that there are risks involved with parents signing the house over to children:
1. If the children run into financial difficulties or bankruptcy, the house may be forcibly sold to pay debts, which would result in the parents being evicted with nowhere to go.
2. If a married child divorces, the house may be need to be sold as part of the divorce settlement, again resulting in the parents being forced to move.

Then there are other factors, such as entitlement of the children to benefits, etc.

I looked into this for my grandparents. The solicitor's advice to them was clear cut - "Don't do it - it's not guaranteed to work, it costs money to sort out, and it creates a genuine risk of eviction".

mrginge

patchwork_cat wrote: »

Semantics, as to who pays for whose care! I said taxes and NI, I didn't differentiate! They have paid in to the cradle to grave NHS and deserve that although I know it won't happen.


If you are unable to care for yourself then it should not be Part III accommodation.

It does amuse me when people talk on the one hand about the nhs being a universal system for all and then on the other trot out the 'I've paid my contributions while other people haven't... ' line.

Mojisola

If one of a couple needs residential care, the value of the house is not counted because the other partner still needs to live there.

If both need care or the surviving partner needs care, then the value of the house comes into play.

If a couple own a house as 'tenants in common', they can each leave their share to the next generation when they die with a clause that allows the surviving partner to continue to live in the house and/or sell and use the money to buy another.

If the survivor then needs residential care, only the value of their portion of the property can be used in the assessment. The LA will usually put a charge on the property which is repaid when the house is sold. Some LAs in the past have considered half a property to have no value and have fully funded the residential care but I wouldn't rely on that happening in the future.