Transferring ownership of property

paulpud

Could someone please advise me regarding transferring ownership of a property from an elderly mother to her daughter and son?

My other half's mother, who is now in her 80s, owns a bungalow which I'd take a guess is worth around £250,000 and will be left in equal shares to my other half and her brother as part of her will. A few years ago she and her late husband decided to release a little equity from the property (I think around £30,000), a statement for which arrived last week. It appears that the value of the payback for this equity release is climbing at an alarming rate, and currently stands at around £110,000. To avoid the risk of this equity release agreement swallowing up any more of the value of the house we have discussed the possibility of the ownership of the house being transferred now and paying off the equity release debt. We're not wealthy people but we could probably scrape the money together between us and figured that it would be put to a better use than earning the miserly interest rates on savings at the minute.

First of all is this easy enough to do?

The other mitigating factor would be her health. She's getting a bit frail now, has recently recovered from surgery and receives care in her home. We don't envisage that she may require residential care, but can't rule it out completely. Bearing in mind that usually involves the local authority taking ownership of the property would that have implications on any transfer to my other half and her brother?

mgdavid

suggest you download and read the pdf doc on this link:
http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

Also if your mother has already done an equity release on the property then won't the equity release compnay have a first charge on the property, meaning you are not totally free to change the ownership?

margaretclare

mgdavid wrote: »

suggest you download and read the pdf doc on this link:
http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

Also if your mother has already done an equity release on the property then won't the equity release compnay have a first charge on the property, meaning you are not totally free to change the ownership?

Yes, they have first charge on the value of the property, just like any other mortgage lender.

When we did equity release on ours, the conveyancing solicitor had a checklist of points he was obliged to go through with us and tick the boxes when he was satisfied that we understood. One was 'have you discussed this with family members in case of any inheritance being affected' and another was deprivation of assets and the effect on means-tested benefits.

I am surprised that this was not done in your MIL and FIL's case.

Errata

I am surprised that this was not done in your MIL and FIL's case.

It may have been done and the owners chose not to discuss it with family. Their property, their choice.

paulpud

Thanks, at least I can now share this information with them.

I don't really know the ins and outs of the equity release that was taken as it happened before I started my relationship with my other half, but she has told me it was something of an ill thought out plan to add to a rainy day fund that wasn't really necessary.

I think the first port of call would be to discuss an early exit with the equity release company and take it from there with a view to selling the property and funding her residential care if she ever needed it.

margaretclare

It sounds as if it was an 'ill-thought-out plan', although no good crying over spilt milk.

We did ours to pay off an existing mortgage. We didn't want to go on paying a mortgage until we were 83 just in time to die and leave it to someone else. My younger daughter's untimely death was a big factor in our thinking. We didn't so much as need income as we didn't want the monthly mortgage outlay, if that makes sense.

I think you're right in thinking the first port of call must be the mortgage lender.

Savvy_Sue

margaretclare wrote: »

I think you're right in thinking the first port of call must be the mortgage lender.

And the second would be separate legal advice for your mil, and for her children. What is in her best interests may not be in theirs.

troubleinparadise

The other mitigating factor would be her health. She's getting a bit frail now, has recently recovered from surgery and receives care in her home. We don't envisage that she may require residential care, but can't rule it out completely. Bearing in mind that usually involves the local authority taking ownership of the property would that have implications on any transfer to my other half and her brother?

You have several issues to address with your plan, however well intentioned, and the previous replies are all helpful.

Just to clarify, the LA does not take ownership of a property if residential care becomes necessary.

A financial assessment is carried out, and if the person has funds exceeding the £23,500 threshold (at present), then they will be required to fund their own care. Sometimes that means a person's house has to be sold to meet those costs.

If it is found that a house has been "disposed" of via gift, when it might be expected that care could be needed, then there is a risk of falling foul of the rules on "deprivation of assets", and LA funding can be withheld.

As has been said, all concerned should take financial and legal advice.

agarnett

troubleinparadise wrote: »

If it is found that a house has been "disposed" of via gift, when it might be expected that care could be needed, then there is a risk of falling foul of the rules on "deprivation of assets", and LA funding can be withheld.

Agreed the part of t-i-p's post I have quoted doesn't look like a prime consideration in the OPs case (where equity release has already complicated the issue). However, what happens if six months has passed since a deliberate disposal? The relevant guidelines within that document linked to by mgdavid earlier say this:

4 Powers of recovery
Under section 21 of the Health and Social Services and Social Security Adjudications (HASSASSA) Act 1983, where a resident has deliberately deprived himself or herself of an asset the local authority can recover any sums it consequently has to pay towards the resident’s care costs from the person who the asset was transferred to, as long as the deliberate deprivation occurred within six months of the resident approaching the local authority for funding. If the transfer was made more than six months before the local authority cannot use this section.
Although the six-month limit only applies to the particular power of recovery, the Assessment of Resources Regulations place no set time limit beyond which the local authority has to ignore transfers of assets. If a transfer occurred more than six months before the resident applies for assistance the local authority can still treat him or her as having deliberately deprived themselves of that capital under the charging regulations. They may initially refuse to fund the resident, necessitating a challenge or if they do provide funding in these circumstances they may treat the assistance provided as an accruing debt owed by the resident to the local authority. The local authority could make use of the Insolvency Act 1986 to pursue a debt of this kind and it is possible that a court might order a transfer to be set aside if it had been carried out with the intention of defrauding existing or future creditors. To date there are few known examples of local authorities making use of this legislation but this may change. Local authorities have had considerable budget cuts in the last spending review, and because of this are likely to look closely at cases where they consider deprivation of assets may have taken place.

troubleinparadise

Apologies for going off the OP's original topic, but you make a good point, Agarnett.

Whilst the threat of legal action looms with regard to deprivation of assets, I'm not too sure that much ever takes place. And whilst the LA might say that they will not fund in cases such as that, the likelihood of a person needing residential care not receiving it because the money has disappeared and then being left to fend for themselves is not going to happen.

Perhaps the threat is enough to achieve compliance - as it should be morally. And perhaps most people are moral.

And sometimes it is being able to make a choice of which residential home to live in due to being able to pay for it with your own money wins over giving it to your family whilst you live out your days in the home that meets the LA funding..... I know which I'd rather do!