Gift with reservation of benefit

Linton

CLAPTON wrote: »

just to observe :

since your parents continue to live in the property and their estate will be under 325,000 (or 650,000), plus you are opening yourself to capital gains tax, then it would be difficult to provide any reason to give you the house, except to avoid care costs.

Especially as the parents are risking becoming homeless - if the OP died/divorced/became bankrupt the house may have to be sold. So it is very difficult to see any advantage for the parents whatsoever.

love2learn

I've read through all your comments and I appreciate the effort those made in replying.

To give some more information, the house is worth a maximum of £100,000. In 2016 the threshold for means tested care costs is going to be £118,000. I don't anticipate having to sell the house for 10 - 20 years. My parents health is reasonably good and they are nowhere near needing a community care assessment to determine need for residential care. And in addition to that Age UK says most old people don't require care. If one parent needs care and the other doesn't they can't touch the house. If neither need care, then they can't touch the house.

In the unlikely, but possible event that both need care. Or the surviving parent needs care, then the council get to decide whether or not there has been deliberate deprivation of assets, and they can apply a notional value to my parent(s) estate when determining whether or not to fully fund residential care.

Firstly, the house is not worth more than the 2016 change to £118,000 which will be the new threshold. Although I'm aware the government could change this in the future. The house could also be worth more than £118,000 in the future if it appreciates significantly in value. In which case if the local authority decides to apply a notional value to my parent(s) estate they could refuse to fully fund care costs.

In which case I would take the matter to court, and avoid massive legal costs by self representing with granted power of attorney. The local authority then need to prove deliberate deprivation of assets. There is no time limit on how long they can go back, however the well known test case in Scotland "Yule Vs South Lanarkshire Council" is not an easy open and shut "the council will win all future cases" sort of case.

In the "Yule Vs South Lanarkshire Council" case... The old lady was 78 when she signed the house over, had an accident the following year resulting in her breaking her arm. Although at that time a community care assessment was done it was not determined that she needed care at the time. She then went on to develop senile dementia. It was deemed then that she did not develop dementia over night and that it was likely that her health was far from perfect when she signed the house over. Add to the that the fact that power of attorney was granted at the same time the house transfer was made, then the council had a very good case to take to court.

In my case, my parents are of good health. Not perfect, but nothing that could be considered anywhere near the level of needing care. They are in their 60's also. One is less healthy than the other, however the likelyhood of "both" needing care within the next 10 - 20 years is unlikely based on how fit one of them are. My dad recently completed a 60 mile bike ride. He's fitter than me. They've actually gifted the house for their grandchild, but gifted it to me to ensure their grandchild is mature enough to manage the asset. I will decide if they are or not, and hold off until they are.

And even if the council deem the gift deliberate, there's the increased allowance in 2016 and the very real reality that they would struggle to prove this in court if we challenge them based on evidence of good health at the time of gift and the gift will have been made 10, 15 maybe even 20 years in advance. So it doesn't look like deliberate deprivation of assets. So notional value or not, they still need to satisfy a judge in court if I decide to challenge them.

Now I understand that tax payers may not be happy with this (unless they're in a similar predicament) However my beef and my parents beef is that a proportion of either national insurance or tax should be put into a separate fund to fund residential care for the elderly.

Also my current estate is joint with my wife and I don't anticipate it being more than £325k within the next 10 - 20 years. My wife and I are solid, so even I die she would not force the sale of the house. My lawyer said she couldn't anyway as life rent in Scottish law is on the house for both my parents, so they have it until they die.

What incentive do people have to work hard and pay off a mortgage over 25 years if the local authority is just going to try and take it off them if their health fails?

I myself pay a joint mortgage on a house worth considerably more than the one my parents have gifted to me. I have a child, and I will do everything possible to pass my house on to my child later in life. I would happily pay a little more tax over my lifetime if it meant protecting my house from being forcefully sold to pay for care home fees.

At the end of the day, it's not my fault if the government is so useless that it fails to protect the life's work of those who have worked hard all their life to contribute to the success of the country. I don't doubt for a second that if everyone who owned a house knew about this, it would be a big issue for voters!


In the case of my own house, there are others ways around this...

(1) Equity release leaving less than £118,000 equity in the property with deferred payment on death. Use the proceeds to open up investment bonds with whole of life insurance attached to it. Insurance can't be taken into consideration in means tested care. (go research it)... they can try, but a law protects the investment bond if insurance is attached.

(2) Downsize our house at retirement, move into a low cost retirement flat and use the proceeds of the sale to open investment bonds.

(3)If the house is worth enough and can achieve a good rental income, then rent it out to pay the care costs. Supplementing any short fall with pension income.

(4) Top oneself, as if my quality of life is ever so bad that I need care... for me personally there's more to loose by not being able to pass my assets on to my child than a few years of incontinence whilst sitting in a lounge watching the telly and waiting for my life to end. Simple really haha

antrobus

uknick wrote: »

The OP is not receiving market rent from their parents. If that is the case why are they not liable for POAT? Unless the market rent is below £5k per year....

In broad outline, the rules apply where an individual successfully removes an asset from their estate for IHT purposes (ie the GWR rules do not apply) but is able to continue to use the asset or benefit from it.

http://www.just-tax.co.uk/tax_factsheet_capital_taxes_6.htm

I think in this case, the GWR rules do apply.

love2learn

antrobus wrote: »

In broad outline, the rules apply where an individual successfully removes an asset from their estate for IHT purposes (ie the GWR rules do not apply) but is able to continue to use the asset or benefit from it.

http://www.just-tax.co.uk/tax_factsheet_capital_taxes_6.htm

I think in this case, the GWR rules do apply.

You're right, POAT doesn't apply as there has been no avoiding of IHT. My parents estate is worth nowhere near even the single IHT allowance of £325K ;-)

antrobus

love2learn wrote: »

..... The local authority then need to prove deliberate deprivation of assets. ....

That wouldn't be difficult if they were able to identify you as the originator of this thread.:)

love2learn wrote: »

....The primary reason for the house being transferred to my name was the avoidance of potential care home costs. ....

love2learn

antrobus wrote: »

That wouldn't be difficult if they were able to identify you as the originator of this thread.:)

Dynamic IP address, and no personal detail registered with this username. So yep, still difficult for them. But thanks for your concern hehe :-)

CLAPTON

love2learn wrote: »

Now I understand that tax payers may not be happy with this (unless they're in a similar predicament) However my beef and my parents beef is that a proportion of either national insurance or tax should be put into a separate fund to fund residential care for the elderly.




At the end of the day, it's not my fault if the government is so useless that it fails to protect the life's work of those who have worked hard all their life to contribute to the success of the country. I don't doubt for a second that if everyone who owned a house knew about this, it would be a big issue for voters!

I'm sure what you meant to write is

-that you are perfectly happy to pay more in taxation today and for the next 50 years, to support other people's parents with care costs even if your own parent never need that care.

and

-that you are more than than content to pay capital gains tax when your parents die and you sell the property (tax you wouldn't have
had to pay if you simply inherited).

many people agree with you

antrobus

love2learn wrote: »

Dynamic IP address, and no personal detail registered with this username. So yep, still difficult for them. But thanks for your concern hehe :-)

Well they could go all Norwich Pharmacal on your a.... err, behind and get that info from your ISP.

But the good news is that, if you parents are in good health, it's likely to be years before that possibility ever emerges. By which time all the records will have been deleted. So you should be safe enough.:)

jem16

love2learn wrote: »

To give some more information, the house is worth a maximum of £100,000. In 2016 the threshold for means tested care costs is going to be £118,000.

Your only problem with that is that it doesn't apply in Scotland. It's still £23,750.

http://www.money.co.uk/article/1009567-social-care-changes-what-they-mean-for-you.htm

Mojisola

Are you putting money aside so that you can pay a top-up fee and allow your parent/s to live in a reasonable care home, should they need residential care, rather than the ones that work to the council's budget?