Parent in care home: sell or rent house?

Alison_P

My mother is now settled in a care home. Her house is empty. Should we rent it out to help pay care home fees, or sell it? When she dies her estate will not be over inheritance tax threshold.

Person_one

Do you have POA over your mother's financial affairs?

If you do, do you want to be a landlord? Do you have a good understanding of the legal requirements and responsibilities involved?

westernpromise

Personally I would sell it because the rental income can only be used to fund care home fees if you succeed in letting it and if the tenant then pays the rent and if each successive tenant leaves the place it a fit state to be let out again. If any of these does not happen, and they're very common, then you would have a problem.

Also, while the estate might be under the IHT threshold now, as soon as the property gets let out it becomes exposed to CGT. It takes a while to accrue any liability but there is a risk of doing so if the property is kept long enough.

pmlindyloo

What is happening at the moment as regards the care home fees?

Is she self funding from savings or is the local authority paying for her care?

If the LA is paying for her care then there is a 12 week disregard when her property is disregarded.

Have a read of this:

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS38_Treatment_of_property_in_the_means-test_for_permanent_care_home_provision_fcs.pdf?dtrk=true

If your mum does not have the means to self fund without selling the house or renting it out then you have to do some sums.

Will the rent (plus mum's pensions, AA etc ) cover the care home fees?

If they don't, then your mum might as well sell it (see lasting power of attorney question above)

TBagpuss

What does your mum want you to do (or has she lost capacity?)
Renting it out means that you )on her behalf) have a whole raft of new responsibilities as a landlord - are you in a position to take those on?
What is the rental market like in the area where the house is? Is the property in good condition and suitable for renting out or will you need to update it first?

I'd suggest that you sit down and make a list of pros and cons of renting / selling.

It's also worth considering what is likely to happen longer term. If your mum dies, will you want to be dealing with continuing as a landlord, then having to deal with ending a tenancy and selling the proeprty?

Also think about whether there is an emptional element - how easy / difficult will you / your mum find it to have tenants in her home, potentially criticising and perhaps causing damage to things which may have sentimental value.

stokesley

In the same circumstances, we opted to sell - I had no wish to become an accidental landlord, upgrading the house would have written off the first couple of years rent, and my mother had sufficient income via pensions and AA to cover care fees.


Had any one of these circumstances been different, I may have made a different decision.


Good luck!

Alison_P

Thank you for all your helpful comments. My mother has capacity and no emotional attachment to the house/contents. Whilst the house is in a good area for letting it does need some updating before it could be let. Currently she is able to pay care home costs from her income and savings. We think the combination of income and savings would mean she could manage without selling for about 5 years but I think your comments are moving the decision towards selling. Now to discuss with my sister and mother.

xylophone

http://societyoflaterlifeadvisers.co.uk/

You might wish to discuss the matter with a specialist.

With regard to INCA, there are (as far as I know) now only two providers and you would need to go through an IFA.

https://www.partnership.co.uk/paying-care-fees/immediate-care-plan/

https://advisers.friendslife.co.uk/products/lifetime-care/

If the house is sold, you will need to decide how to invest/deposit the cash for income and growth - depending on how confident you are with this, you might want to consult an IFA.

The need to supplement to pension etc to pay the care home fees may arrive sooner than you think - someone of my acquaintance now fully self funded in a care home is paying over £60,000 a year (south east) and the fees increase well ahead of inflation.

In this case it was decided to sell the family house - it was in a very desirable location but did need updating - then too, this lady's Attorney lived at a distance from the house and had no desire to cope with the responsibilities of updating the property and being a landlord and further down the line having to sell the property if the rent didn't cover the gap.

G_M

Person_one wrote: »

Do you have POA over your mother's financial affairs?

If you do, do you want to be a landlord? Do you have a good understanding of the legal requirements and responsibilities involved?

Unanswered and relevant.

My mother has capacity and no emotional attachment to the house/contents.

Different issue (though still relevant!).

Keep_pedalling

Alison_P wrote: »

Thank you for all your helpful comments. My mother has capacity and no emotional attachment to the house/contents. Whilst the house is in a good area for letting it does need some updating before it could be let. Currently she is able to pay care home costs from her income and savings. We think the combination of income and savings would mean she could manage without selling for about 5 years but I think your comments are moving the decision towards selling. Now to discuss with my sister and mother.

You did not say whether your mother had POA sorted, if the answer that question is no, get it sorted while she has the capacity to do so.