Deprivation of assets

Keep_pedalling

dunstonh wrote: »

If it a transaction is done for a justifiable reason and at the time their health suggests no reason why they would need care, then it is not a problem. However, if it is done with the intention to qualify under a means test then it can be included as a deprivation of assets.

It has to be a happy coincidence. For example, if the transaction was justified under tax planning. Then that would be fine. So, unless there is a justifiable alternative reason for doing the transaction, it will be at risk of deprivation of assets.

Although I can’t think of any other reason for giving your home away. Even if they have an IHT issue, a gift with reservation, as this would be, would not help.

Whatever the morals of this, the parents would be nuts to give away their major asset. So many things to go horribly wrong. The death, divorce or bankruptcy of a child could end up with them losing their home.

dunstonh

Although I can’t think of any other reason for giving your home away. Even if they have an IHT issue, a gift with reservation, as this would be, would not help.

I cant either. However, I suspect the solicitor (if it is even a solicitor - could well be one of those non-qualified will writers who also do trusts and estate handling) will be looking to use a discretionary trust. However, even those are pretty pointless nowadays for most people and you lose the new IHT allowance for primary residence if you do that.

All that cost for something that statistically is highly unlikely to ever happen.

Hutch100uk

le_loup wrote: »

......... and they will have to pay you rent.
......... and you will have to pay tax on it.
......... and their motives are a disgrace.

I'm not interested in your opinions on their motives.

Hutch100uk

StumpyPumpy wrote: »

As you and your sibling appear to think this is a bad idea, how about this for a suggestion: Arrange for your parents to take a couple of tours of care homes in the area. Make sure you include at least one of each of privately and publicly funded homes. Then ask them which they would like to be placed in should the need arise, they might well come around to the thinking that maybe they should use some of their assets to ensure their personal well being* rather than, eg. paying off a child's mortgage.

Don't think I'm having a dig at state funded care homes, I'm not. They do a great job, but their resources are much more limited and you get what you pay for (or don't). With your own money you get to pick and choose where you go, with the state's money it is Hobson's choice.

*As an aside, this can be a useful exercise to give family an idea of where they would be most comfortable well ahead of the time where it might be needed.

SP

My parents know all about the care home system. My grandmother was in one for a short time so they are well aware of all this.
My grandmother ended up in state funded one locally and was perfectly fine.

I'm sure my solicitor will come up with more practical reasons to convince them this isn't a good idea.

Hutch100uk

I appreciate all the advice I've been given so far and just reinforces this isn't a good plan of action.

I do realise this topic would raise some 'moral issues' and indignation with many but, just to re-iterate, I'm not looking for people's personal opinions on that side of it. Although I'm sure some can't help but give them regardless.

badmemory

Maybe you could suggest that your parents look at some of the CQC's more recent reports. The situation would appear to be deteriorating.

Linton

It is not just the cost of care homes. Most people dont go into care homes. If you can pay for modifications to your house and for care at home you could avoid going into a care home for a significant amount of time. Councils can only offer a restricted number of hours/day from a visiting carer. Even a good care home could be a nightmare compared with continuing to live in you own home. Being sat in a communal sitting room in front of daytime TV turned to high volume seems like torture to me.

For parents to give their home away to a child whilst they still live in it can be very risky - what happens if the child dies, divorces, goes bankrupt and the house needs to be sold? Ok it's unlikely but it is still a risk and could happen. Why take the risk when there is no need?

Why is it that people are so keen on parents or themselves avoiding paying for their old age but would be shocked if a younger relation announced they were giving up work and giving away their assets to live off the state? What is the difference?

Mojisola

dunstonh wrote: »

I cant either. However, I suspect the solicitor (if it is even a solicitor - could well be one of those non-qualified will writers who also do trusts and estate handling) will be looking to use a discretionary trust.

It could well be that their legal advisor had an eye on how much he/she could make out of the scheme.

Hutch - did your parents get any details about how much they would have to pay?

xylophone

My parents would like to put their house in my name (and my siblings) in order to protect their assets from being used should they go into a care home.

http://sayermoore.co.uk/Transfer may be of interest.

Your parents' (admitted?)"significant operative purpose" for the gift is to avoid paying for care if such care should be needed?


They are

aware of the possibility that they might be provided with accommodation and that they might be liable to pay for it.

The LA might be minded to take a robust view of the case.....

Apart from this, there is your situation should you want to buy a property of your own, the problems that might arise in the event of divorce or family quarrel/dispute ... you are right to be cautious.

zagfles

HappyHarry wrote: »

I think your parents would be unwise to take such an action.

You could ask your parent's local authority about how they would view this scenario. That should give you a clearer idea than you would get anywhere else.

You could also try asking a solicitor to guarantee they will make good any future care fees that the local authority claim under such circumstances. I suspect you won't get far though.

Though there are many articles claiming that a local authority could not claim deprivation of assets if the parents were in good health when the property was given away, all of them come with very, very large caveats. Mainly saying that such courses of action are untested in law.

Other concerns:
(i) It does not help with IHT planning.
(ii) You and your siblings may face a CGT liability when your parent's house is eventually sold.
(iii) If any of you or your siblings get divorced, a share of your parent's house will form part of the marital assets.
(iv) If any of you or your siblings hit financial difficulties, your parents house will be counted as an asset.
(v) You may need to pay stamp duty when you acquire your parent's home.
(vi) As you will own a property, you will suffer the enhanced rate of stamp duty should you ever purchase your own home.

Yes and as well as all this, there's a little known tax called Pre-owned Asset Tax (POAT) which applies where someone continues to live in a property which they've given away. This is like income tax on the rental value! See https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44001

My parents wanted to do the same. I talked them out of it.