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Buying a house with an annexe for my elderly Dad
Jofrances
Posts: 5 Forumite
Hi,
My husband and I are looking in to buying a house with an annexe for my Father who is in the early stages of Dementia. The house is 900k, our house has been valued at 545k (with a mortgage of 10k outstanding) my Father’s house is worth 800k. My Father has a further 250k in stocks and an income of 4K a month from pensions. I have property elsewhere total value 800k. Other than a few small bequeathments amounting to about 100k, I am the sole beneficiary of his estate. My Mother died in 1994 so I would have an additional inheritance tax allowance from her.
Can anyone offer advice about who should pay what on the purchase of the new house please? What is most logical and has the best tax implications. We would also need to ensure money is set aside for carers or if things get really awful towards the end the possibility of residential care, which we are trying to avoid if at all possible. If it’s all too complex for advice on here do you think I should seek advice from a solicitor or an accountant? Thank you!
My husband and I are looking in to buying a house with an annexe for my Father who is in the early stages of Dementia. The house is 900k, our house has been valued at 545k (with a mortgage of 10k outstanding) my Father’s house is worth 800k. My Father has a further 250k in stocks and an income of 4K a month from pensions. I have property elsewhere total value 800k. Other than a few small bequeathments amounting to about 100k, I am the sole beneficiary of his estate. My Mother died in 1994 so I would have an additional inheritance tax allowance from her.
Can anyone offer advice about who should pay what on the purchase of the new house please? What is most logical and has the best tax implications. We would also need to ensure money is set aside for carers or if things get really awful towards the end the possibility of residential care, which we are trying to avoid if at all possible. If it’s all too complex for advice on here do you think I should seek advice from a solicitor or an accountant? Thank you!
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Comments
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You certainly should not make a decision based on advice from a forum like this but it can help a lot in helping you formulate the questions you do need professional advice on.
Since there are three of you I would start with looking into owning 1/3rd each of the new house.0 -
Another way to look at it would be tovalue the annexe separately (1/4 of the total value - whatever) and dad contributes that.
Own as 'Tenants In Common' rather than Joint Tenants, specifying the % ownership.
Have you got POA? If not, set that up now. And if he needs help with money/banking, get the POA registered with his banks so you can help him manage.
But keep his money/accounts clearly separate from yours.
Consider carers in future- if he's on his own in an annexe and his dmentia worsons, will he be safe? Might you get a live-in carer and if so where would they sleep?
Taxwise:
* SDLT. If you have property elsewhere you'llpay the extra 3% on your purchase unless you are moving from, and selling, your current main residence
* I assume he will be moving from & selling his curent main residence so the same rule applies to his purchase into the new home
* IHT depends on his total estate value and his allowances
I'd suggest he, and you, all get advice from a wills/Probate/tax solicitor and draw up wills.
A financialadviser might be an idea fo any investments outside the property but they can be costly.....0 -
Hi,
My husband and I are looking in to buying a house with an annexe for my Father who is in the early stages of Dementia. The house is 900k, our house has been valued at 545k (with a mortgage of 10k outstanding) my Father’s house is worth 800k. My Father has a further 250k in stocks and an income of 4K a month from pensions. I have property elsewhere total value 800k. Other than a few small bequeathments amounting to about 100k, I am the sole beneficiary of his estate. My Mother died in 1994 so I would have an additional inheritance tax allowance from her.
Can anyone offer advice about who should pay what on the purchase of the new house please? What is most logical and has the best tax implications. We would also need to ensure money is set aside for carers or if things get really awful towards the end the possibility of residential care, which we are trying to avoid if at all possible. If it’s all too complex for advice on here do you think I should seek advice from a solicitor or an accountant? Thank you!
The starting point would be to seek financial advice however as a starting point...
If you were to sell both of your main residence and you father was to gift you the 400k approx you need for your house with annex, this would be counted as a gift to you and if he survives 7 years, it would fall outside of his estate for inheritance tax purposes.
You should consider what liquid cash is needed for your father in terms of access for care etc. Please bear in mind that if people go into a care home, the average time spent in there is quite short- 2-3 years perhaps from what I remember reading. He seems to have a good income so you may want to consider whether this could pay for carers and towards his fees also.
In terms of the surplus cash and investments he holds, you would probably better putting these into an investment bond which then sits within a trust. Depending on access/income requirements etc but for any successful planning to avoid paying tax on death is likely to need 7 years to take full effect. Therefore the sooner you act, the better chance you have to plan properly.
If not already done so, you should consider power of attorney etc.
As I said though, you should seek financial advice..0 -
I don’t think you should do it. Looking after someone with dementia is a skilled job and it is exhausting. It can only get worse and moving your dad may well trigger a more rapid deterioration.
You would be better to organise carers, trips out to lunch clubs, daycare facilities etc in order to keep him out of residential care for as long as possible.0 -
Does the fact that father will be occupying the annex in exchange for the cash gift invoke any special tax rules?middleclassbutpoor wrote: »If you were to sell both of your main residence and you father was to gift you the 400k approx you need for your house with annex, this would be counted as a gift to you and if he survives 7 years, it would fall outside of his estate for inheritance tax purposes.0 -
Does the fact that father will be occupying the annex in exchange for the cash gift invoke any special tax rules?
Not that I’m aware of.
There will be no capital gains tax
Providing the payment of care is self funded, there isn’t a deprivation of asset scenario to worry about.
It’s just inheritance tax should he die within 7 years.
You should seek professional advice though...0 -
What about Pre-Owned Assets Tax?0
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Another vote for obtaining POA immediately. And yes, you need specific professional financial and legal advice.There is no honour to be had in not knowing a thing that can be known - Danny Baker0
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I'd agree with this, It's especially exhausting for someone with an emotional involvement, and easy to slip into a situation where one's own life and responsibilities suffer.I don’t think you should do it. Looking after someone with dementia is a skilled job and it is exhausting.0 -
There are complications for SDLT, but also potential savings, with a house with an annex. There is more about it here: https://www.blakemorgan.co.uk/news-events/blog/additional-3-stamp-duty-land-tax-surcharge-granny-/* SDLT. If you have property elsewhere you'llpay the extra 3% on your purchase unless you are moving from, and selling, your current main residence
* I assume he will be moving from & selling his curent main residence so the same rule applies to his purchase into the new home.....0
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