Selling Dad's House

theshed

My recently widowed Dad of 84 has been discussing selling his house, pre war mid-terrace worth about £80,000.
He wants to sell and give money to family, including myself. He is fit and healthy but at 84 I think moving to sheltered accommodation or perhaps a 'granny' flat with us would be best. Our property is not big enough so we would have to move.
I am thinking, modernising and renting Dad's house would provide an income to pay for either of above.
What are the implications of the above with regard to tax, inheritance and care costs should that become necessary ?
Thanks 

TheJP

How would he pay for his accommodation if he wants to give the money away? That would be deprivation of assets if he needed care. If he moved in with you would you be willing to be his carer if he needed care? Its a big responsibility that needs a lot of thought.

theshed

Locally to him there is property for the over 60's with basic care at a rent of £550/month. He could pay this from his pension.
Possible future care costs is what worry's me. I am not young myself so caring for my Father full time would not be an option.
I am concerned that decisions made now will have financial implications later, as you say lost of thought.
And, hopefully good advice from this forum and others.

sheramber

There is a lot to think about.

Giving the sale money away would be considered deprivation of assets if he needed to go into care and he would be assessed as still having the money available.

Have you  checked the requirements for being a landlord- certificates required etc.

Rental income would be your dad's  and taxable on him.

There could be capital  gains tax payable on the eventual sale of the house.

Could you absorb the costs if the tenant stopped paying rent, trashed the place?

If your dad needed to go into care the house would be considered in his assessment for care costs.  Either the rent would need to be used to cover the costs or the house sold. 

 Obviously, he would no linger need to pay for sheltered housing but if you were using the rent ( less any tax due by your dad)  towards paying for your bigger house how would you manage?

thegreenone

Rented sheltered accommodation may be the best bet.  If Dad wishes to give gifts, make them small ones (£3000 per year) and keep the capital in case of care needs.

If you have siblings, be very careful about upsizing with an Annexe, using some of Dad's money.  You could end up with a big house (nice) and your siblings with not a lot (not nice), unless you can remortgage to give them the same as you received.  Also, as above, think VERY carefully about being Dad's carer.

TheJP

theshed said:

Locally to him there is property for the over 60's with basic care at a rent of £550/month. He could pay this from his pension.
Possible future care costs is what worry's me. I am not young myself so caring for my Father full time would not be an option.
I am concerned that decisions made now will have financial implications later, as you say lost of thought.
And, hopefully good advice from this forum and others.

Essentially what he is proposing is depriving his assets so he doesn't have to pay for his care, he could be charged care fees as if he still owned the property which would likely then fall onto you and your siblings.

Mojisola

thegreenone said:

Rented sheltered accommodation may be the best bet.  If Dad wishes to give gifts, make them small ones (£3000 per year) and keep the capital in case of care needs.

The £3000 a year is relevant to inheritance tax but would still be considered deprivation of assets if care was ever needed.

TBagpuss

How wouldany modernisation of his current house be paid for? If the palan would be for you to find this then you might be able to have an arrangment whereby you find the works in return for a % of the propery ownership (You'd both need advice about how to work outyour share and how to record it, but provided that your share reflected a fair and reasonable amount to reflect the value of the investment then it wouldnt be a deprivation of assets. You and your dad would split the rent in accordance with your shares in the property.

BUT youhe would be landlords with all the legal responsibilities that carries and the rent would be taxable, and you've need to be able to afford repairs, maintenace and anyvoid periods.

Sellingthe house might be better- he can then downsize or rent and dip into his capital as needed, and have capital to use to fund care if he needs it in the future. 

An annex hs downsides - it means that you may end up having to provide more care than you expected, and you could wind up having to sell your home when he passes in order to pay any other siblings etc their inheritance - again, you and he would both need spearate, independent advice if you went down thtroute to ensue that he had security, and that you were both clear about what would happen when he passes.

Him gifting the finds from the sale of the house yto you or siblings would be deprivation of assets should he get to a point where he needed care. Unless he has a very significant amount of savings, the value of his house means that his estate would be well below IHT levelsd so it's probably best for him to retain the sale proceeds, and to make a will to ensure that his estate is shared the way he wants when he passes. 

It would also be sensoble for him to think about Powers of Attorney if he hasn't already, so if he loses capacity you (or other children)  can look after his financial affais for him, and make any medical decisions which may be needed 

p00hsticks

Mojisola said:

thegreenone said:

Rented sheltered accommodation may be the best bet.  If Dad wishes to give gifts, make them small ones (£3000 per year) and keep the capital in case of care needs.

The £3000 a year is relevant to inheritance tax but would still be considered deprivation of assets if care was ever needed.

And unless he has a very large amount of savings or other assets then inheritance tax is not going to be an issue anyway, so no need to start giving money away simply to avoid it.

theshed

Just a quick update. There is some information on the Gov't website that gives good guidance. 
I am not that savvy with such things, hence MSE, but things do not look quite so bleak. I found it quite difficult to uncover and decipher the information but basically some of the options we considered are available, if you follow the rules.
I am a bit relieved it has to be said that he no longer thinks moving in with us is a good idea.
I will be taking professional advice and suggest others do the same in similar circumstances.
Thanks all.