Is paying off mortgage on jointly owned property, deprivation of assets?

Keep_pedalling

Grumpy_chap said:

Keep_pedalling said:

A couple of points here. The OP’s father may be the beneficial owner but legal ownership is 50/50. Selling now will loose the rental income and is likely to lead to a CGT liability as neither the OP or their father have ever lived there.

If things are left as they are, on the OP’s father’s death his estate will consist of a 50% share of the house less funeral cost less debt owed the the LA. If that is insufficient to pay off the debt then the estate will be insolvent and the the LA will only get a portion of the debt repaid.

Thanks, so the assessment from a contribution to care is different from the assessment for IHT (under which the 50% property gifted would likely be a failed transfer as GWR).

Yes, for taxation purposes it is beneficial ownership that counts but for everything else it is legal ownership. As beneficial owner the OP’s father is responsible for income tax on the rental  income, would bare all the CGT liability should it be sold while he is alive and the value of the whole house is used in IHT calculation on his death. 

It is advantageous to keep the current arrangement for both the LA and the OP as CGT will not apply if the house is sold after his father dies.At some point however the house will have to be sold to meet the debt to the LA unless the OP happened to have significant savings to pay it off and keep the house.

Presumably at the last financial assessment only 50% of the house value was declared. 

Grumpy_chap

Keep_pedalling said:

Yes, for taxation purposes it is beneficial ownership that counts but for everything else it is legal ownership. As beneficial owner the OP’s father is responsible for income tax on the rental  income, would bare all the CGT liability should it be sold while he is alive and the value of the whole house is used in IHT calculation on his death. 

It is advantageous to keep the current arrangement for both the LA and the OP as CGT will not apply if the house is sold after his father dies.At some point however the house will have to be sold to meet the debt to the LA unless the OP happened to have significant savings to pay it off and keep the house.

Presumably at the last financial assessment only 50% of the house value was declared. 

Thanks you - that is a good explanation and gives certainty to the OP.

sclare

• "Council are now holding a charge against the property for the ongoing care costs"

No, that isn't the case. There is no charge on the house at present. As far as I'm aware, they can't put a charge on it without my permission. 
What I'm concerned about is that on his death (when the house will revert to me automatically, without any will being involved, as we're joint tenants, not tenants in common) the LA might come after me for payment, citing DoA. 

sclare

If things are left as they are, on the OP’s father’s death his estate will consist of a 50% share of the house 

No, no proportion of the house will be part of the estate. He and I are joint tenants, and the house will revert to me in its entirety, instantly on his death. 

Grumpy_chap

sclare said:

If things are left as they are, on the OP’s father’s death his estate will consist of a 50% share of the house 

No, no proportion of the house will be part of the estate. He and I are joint tenants, and the house will revert to me in its entirety, instantly on his death. 

Do the Council know and correctly understand this?

It is just in the opening post, you stated:

sclare said:

For the last few years, since his liquid funds ran out, the council has been deferring payment on the balance of his monthly care costs (after his benefits and the rental income have contributed to it). I continue not to benefit in any way from the rental property. 

My understanding is that when a Council "defers payment" in this way, they really mean to defer the payment for now in the expectation that the value of an illiquid asset will be capable of being realised at death.
Does your father have any other illiquid assets that the Council may be considering in this regard?

Ordinarily, repayment of debt is not considered DoA.
In the case where payment is deferred based upon the asset being realised at death, I can see the Council taking a different view if they understand that the asset will not be realisable at death.  In fact, it is hard to see that the Council would have anything to gain by not forcing the sale of the house now while it is in the father's estate.

From what I understand, the mortgage was cleared about 5 years after the father had suffered the stroke and gone into care.  It was evident at that time that care would need to be funded.  I don't wish to pry, but is the father in good mental health or is there a PoA (power of attorney) in place?  The Council may take a different view if the decision to clear the mortgage debt was by an individual acting under PoA rather than by the father himself.

I would not expect to see any leniency from the Council given neither the OP nor the OP's father reside at the property.

Keep_pedalling

sclare said:

If things are left as they are, on the OP’s father’s death his estate will consist of a 50% share of the house 

No, no proportion of the house will be part of the estate. He and I are joint tenants, and the house will revert to me in its entirety, instantly on his death. 

If you are planning on not paying any of the deferred costs on the basis that you own the house outright you should be aware that a major creditor can still pursue this through the courts who have the power to sever the tenancy after his death. This normally does not happen because of the costs involved but as we are probably talking about six figures here I would think this action likely.

Also the LA do not need your permission to put a charge on the property, that again can be done through the courts. If this did happen the tenancy would be severed at the same time to protect your share. 

Grumpy_chap

sclare said:

• "Council are now holding a charge against the property for the ongoing care costs"

No, that isn't the case. There is no charge on the house at present. As far as I'm aware, they can't put a charge on it without my permission. 
What I'm concerned about is that on his death (when the house will revert to me automatically, without any will being involved, as we're joint tenants, not tenants in common) the LA might come after me for payment, citing DoA. 

The online literature all indicates that the deferred payment (LA funding care costs in the interim) will be attached to a Deferred Payment Agreement (DPA) which will be effectively a loan secured against the property.  That is a charge against the property in all but name.

https://www.carehome.co.uk/advice/deferred-payment-agreements-to-pay-for-care-home-fees#

https://www.moneyhelper.org.uk/en/family-and-care/long-term-care/deferred-payment-agreements-for-long-term-care

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs38_property_and_paying_for_residential_care_fcs.pdf

https://www.which.co.uk/money/pensions-and-retirement/financing-later-life-care/care-home-finance/deferred-payment-agreements-agEiK9I7h0TN

What are the details of the DPA between your father and the LA?

sclare

Thank you very much both of you. The council do know (or at least I told them this at a previous meeting) that we are joint tenants. 

Unfortunately I do not have sight of the deferred payment agreement. My dad doesn't seem to have a copy, or at least we can't find one. As I have POA I'll ask the council for a copy. 

I am not trying to avoid responsibility here, but I do need to know where I will stand when it happens. It's important to me that I have all the relevant information when the time comes. Not least because this property is someone's home, and has been for 15 years or more. I have to factor that in as well.  I have a feeling that everything to do with this house is going to be a complete nightmare when Dad dies

Keep_pedalling

sclare said:

Thank you very much both of you. The council do know (or at least I told them this at a previous meeting) that we are joint tenants. 

Unfortunately I do not have sight of the deferred payment agreement. My dad doesn't seem to have a copy, or at least we can't find one. As I have POA I'll ask the council for a copy. 

I am not trying to avoid responsibility here, but I do need to know where I will stand when it happens. It's important to me that I have all the relevant information when the time comes. Not least because this property is someone's home, and has been for 15 years or more. I have to factor that in as well.  I have a feeling that everything to do with this house is going to be a complete nightmare when Dad dies

You should definitely get a copy of the agreement. Also check out how the changes in funding rules that are coming in in October are going to affect how much he has to contribute going forward. You may find that his income is enough to pay ongoing ‘hotel’ costs and he may no longer need to contribute to further care costs.

sclare

The plot thickens. I spoke to Dad's social worker the other day, and she sees no record of deferred payment on her records. She's speaking to the finance people to find out exactly what's going on. Dad 'owes' £275,000 yet according to 'the computer' he's still paying for his care (which he is at £500 a month - less than 10% of what his care costs).

Anyway, I've asked her to ask the finance people to send me every bit of documentation that exists, so we'll see.