Planning to minimise IHT involving nursing home fees

Grumpy_chap

theoretica said:

Wouldn't the simplest way for the debts to be paid off by the estate to be in kind?  Eg X% of the house transferred to wife and sister to repay the debt and the other Y% transferred to wife and sister as inheritance?  It would be more complicated if the debt was due to other people.  It is not uncommon for beneficiaries who want to inherit a property to pay off debts to prevent a sale being necessary - and this seems similar to that.

It is similar to that, except that leaves the OP's wife with an inheritance (half the house) that cannot be realised because Sister lives in the house.
The exact same reason the house cannot be readily sold now.
Future considerations may include the OP's wife incurring CGT as and when the house is sold, consideration if OP's wife ever claims means-tested benefits, consideration if OP's wife ever needs to meet own car home fees.

mybestattempt

Grumpy_chap said:

[Deleted User] said:

OK.  But the gift to the aunt to pay the care home fees would still be a PET.
I thought that there was talk about (i) a gift, or (ii) a loan.  

I read that it would be a loan:

Busymole said:

We are also considering a scheme whereby the continuing care costs are paid by my wife and her sister and recorded as a debt against the aunt's estate, which would then be deductible from the estate's value at her death. 

A gift would not reduce the value of the Aunt's Estate, so not avoid IHT.

[Deleted User] said:

Hence my comments about the risk of there being a CLT if, after death, it is decided that the estated does not need to repay the loan.

I am not familiar with the abbreviation CLT and an internet search suggests "Cross Laminated Timber" which I think the context makes clear is not what you meant.

I searched CLT in the HMRC Inheritance Tax Manual, which threw up references to lifetime transfer and PCLT, personal chargeable lifetime transfer.

I think this is something, along with all the other potential issues, which can be addressed when the OP gets the professional advice now being sought.

Busymole

theoretica said:

Wouldn't the simplest way for the debts to be paid off by the estate to be in kind?  Eg X% of the house transferred to wife and sister to repay the debt and the other Y% transferred to wife and sister as inheritance?  It would be more complicated if the debt was due to other people.  It is not uncommon for beneficiaries who want to inherit a property to pay off debts to prevent a sale being necessary - and this seems similar to that.

Thanks, that sounds like a useful idea. I will see what the solicitor thinks.

Keep_pedalling

One possibility is that the LA will pay the fees but put a charge on the house it certainly is not exempt from the financial settlement. 

What sort of income do the couple living rent free have? It seems unfair that they continue to benefit from this grace and favour arrangement at the time of your aunt’s greatest need.

xylophone

What sort of income do the couple living rent free have? It seems unfair that they continue to benefit from this grace and favour arrangement at the time of your aunt’s greatest need.

Aunt is 101 years old.

Some fifty years ago, Aunt (presumably living in her own property) chose to buy another property specifically for use as a home for 

one of her (two?) nieces (the OP's sister-in-law).

It appears that she did not ask for any rent. That was and is her choice. 

She is compos mentis but preferred that her financial affairs should be handled by her nieces from the time that a PoA was 

brought into effect.

The niece has occupied and maintained the property since that time either alone or with her husband.

Aunt's will leaves the property in equal shares to her two nieces but has requested that the occupying niece should be permitted 

to continue to occupy the property for her  (and husband's?) lifetime.

Both nieces now have cash savings as a result of legacies that they have already received.

it is proposed that the nieces should take over the payment of Aunt's care home fees (Aunt is happy in the home and wishes to 

stay there until she dies).

It would be possible to structure these payments as a loan secured against the property.