Selling house to pay for care home

roadweary

Hi,

Our mother is the one asking these questions when we are suggesting selling the home, so please, no insensitive comments.

Our mother needs to go into a care home.  At a guess the house will be worth £500 - £600k.  It's her only home.  If she sells it, I don't think there would be any capital gains as it is her only home.

In terms of the funds realised.....I guess standard tax would apply to any interest generated against her other pension income etc....

At some point, like all of us, she will pass.....would any remaining funds pass in her inheritance the same as though she had kept the house, and standard death duty apply?  I think that currently stands at £500k threshold when passing money to children.

Also, half of the house is 'protected' which is something my Dad did so that should the house value be needed to fund care for my Mum, half of it would have been reserved for the children.  Not sure if / how that impacts things in this case?

A solicitor's email states "the Land Registry form transfers title of the property, so that the property will be owned legally by <mother> and her three children, but the beneficial interest is divided so that <mother> has one half and the other half is held on trust for <mother> for her lifetime and then to the children afterwards.

I hope that makes more sense to somebody on here!

Thanks,
R

caprikid1

"Also, half of the house is 'protected' which is something my Dad did so that should the house value be needed to fund care for my Mum, half of it would have been reserved for the children.  Not sure if / how that impacts things in this case?"

Google Deprivation of assets , All will be fine till the 300K runs out

RAS

Assuming mum is widowed? This sounds like the parents severed the tenancy and dad left his half to the children, with a life interest for mum?

You need to go back to the will and clarify what happens when the house is sold. Quite possibly mum is entitled to the income generated by the equity released when dad's half is sold. But not to spend the capital.

Is the Immediate Post Death Trust registered with the HMRC as recently became a requirement? 

So monthly, mum will have any pensions, presumably attendance allowance, and possibly income from the equity released by dad's portion of the house sale to pay towards care home fees, and the capital value of her half of the equity to cover the rest of the fees.

Mum may need good financial advice to identify accounts to generate regular income from dad's portion of the equity.

propertyrental

I'm not a lawyer but (see bold

roadweary said:

Hi,

Our mother is the one asking these questions when we are suggesting selling the home, so please, no insensitive comments.

Our mother needs to go into a care home.  At a guess the house will be worth £500 - £600k.  It's her only home.  If she sells it, I don't think there would be any capital gains as it is her only home. would be true if she owned the property, but ownership is shared with childen. Do the children live there as their main residence? If not CGT may be due on their shares

In terms of the fund realised.....I guess standard tax would apply to any interest generated against her other pension income etc....If the mony relaised is hers (some might belong to children...? then normal income tax applies to any interest earned - but there is a tax free amount (£1000) on interest from savings accounts

At some point, like all of us, she will pass.....would any remaining funds pass in her inheritance the same as though she had kept the house, and standard death duty apply?  I think that currently stands at £500k threshold when passing money to children. What does her will say? But IHT is due (or not) based on the total value of her estate (ie house, savings, investments, jewelry,  mediteranean yacht etc

However there is an increased IHT allowance where the will specifies that the main residence is passed to the deceaced's children

Also, half of the house is 'protected' which is something my Dad did so that should the house value be needed to fund care for my Mum, half of it would have been reserved for the children.  Not sure if / how that impacts things in this case?

A solicitor's email states "the Land Registry form transfers title of the property, so that the property will be owned legally by <mother> and her three children, but the beneficial interest is divided so that <mother> has one half and the other half is held on trust for <mother> for her lifetime and then to the children afterwards.
what does th Land Registry Title say. Buy a copy for £3

Is there a Deed specifying the anbove, or just the email?

I suspect the fact that mother can remain in the house till death means it is a gift with reservation which may impact on IHT

Not clear what happens to the life interest if the property is sold......

Legal advice needed from a Probate solicitor, ideally the one who set this up for your dad and sent the email. Though there are some pretty knowledgeable folks here who may know better than me.

RAS

If dad's will left the house to the children and life interest to mum, then mum is currently the sole beneficial owner and no CGT is owed on the increased value. That is one of the reasons making children absolute inheritors of a severed tenancy on first death is a bad idea.

OP, this thread would be better in the Life and Family forum under Death and Probate section. Message the mods to move?

roadweary

RAS said:

If dad's will left the house to the children and life interest to mum, then mum is currently the sole beneficial owner and no CGT is owed on the increased value. That is one of the reasons making children absolute inheritors of a severed tenancy on first death is a bad idea.

OP, this thread would be better in the Life and Family forum under Death and Probate section. Message the mods to move?

Thanks - I will ask the mods to do that....once I find the right button / function!  In the meantime, I'm not clear if the bad idea comment applies to the situation here and why?

RAS

OK, moving threads is under Report. I've done so on your behalf.

roadweary

Thank you....also interested in whether this applies to my case "That is one of the reasons making children absolute inheritors of a severed tenancy on first death is a bad idea."

Keep_pedalling

caprikid1 said:

"Also, half of the house is 'protected' which is something my Dad did so that should the house value be needed to fund care for my Mum, half of it would have been reserved for the children.  Not sure if / how that impacts things in this case?"

Google Deprivation of assets , All will be fine till the 300K runs out

The OPs father’s share being in trust is not deprivation of assets. At the moment their mother is the beneficial owner of the whole house but only the legal owner of half of it. £300k in cash plus her income will last a good few years.

RAS

roadweary said:

Thank you....also interested in whether this applies to my case "That is one of the reasons making children absolute inheritors of a severed tenancy on first death is a bad idea."

If an absolute inheritor is not resident in the house, they have to pay CGT.
They lose first time buyer status, if that's relevant.
And they pay additional SDLT when buying their own house, if their part share is valued at over £40k.

There have been a number of threads here where people have discovered financial penalties as a result of wills and trusts that appear to have been created by people who are more interested in their own income stream than understanding the tax implications of what they've created.

roadweary

RAS said:

roadweary said:

Thank you....also interested in whether this applies to my case "That is one of the reasons making children absolute inheritors of a severed tenancy on first death is a bad idea."

If an absolute inheritor is not resident in the house, they have to pay CGT.
They lose first time buyer status, if that's relevant.
And they pay additional SDLT when buying their own house, if their part share is valued at over £40k.

There have been a number of threads here where people have discovered financial penalties as a result of wills and trusts that appear to have been created by people who are more interested in their own income stream than understanding the tax implications of what they've created.

Apologies for my lack of understanding.  You started with:  If dad's will left the house to the children and life interest to mum, then mum is currently the sole beneficial owner and no CGT is owed on the increased value.

So, what is it that we need to check to understand if we are in a situation where no CGT would be owed on the house versus owing CGT (absolute inheritors...)?

Thank you