Letting the Family home.

LimaSigma1972

I wonder if anyone could tell me what are the implications to IHT, if a parent goes into care and chooses to let the family home?

1) Would this incure capital gains tax when the house was sold?

2) If the home is left to there children after spending time in a care home. Would this invalidate the £175k increase in IHT to £500k. Because the home is no longer the primary residence of the parent?

Any information on this would be much appreciated.

poseidon1

LimaSigma1972 said:

I wonder if anyone could tell me what are the implications to IHT, if a parent goes into care and chooses to let the family home?

1) Would this incure capital gains tax when the house was sold?

2) If the home is left to there children after spending time in a care home. Would this invalidate the £175k increase in IHT to £500k. Because the home is no longer the primary residence of the parent?

Any information on this would be much appreciated.

You may find this article helpful with regard to RNRB

https://techzone.aberdeenadviser.com/public/iht-est-plan/residence-nil-rate-band-guide#:~:text=To claim the RNRB, there,used in claiming the RNRB.


As for CGT, if the property is sold during the parent's lifetime there maybe  CGT exposure on future gains but only on a time apportioned basis, with an additional allowance for the 1st 9 months the property was not occupied as their home - see below

https://www.gov.uk/tax-sell-home/let-out-part-of-home

Keep_pedalling

Whether the property is rented or sold, the RNRB is protected by the downsizing rule so it won’t be lost. 

I would be more worried about becoming a landlord, if you have no experience of being one you should do your homework with regards to what your responsibilities are going to be and what can happen if things go wrong and you get the tenants from hell. You will probably find that you will also have to spend quite a lot of money up front to get the building up to spec to be able to let it particularly if it is an older building with a poor EPC rating.

Hoenir

LimaSigma1972 said:

 if a parent goes into care and chooses to let the family home?

Why would a person going into care wish to have the responsibilities of being a LL? 

LimaSigma1972

Hoenir said:

LimaSigma1972 said:

 if a parent goes into care and chooses to let the family home?

Why would a person going into care wish to have the responsibilities of being a LL? 

I tend to agree with your thoughts here. However in some circumstances the individual might physically need 24 hour care but they do not want to initially sell there property and think that having a letting company manage the property could bring in some financial income to help towards care costs. 

Marcon

LimaSigma1972 said:

Hoenir said:

LimaSigma1972 said:

 if a parent goes into care and chooses to let the family home?

Why would a person going into care wish to have the responsibilities of being a LL? 

I tend to agree with your thoughts here. However in some circumstances the individual might physically need 24 hour care but they do not want to initially sell there property and think that having a letting company manage the property could bring in some financial income to help towards care costs. 

It's certainly an emotional wrench to accept that once you've gone into a care home you aren't going to return to your own home - and selling that home emphasises the finality of moving out. I appreciate your question didn't ask about this aspect (and apologies for going off topic), but letting a company manage the property to bring in some financial income is going to bring its own headaches. Selling the property and using the capital (+ any investment return on that capital) is worth exploring as an alternative to becoming an elderly first-time landlord.

Silvertabby

The average monthly rent from an average sized house will barely pay for 1 week of care home fees.  Does this person have enough savings/pension income to be able to pay for the other 3 weeks?  

MarzipanCrumble

tbh it depends what the rental income would be for the property less management fees. 

If I was advising (for which I have no credentials whatsoever) I would get a sale price of house then explore an Immediate Needs Annuity.

Keep_pedalling

MarzipanCrumble said:

tbh it depends what the rental income would be for the property less management fees. 

If I was advising (for which I have no credentials whatsoever) I would get a sale price of house then explore an Immediate Needs Annuity.

Less income tax as well.