Inheritance/Tax/Care Cost Help!

bra1ne

My Wife and I have moved in with her parents to help assist in the care of her elderly dad. The situation is we sold our property and they sold theirs and we put everything in a pot and my wife and I have also taken a mortgage which has paid for a larger house to accommodate all of us.
The house is completely in our names but I am unsure how things are in regards of tax, inheritance tax or care (in case her dad has to go into hospital due to serious illness) and whether we need to declare anything now to avoid problems in the future.

If anyone has any advice it would be greatly appreciated.

margaretclare

AFAIK as the house is completely in your names there shouldn't be any problem in case of dad needing care. I'm no expert, but I don't think IHT either, because you own it all, don't you? A person needing care is assessed on 'their' assets, not anyone else's.

HTH

sloughflint

If some of your parents money was used to pay for the house, I wonder if that would be classed as a gift and therefore potential inheritance tax consequences depending on estate size? Worth looking into that side of things.

bra1ne

Thanks for the quick reply but what about the money they have put into the house as they owned their old house outright and in effect have "given" us over 100k , though its not gone into our pockets but used as the deposit for the shared house.

{EDIT}Sorry replied before I saw sloughflint's reply. Thats what I am not sure about either so assuming I will need to go for proffesional advise if nobody else has any ideas.

localhero

Hi Bra1ne,

Particular care is required with this transaction.

IHT - because your in laws are benefiting from the gift (ie living in the property) the 7 year rule does not apply. Further, IHT will be calculated on the value of the property on death rather than at the time of the gift.

If their combined estate is below £600,000 this won't matter.

Care fees - If either of your in-laws require care, they will be means tested. The gift of £100,000 could be construed as deliberate deprivation of assets and disregarded, causing difficulties for you and your wife. Local authorities can (and do) go back any length of time.

A possible solution would be for all 4 of you to own the property as tenants in common, but for your in laws (and you and your wife too for that matter), to make Wills leaving their respective shares of the property to you and your wife (rather than each other).

To provide security for all 4 of you, the Wills can provide a 'right to remain' or life interest in the property to the survivors.

I would suggest you contact a competent professional to make things watertight.