IHT/Gift tax/care home fees

[Forestlfc]

Hello!

Newbie to the site and what I have read so far has been very useful, so thanks to the experts who have contributed.

I have read some of the comments/replies regarding home care fees/IHT/gift tax with regard to selling a house and paying for some of care home fees and gained a good grounding. However, can anyone advise what the situation is for the following:

Dad, divorced, 64, has been living in a rented flat for many years. 3 years ago my two siblings and I bought the flat (with dad’s consent as dad couldn’t afford it) with a mortgage and we have been paying the mortgage ever since. However flat and mortgage is in dad’s name. There is only a few years left on the mortgage.

Dad’s health has been deteriorating and is not as able to look after himself as he once did. He’s still okay but should he need to go into a care home, would the flat count as his asset? Even if we can prove we have been solely been paying the mortgage? And if so would this effect any contributions for care home fees? (Presumably so as the value is over the £23K)

For IHT, it is below the threshold therefore if it is ‘his’ asset can he gift it to us now? I am aware of the 7 year rule here but would it be seen as ‘deprivation of capital’ even if we have been paying for the flat?

Hope it makes sense! Thank you in advance.

Jo

[Lee Young]

Doesnt sound as though you gave the flat to dad as you have carried on paying the mortgage. At worst this would be construed as a trust arrangement in which case the flat value would be ignored for the purposes of the care fees.

[Forestlfc]

Hello Lee

Thank you for your reply. Been a bit poorly with a cold so only just getting back to normal, so my apologies for delay.

Noted regarding the trust arragement but would this still be the situation as the flat and mortgage are in dad's name (not ours) we just make the mortgage payments. As the flat is legally in dad's name, would it be his asset and therefore included for home care fees?

I started to read up on GWR (before I became ill) so will do a bit more research as if the flat is dad's asset and he 'gifts' it to his children but still lives there, from what have read it would be a GWR, correct? and therefore taken into account for home care fees?

A brief reply and point me in the right direct (as I am sure you are busy) would be greatly appreciated.

Thanks Lee

[maths]

Are your names not also on the mortgage?

How did your father obtain the mortgage only in his name?

On the Land Registry form TR1 what was entered concerning the transferee and any trust arrangement?

What were your intentions when it was bought ie were you buying it for him or were you buying it for yourselves but all agreed he could continue to reside there?

[Forestlfc]

Hello Maths

As per my earlier post, flat in dad name and on motgage. No trust arrangement exists as far as I am aware.We were buying it as an investment allowing dad to live in it for as long as he could.

Hope that helps
Thx

[Lee Young]

Did you write down anywhere that dad could stay there for as long as he wanted.

[Forestlfc]

Hello Lee

Many thanks for your continued help.

When we looked at the cost of mortgage and repayments between us (3 yrs ago), I made a note of all these (with dates of repayments and projections) and also that dad could live in the flat . It is nothing formal, just my handwriting, but would this help?

I have also been reading about a DT but if we formally set this us with a solicitor, I assume it would only take effect from the date we set it up (i.e. now) Is that correct?

And in any case would the LA be in a position to challenge a DT or this current arrangement when we have clearly made the purchase some time ago as an investment and it is only now that dad's health has unexpectedly deteriorated.

I have read about GWR and don't think it applies here, but be very grateful if you could confirm.

Vet much appreciated Lee....and sorry (again) for delay....day to day family life seems never ending!

Thank you

[Lee Young]

You will have to convince the local authority that the property, although in Dad's name, is not his because you paid for it. Going to be tough on what you have said because the local authority will probably construe your oringinal purchase as a gift to dad. In the absence of concrete evidence otherwise then this would be a fair conclusion.

The local authoirty would conclude that a declaration of trust done now is only evidence of what you now think (bearing in mind the likelihood of care fees) and deem it largely irrelevant. Its probably worth putting in palce as it will be relatively inexpensive, but there is no guarantee it will work. The declaration would need to reocrd what you thought was the situation from the outset, not what it is from now on.

However as dad has paid akllthe mortgage payments he must by definition have received an equitable interest in the property, and therefore he will have asssets (value) that are assessable on him.

[Forestlfc]

Okay. Thank you again Lee.

One last point please, the mortgage payments, have been paid by us equally not dad. Obviously we have bank records which can evidence this.

Can the LA just ignore that fact, legally, then?

Many thx

[Lee Young]

If Dad has not paid the mortgage payments then this is very good evidence that the property is not his.