Transferring ownership of parents house

[readsalotgirl63]

FIL died last year leaving MIL in house which is owned by her outright. She is fairly fit and coping well by herself. SIL is struggling with the loss of her dad and is very emotionally attached to the house and is very concerned that MIL might have to sell it to pay for care. SIL is my DH's sister

She has now suggested that she and my DH ask MIL to transfer the house to them. I have said I think the local authority would regard this as deprivation of an asset and put a charge on the house anyway as MIL would still be living in it.

SIL then asked if she and DH bought the house and MIL paid them rent would this avoid the house having to be used to pay for care. I think that the purchase price would need to be market value and the rent market rate for it not to be regarded as deprivation of the asset.

SIL would want MIL to "sell" to her and DH for substantially discounted price and allow MIL to live in it rent free in return. I still think this is deprivation of the asset. Incidentally DH is not really interested in any of these scenarios and SIL has no spare cash but she is very distressed at the thought of losing the house.

I'd really welcome a legal opinion - MIL and SIL are in England btw
Thanks

Disposing of an asset with the intention of qualifying for greater care fees funding is classed as deprivation of capital. So my understanding is that any disposal of the home for less than its full value could be regarded as deprivation of capital. If it is disposed of for its full value the money received would become an asset which can be taken into account for care fees, which defeats the object of the exercise.

Note that it is up to the LA whether or not to treat a particular situation as deprivation of capital. The regulations allow them to treat certain situations as deprivation of capital but do not stipulate that they must do so. They have discretion as to whether or not to treat the individual as still having the capital.

Hi - thanks for the response as you have confirmed what I thought although I didn't know that LAs had such discretion. To be fair to SIL her motivation is to keep the house as she is very emotionally invested in it and she is still grieving.
However I am a little concerned that she might try to discuss this with MIL who is likely then to come to DH and I for advice - so I wanted to be sure of what we are saying.
Many thanks

Is your mil in reasonable health?
Is she known to her local social services dept?
Is she receiving any assistance or care from your social services.?
Has she received care in the past?
Has she ever undergone a financial assessment for any care or assistance?

I think you can't be expected to retain your assets to pay care fees if there is no reasonable expectation of her needing to receive care in the foreseeable future.
Obviously if she is currently receiving care or services such as meals on wheels, home care, attending a day centre etc then the reverse may be true.

Can I suggest that if she is fit healthy and not currently known to or receiving services or care from Social services that she considers giving 1/3 to her children and retaining 1/3 herself.
This means she retains an interest in the house so could fund some care if needed and the house can't be sold from under her by her dc.

Thanks Bertha . MIL is mid 70s and in pretty good health and not known to social services or receiving any care/support herself. She cared for FIL herself until almost the end of his terminal illness - he did have carers in the last couple of months but she was doing the bulk of the care. That has taken it's toll and she has slowed down a little but really is coping well and is pretty sharp still.

MIL asked our advice just prior to the election when, in view of the Tory proposals to allow everyone to retain £100K of assets, we advised her to keep the house in her name as it is worth about £200K. DH would rather she sold the house to pay for care if needed and is reluctant to be financially entangled with his sister. However your suggestion is a possibility so I will discuss with DH as, if we did do that, we'd need a plan for if MIL needed to liquidate her share.
Thanks again

What would the rental value of the house and your MILs pensions be vs the cost of care in your area?

If you are arranging care yourself, rather than getting social services to sort it for her, then if you can pay the bills privately (from a combination of rent from the house plus any pensions and savings MIL has), then the house wouldn't need to be sold.

There's options and it's worth having a chat round those before hand.

Is your sil expecting to be left the house? Surely if she can't afford to buy out your DH then the house will have to be sold anyway?

There is a further reason why what is proposed is worse than doing nothing. Capital Gains Tax would be paid on any disposal of the property during the time it is owned by H and his sister. If the mother simply leaves it to them in a will there would be a CGT free uplift.

So as well as potentially still having to pay care home fees, she won't own the property anyway, CGT will be paid, and inheritance tax as well (unless, as you say, she sells it for full market value and pays market rent). If she falls out with either child she may find herself homeless.

Hi - Invisible - afaik MIL has only state pension and we have no idea of what her savings are - she and FIL would not discuss finances and yes I do think there are conversations to be had as to quite how MIL will be cared for and how this will be paid for. I think SIL is very emotionally invested in the house and cannot bear the thought of losing it. However it is unlikely she will be able to buy out DH - I am preparing myself for difficult conversations with her in the future as DH doesn't know the meaning of the word tact!.
Thanks also Collaborate - I hadn't considered the CGT implications - another reason not to get involved in any of SILs " cunning plans".