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Original poster

MIL in care home - what to do with house

48 replies

Chupney · 03/01/2023 22:08

MIL is now full time in a care home with moderate to severe dementia. DH wanted to rent out her house to pay the fees but as it's a assisted living house she can't sublet. However if he sells the house it will no longer be exempt for inheritance tax purposes (her estate is about £650k). She has enough savings to pay her fees (house is worth about £200k) but obviously the house is currently unoccupied and being 45 mins away is a pain to visit every 30 days for house insurance purposes.

If he sold the house and bought another he could rent out to assist with her fees presumably because she'd never lived in it, it wouldn't be inheritance tax exempt?

She was always so keen to avoid inheritance tax when she was fully cognisant (ex accountant) but no one forsaw the issue with the subletting (she bought it when she was fully cognisant) or the fact she'd need full-time care outside her home (alarms etc she thought that was all she'd need till she died).

What would you recommend DH does for the best?

OP posts:
thesandwich · 03/01/2023 22:15

Can’t help with the details but I have a vague recollection that if your fil died, that increases the iht threshold if the allowance wasn’t used by him?
www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

Vermin · 03/01/2023 22:17

its the value of the estate that counts for IHT not the type of asset - are you confused with capital gains tax, where the gain made on a primary residence is exempt? The value of the property (whether still in property or as realised cash) will be taxed as part of her estate following death provided the value of the estate is still above the IHT threshold in place at that time (which of course it may not be after care home fees).
In any case, it ceases to be a primary residence (& therefore CGT exempt) if she hasn’t lived in it prior to sale (6 months I think?). There’s no tax benefit in keeping it and since those properties are notoriously hard to sell, get it in the market.

Original poster
Chupney · 03/01/2023 22:20

thesandwich · 03/01/2023 22:15

Can’t help with the details but I have a vague recollection that if your fil died, that increases the iht threshold if the allowance wasn’t used by him?
www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

Sadly FIL divorced her and left her on her own hence DH sorting everything for her. But appreciate the advice in case it was applicable.

OP posts:
Original poster
Chupney · 03/01/2023 22:24

Vermin · 03/01/2023 22:17

its the value of the estate that counts for IHT not the type of asset - are you confused with capital gains tax, where the gain made on a primary residence is exempt? The value of the property (whether still in property or as realised cash) will be taxed as part of her estate following death provided the value of the estate is still above the IHT threshold in place at that time (which of course it may not be after care home fees).
In any case, it ceases to be a primary residence (& therefore CGT exempt) if she hasn’t lived in it prior to sale (6 months I think?). There’s no tax benefit in keeping it and since those properties are notoriously hard to sell, get it in the market.

Apologies. There's some bits I don't understand.

I thought you could leave £325k cash inheritance tax free plus £175k of house value if it was the family home and passed to a direct descendant? Therefore £500k inheritance tax free if some of that was property value? You mentioned realised cash so if the family home was sold and the cash realised was £200k, would that mean £500k was inheritance tax-free or only £325k because the house was sold prior to her death? Really appreciate your help and time.

OP posts:
Original poster
Chupney · 03/01/2023 22:25

(and yes with fees of £50k year and her body being strong, though her cognition has declined it may be a moot point. But one DH wants to make in her best interests)

OP posts:
Soontobe60 · 03/01/2023 22:29

Unless he has POA, he can’t sell her house.

Original poster
Chupney · 03/01/2023 22:33

He has POA. He sorted that when FIL left as she just fell to pieces.

OP posts:
Soontobe60 · 03/01/2023 22:35

Also, if she isn’t allowed to rent out the house, surely he won’t be able to rent it out either if she were to die? I’d check her contract to see whether the house has to be sold to someone else who needs assisted living.

Original poster
Chupney · 03/01/2023 22:39

If she were to die he would sell it. He wants to rent it out to pay her care home fees and (possibly mistakenly) reduce the inheritance tax bill. It does need to be sold to someone who needs assisted living. It's a sought after development and there's a waiting list of pre approved people.

Sadly he would usually have discussed this with his mum but she doesn't have the capacity any more.

OP posts:
kweeble · 03/01/2023 22:41

Just sell it to someone who needs assisted living and stop being so mean about inheritance tax. If she lives long enough you won’t have to worry about that anyway/

Soontobe60 · 03/01/2023 22:42

From what I can see, then he possibly could sell the property if it’s for her benefit, however the sticky area is that she already has enough cash to fund her care fees, so the only reason to sell at the moment would be to potentially avoid IHT, which something that could benefit your DH if he’s the beneficiary of her will.
I suggest you speak to a solicitor who’s experienced in this field.

Soontobe60 · 03/01/2023 22:43

kweeble · 03/01/2023 22:41

Just sell it to someone who needs assisted living and stop being so mean about inheritance tax. If she lives long enough you won’t have to worry about that anyway/

This is a fair comment - the IHT wouldn’t actually be that much anyway.

Vermin · 03/01/2023 22:43

Yes you’re absolutely right, I had forgotten the primary residence / direct inheritance which wasn’t a thing when I had to deal with this. Apologies I’ve been talking rubbish.

But also bear in mind that rates change / a new Labour Government will likely change rules as well as rates and holding on to a property you can’t let out in the hope of eventually avoiding tax payable by the estate (not her) may ultimately cost you the insurance / ultilities / service charge and hassle of years, without any benefit. Your DH may also need to consider the difference between what’s in her best interests and what’s in the estate’s best interests (ie the beneficiaries’). Acting in the interests of the beneficiaries (ie reducing the tax bill to the estate) may not be in her best interests and therefore may conflict with the grant of the POA. (Is someone with POA able to make gifts to annual IHT free allowance? Presumably not to themselves at any rate!)

sorry for the misinformation

Original poster
Chupney · 03/01/2023 22:43

kweeble · 03/01/2023 22:41

Just sell it to someone who needs assisted living and stop being so mean about inheritance tax. If she lives long enough you won’t have to worry about that anyway/

It would be a lovely thing if she did. But he cannot predict the future and right now he's trying to do what his mum would do if she could.

OP posts:
piedbeauty · 03/01/2023 22:44

You need to get specialist financial advice from an advisor experienced in IHT and tax planning.

Vermin · 03/01/2023 22:44

Soontobe60 · 03/01/2023 22:42

From what I can see, then he possibly could sell the property if it’s for her benefit, however the sticky area is that she already has enough cash to fund her care fees, so the only reason to sell at the moment would be to potentially avoid IHT, which something that could benefit your DH if he’s the beneficiary of her will.
I suggest you speak to a solicitor who’s experienced in this field.

The other reason to sell would be to reduce outgoings for Shia mother - aren’t service charges normally savage, and payable whether the property is empty or not?

Oldnproud · 03/01/2023 22:45

What should he do for the best? Stop trying find ways to avoid paying the taxes that should be due on a £650,000 estate when she dies, of course!

Vermin · 03/01/2023 22:48

“Trying to do what his mum would do if she could”- is that what the POA says he can do? Or is he allowed to manage her finances in her best interests at the relevant time? Again, the two may not match and he should take personal advice to ensure he doesn’t overstep (especially if there are other beneficiaries under her will / intestacy).

Original poster
Chupney · 03/01/2023 22:48

Vermin · 03/01/2023 22:43

Yes you’re absolutely right, I had forgotten the primary residence / direct inheritance which wasn’t a thing when I had to deal with this. Apologies I’ve been talking rubbish.

But also bear in mind that rates change / a new Labour Government will likely change rules as well as rates and holding on to a property you can’t let out in the hope of eventually avoiding tax payable by the estate (not her) may ultimately cost you the insurance / ultilities / service charge and hassle of years, without any benefit. Your DH may also need to consider the difference between what’s in her best interests and what’s in the estate’s best interests (ie the beneficiaries’). Acting in the interests of the beneficiaries (ie reducing the tax bill to the estate) may not be in her best interests and therefore may conflict with the grant of the POA. (Is someone with POA able to make gifts to annual IHT free allowance? Presumably not to themselves at any rate!)

sorry for the misinformation

Many thanks @Vermin . He is the sole beneficiary and executor and POA. He's also not the one in our household who does our finances! (Much to his mum's disapproval! 😄) So it's been a massively steep learning curve for him. He's finding everything a complete hassle as he's never done it before (I do our insurance and utilities for example) but he wants to do what his mum drummed into him. He wishes he could ask her for advice. 😟

OP posts:
TheSmallAssassin · 03/01/2023 22:48

If people are in need of this kind of property it does seem wrong to leave it empty.

Original poster
Chupney · 03/01/2023 22:49

piedbeauty · 03/01/2023 22:44

You need to get specialist financial advice from an advisor experienced in IHT and tax planning.

Sadly the one his mum used died about 18 months ago just after he got POA. And it's all been downhill for her health and his efforts since.

OP posts:
StuckInTheUpsideDown · 03/01/2023 22:50

There are provisions for how you can get the residence relief on inheritance tax if you sell the home prior to death.

www.gov.uk/guidance/how-downsizing-selling-or-gifting-a-home-affects-the-additional-inheritance-tax-threshold

It is a complex area though and it would probably be worth getting some professional advice from an experienced private lawyer.

stayathomegardener · 03/01/2023 22:51

Having just gone through some of this, I'd look at purchasing a care annuity to pay care home fees.

My Mum with Dementia, epilepsy and high blood pressure at 88 was quoted £145k this covers about half of the £1,000 a week cost, her pension covers the other half.

A specialist broker can arrange this.

By selling the house and spending that we reduced the amount above inheritance tax below the threshold.

It's unfortunate that you probably can't use both parents tax brackets if divorced to bump that figure but again you need specialist advice.

Original poster
Chupney · 03/01/2023 22:51

Vermin · 03/01/2023 22:44

The other reason to sell would be to reduce outgoings for Shia mother - aren’t service charges normally savage, and payable whether the property is empty or not?

Show quote history

Yes hence renting it out. But leaving it empty still incurs £3.5k service charges! So would it make sense to sell that and buy one he could rent out. But if she never lived in it presumably it wouldn't be exempt from inheritance tax?

OP posts:
Original poster
Chupney · 03/01/2023 22:53

Vermin · 03/01/2023 22:48

“Trying to do what his mum would do if she could”- is that what the POA says he can do? Or is he allowed to manage her finances in her best interests at the relevant time? Again, the two may not match and he should take personal advice to ensure he doesn’t overstep (especially if there are other beneficiaries under her will / intestacy).

To be honest he's just muddling through but it sounds very complicated and worth paying for advice so he does the right thing by her.

OP posts: