so the situation is that we are looking at transferring owbership from father in Law, who owns his flat outright, to my wife. He is a widower and my wife is only child. We are in Scotland. Flat is worth £150k.

Am going to discuss with lawyer, but thought I’d go in forearmed with some knowledgehence posting.

Father in law is fit and healthy, independant, but at aged 75 won’t be forever.

any advice/pointers etc

Cheers

Based on my parents’ experiences with my grandparents, try and get as much in place as possible as soon as possible. Power of attorney and other such considerations should be looked at now – you don’t have to actually do anything but at least you’ll understand the options and if you agree, you can get arrangements in place now.

For example, my sister and I have enduring power of attorney (IIRC!) over my parents meaning that if things go wrong, it won’t be a nightmare for us to sort out getting power of attorney to manage their affairs (basically, we both have to agree to it for it to take effect IIRC).

This has been brought on by grandparents being incapable of managing their own affairs (even though they just about manage to live on their own) but my Dad having to do loads of paperwork to get power of attorney now that he needs it but has mean a lot of extra work while he didn’t have it.

Transferring ownershop if fairly straightforward but as you’re doing, go through a lawyer to make sure it’s done properly.

Though of course it may all be different in Scotland… 🙂

afaik, and this is the case in England, as long as he doesn’t go into care within 7 years of transfer of ownership then the government can’t chase you for care costs from the proceeds of the sale of the house.

If he is still living in it, and wants to give it to you whilst continuing to live in it, he has to pay you a full market rent (and you have to pay income tax on it), otherwise it isn’t really a proper gift and it is still liable for inheritance tax purposes and all that.

thanks joe – hadn’t realised that

If he is still living in it, and wants to give it to you whilst continuing to live in it, he has to pay you a full market rent (and you have to pay income tax on it), otherwise it isn’t really a proper gift and it is still liable for inheritance tax purposes and all that.

If the flat is the bulk of the estate I don’t think that will be necessary, it’s comfortably below the IT threshold, £320k if I remember correctly. IANAL.

Edit …and gift or not, I believe it’ll still be subject to IT anyway if he dies within 7 years.

It’s well below the IT threshold. My initial thought was for it to be transfered at a zero or minimal cost and for him to live in it rent free, but I don’t know tax implications

“Based on my parents’ experiences with my grandparents, try and get as much in place as possible as soon as possible. Power of attorney and other such considerations should be looked at now – you don’t have to actually do anything but at least you’ll understand the options and if you agree, you can get arrangements in place now.” – agreed, esp FULL power of att, that becomes more expensive if the party is considered unfit to give consent.

Also check gas/leccy/insurance policies etc etc as they will **possibly** have been annually renewed and therefore will be costing about 200% over the going rate.

FYI: Read the wording on website re care home costs. It’s rather unpleasant IMHO.

Bear in mind that when you sell other than your main residence that capital gains tax applies. Also note that gift tax is 7 years as said above.

Added Edit – below is ‘reflective’ of what I found / was advised

Can I sell my house or give it away?
You might think the easy way around this is to sell your house and give away your money or to give your house to your children, but it’s not that simple. SavvyWoman’s long term care expert, Janet Davies of Symponia, explains:

• If you need care, one of the first questions the local authority will ask is ‘do you own your own home?’: If you answer ‘no’ it will then want to know whether you ever owned your own home.

• If you previously owned your own home but have since sold it: In this case, the local authority will ask a series of questions to try and establish if you sold your house knowing you needed care (called ‘deliberate deprivation’) or if you sold your house when you had no idea you might need care.

• If the house or proceeds of its sale were given away six months or less before you needed care, it is seen as a clear case of deliberate deprivation and the local authority would use the NHS and Community Care Act 1990 to reverse the transfer.

• If the house was sold or given away more than six months before you needed care, the local authority cannot use this act, but has to use insolvency laws to investigate what happened instead.

How the local authority will investigate
What the local authority will try and establish when it investigates cases where parents have given away their home to their children or sold them and then given away the proceeds, is the motivation behind it. It’s worth bearing in mind:

• Local authorities are becoming increasingly vigilant in following up cases where houses have been sold or transferred.

SAVVY TIP: The onus is in the local authority to do the investigating, but if you previously owned your own property, they will almost certainly ask follow-up questions and investigate further if necessary.

• There is no time limit on how far they can go back. Some people mistakenly think that local authorities can only go back for a few years but, under insolvency laws, there’s no limit on how far back they can go.

• Local authorities can request the notes of meetings. If you’ve met with financial advisers or solicitors to arrange the sale or transfer of the property the local authority can – and do – examine these notes to establish the motivation for giving away or selling the house.

SAVVY TIP: Janet Davies of Symponia says that the main reason why a transfer might be ignored is if someone wanted to downsize or give assets away to reduce their potential inheritance tax bill, but that’s by no means foolproof. “If your assets and property are worth more than the inheritance tax threshold it’s likely you’ll have other assets which would take you above the local authority limits for a contribution towards your care.”

• If you’ve given money away and it’s been spent, the local authority will simply refuse to contribute towards the funding of a care home until the ‘notional capital’ – namely the value of the money that was given away/transferred – has been used up.

What to think about
It is definitely possible to give away your house or to sell it and give away the proceeds, but you may fall foul of local authority rules and be no better off and, in addition, you’ll be restricting your choice of care homes.

SAVVY TIP: Local authority funded care may not be appropriate for you. Care homes can cost between £950 and £1200 a week, while the average local authority contribution is around £550 a week.

• Talk to a specialist Talk to an independent financial adviser or solicitor who specialises in this area. Nicola Plant from Pemberton Greenish, SavvyWoman’s wills and trusts expert says some solicitors may not look at the implications of a transfer. “Talk to a solicitor who’s a member of the organisation Solicitors for the Elderly as they will be experts in this area.”

towzwer – lots of useful info, much appreciated

We recently did this in Scotland, my email is in my profile and I’m happy to recommend our Solicitor plus how he/we went about it – we were well advised and had a good outcome.