Parents wills and dividing of the house
Discussion
Well it seems my mothers upcoming surgery has finally focused their minds on sorting out their wills, after many years of my nagging.
Obviously they need to go see a Solicitor but my mother just posed to me an interesting question.
Mom and Dad own their house between them as Joint Tenants. Her plan is to leave her interest to myself and my sister with a clause that allows my father to live there until he dies.
Her feeling being that this means should he ever need residential care only his half of the house is classed as an asset and her half will by then be owned by me and my sister and so cannot be touched to pay for his care.
This make sense to me and I believe can be done
However a number of questions regarding the situation after my mothers death.
Would all 3 of us need to be in agreement in order to sell the house at any point?
Could personal bankruptcy of either myself, sister, or father force a sale?
Could either my sister or I getting divorced and any subsequent assessment of assets force a sale?
Should my dad decide to move house after my mother death, other than goodwill from my sister and I is their any way to ensure he has access to the full value of their current house?
I'm fairly sure the last one isn't possible, but no idea ref the other 2.
Any thought appreciated
Obviously they need to go see a Solicitor but my mother just posed to me an interesting question.
Mom and Dad own their house between them as Joint Tenants. Her plan is to leave her interest to myself and my sister with a clause that allows my father to live there until he dies.
Her feeling being that this means should he ever need residential care only his half of the house is classed as an asset and her half will by then be owned by me and my sister and so cannot be touched to pay for his care.
This make sense to me and I believe can be done
However a number of questions regarding the situation after my mothers death.
Would all 3 of us need to be in agreement in order to sell the house at any point?
Could personal bankruptcy of either myself, sister, or father force a sale?
Could either my sister or I getting divorced and any subsequent assessment of assets force a sale?
Should my dad decide to move house after my mother death, other than goodwill from my sister and I is their any way to ensure he has access to the full value of their current house?
I'm fairly sure the last one isn't possible, but no idea ref the other 2.
Any thought appreciated
Edited by markiii on Tuesday 2nd September 16:17
If, instead of following the advice of an insured solicitor that you pay for advice and drafting, you follow the advice of an anonymous car enthusiast and amateur lawyer who posts in here, and things turn out wrong, do you think that you will be able to sue the internet dude who gave you that advice? If you do think so, think again.
Yes, it can be done - google "Severing a joint tenancy".
Yes, the value of the share of the property would be taken into account in determining assets available in the context of a bankruptcy or a financial proceedings following divorce. A trustee in bankruptcy can force a sale - eventually - but there are rules about how quickly they can do it if it is a personal residence in multiple ownership.
If your mum's will gives your dad a right of occupation for life, it should be possible to draft the trust in such a way as to mean that the house can be sold and that interest carried across to a new property bought with the proceeds of sale - but it would still require you and your sister to agree to it.
Get some specialist advice on this. Any competent wills, trust and probate solicitor will be able to assist with this and drafting an appropriate will to give effect to the plan.
Yes, the value of the share of the property would be taken into account in determining assets available in the context of a bankruptcy or a financial proceedings following divorce. A trustee in bankruptcy can force a sale - eventually - but there are rules about how quickly they can do it if it is a personal residence in multiple ownership.
If your mum's will gives your dad a right of occupation for life, it should be possible to draft the trust in such a way as to mean that the house can be sold and that interest carried across to a new property bought with the proceeds of sale - but it would still require you and your sister to agree to it.
Get some specialist advice on this. Any competent wills, trust and probate solicitor will be able to assist with this and drafting an appropriate will to give effect to the plan.
I don't think she can do that with joint tenancy. This type of ownership automatically transfers the deceased share to the surviving partner. There may be rare exceptions and if there are I'm sure those much wiser/experienced than me will comment.
Your parents need to change the ownership to tenants in common. By doing this she can chose what happens to her share of the house.
However, the downside of this is that there may be an IHT liability as she won't be using the spousal transfer rules. But, that depends of course on the value of her estate. Whatever though, she will use up some of the IHT allowance that could be used against your father's estate.
Another issue is Capital Gains Tax. If you own half the house and don't live in it you may incur a CGT liability when you come to sell it.
You can see this is a very complex area of financial planning which involves many strands of legislation. As you say, best to take professional advice before anything is put in the will, or financial changes are made to the estate.
Your parents need to change the ownership to tenants in common. By doing this she can chose what happens to her share of the house.
However, the downside of this is that there may be an IHT liability as she won't be using the spousal transfer rules. But, that depends of course on the value of her estate. Whatever though, she will use up some of the IHT allowance that could be used against your father's estate.
Another issue is Capital Gains Tax. If you own half the house and don't live in it you may incur a CGT liability when you come to sell it.
You can see this is a very complex area of financial planning which involves many strands of legislation. As you say, best to take professional advice before anything is put in the will, or financial changes are made to the estate.
uknick said:
I don't think she can do that with joint tenancy. This type of ownership automatically transfers the deceased share to the surviving partner. There may be rare exceptions and if there are I'm sure those much wiser/experienced than me will comment.
I'm not sure whether you were replying to the OP or to me but, in case the latter, it's a straightforward exercise to sever the joint tenancy so that the parents henceforth become tenants in common in equal shares.Lurking Lawyer said:
I'm not sure whether you were replying to the OP or to me but, in case the latter, it's a straightforward exercise to sever the joint tenancy so that the parents henceforth become tenants in common in equal shares.
I was replying to OP; didn't see your post until after I hit submit.I agree it's a simple exercise, my partner did it with a property. The recommendation to use a professional is more to do with the whole concept of what the OP's family are looking at doing.
If the OP visited the moneysavingexpert site they'll find numerous threads on this very issue, and invariably they all say get professional advice to explain all the ins and outs of the financial implications.
Breadvan72 said:
There you go, OP. One reply from a fer real lawyer. A contradictory reply from someone who means well but is not, as far as I know, a fer real lawyer. Neither of them is YOUR lawyer.
Not sure whether this is a criticism at me or a general comment. No, I'm not a lawyer but I have been involved in this sort of planning on a personal basis. I don't think my advice was contrary to lurking lawyer, we both said you can't do this with a joint tenancy and it needs to be changed. Or at least that is what I thought I had written.Despite being an accountant (albeit not specialising in tax matters) I found it a minefield to navigate the financial implications as the legislation is written to try to stop the avoidance of care home fees, IHT, CGT etc. etc.
Hence telling the OP to get professional advice.
Yes - can be done using what was loosely termed an NRB trust. I would however suggest caution if the prime mover can be seen as what your local council would describe as 'depriving them of assets' should the last survivor need access to care home funding from Social Services. In my experience no council has ever challenged the will as of yet, but better if the NRB is carefully constructed with the correct powers, with the intention to help legally mitigate IHT in the future. (you don't have to have a massive account or asset balance before hand, only that you are making sure should you win the lottery for example!) NRB trust have for some circumstances been made defunct due to the ability to transfer the IHT allowances between spouses more recently, but they still have their place in certain circumstances.
If both are alive then the home cannot be taken into account if one spouse still lives there irrespective of how the house title is held. But if only one of the partnership/ marriage survives and has to go into care, then naturally the 'share' owned by the survivor would be seen as a potential asset and thus that 'share' will have a value that would be added to any other liquid funds once the house is sold, and therefore taken into account (if currently over £23,250k - note changes will take effect - This figure sits alongside a new care cost cap of £72,000, but don't let that fool you - this figure only covers part of the care home fees! ). So, Tenancy severance and a properly constructed NRB trust in each of the Wills can at least halve the exposure in respect to potential Care Home fees.
Generally if the surviving partner has to move to a care home, and therefore the house needs to be sold, part-funding from social services can usually still be applied for, to cover up to 12 weeks (discretionary - and does not have to be repaid!) of funding if liquid assets (bank, savings etc) are meagre, and whilst the house is being sold (not overpriced, not a scam). Once the 12 weeks are up, and if the house transaction has not been completed, or a sale has not been forthcoming, then social service will seek to lodge a restriction against the title at the Land Registry provided the property is in sole name or joint. A restriction will already be in place if a 'severance of tenancy' has already been lodged, and under these circumstances, in my experience Social Services cannot add another, and will instead provide paperwork for the owners (or POA) to sign for the recovery of any funds provided by them from the date that the 12 weeks disregard ended and the date that the property was sold/ payment recovered.
If both are alive then the home cannot be taken into account if one spouse still lives there irrespective of how the house title is held. But if only one of the partnership/ marriage survives and has to go into care, then naturally the 'share' owned by the survivor would be seen as a potential asset and thus that 'share' will have a value that would be added to any other liquid funds once the house is sold, and therefore taken into account (if currently over £23,250k - note changes will take effect - This figure sits alongside a new care cost cap of £72,000, but don't let that fool you - this figure only covers part of the care home fees! ). So, Tenancy severance and a properly constructed NRB trust in each of the Wills can at least halve the exposure in respect to potential Care Home fees.
Generally if the surviving partner has to move to a care home, and therefore the house needs to be sold, part-funding from social services can usually still be applied for, to cover up to 12 weeks (discretionary - and does not have to be repaid!) of funding if liquid assets (bank, savings etc) are meagre, and whilst the house is being sold (not overpriced, not a scam). Once the 12 weeks are up, and if the house transaction has not been completed, or a sale has not been forthcoming, then social service will seek to lodge a restriction against the title at the Land Registry provided the property is in sole name or joint. A restriction will already be in place if a 'severance of tenancy' has already been lodged, and under these circumstances, in my experience Social Services cannot add another, and will instead provide paperwork for the owners (or POA) to sign for the recovery of any funds provided by them from the date that the 12 weeks disregard ended and the date that the property was sold/ payment recovered.
Edited by 3Dee on Tuesday 2nd September 15:28
Breadvan72 said:
If, instead of following the advice of an insured solicitor that you pay for advice and drafting, you follow the advice of an anonymous car enthusiast and amateur lawyer who posts in here, and things turn out wrong, do you think that you will be able to sue the internet dude who gave you that advice? If you do think so, think again.
Hey I've told them to go see a solicitor and offered to go with them.This is akin to asking your mates down the pub for an opinion, the solicitor will ensure things are done properly regardless of what you lot say :-)
markiii said:
Hey I've told them to go see a solicitor and offered to go with them.
This is akin to asking your mates down the pub for an opinion, the solicitor will ensure things are done properly regardless of what you lot say :-)
Let's hope so....This is akin to asking your mates down the pub for an opinion, the solicitor will ensure things are done properly regardless of what you lot say :-)
But they won't necessarily know about the Social Services funding end of things and what to expect... You forget, there are a a good few here that work in the relevant professions and fields, amongst those who have an 'opinion'! Trick is to work out who!
well so far you've collectively made me consider
They potentially need IHT advice as well, I doubt the assets are worth sufficient to fall foul of IHT limits but its worth considering.
A joint tenancy would need turning into a Tenancy in common before my mother can leave her share to me and my sister.
So it was worth asking
keep it coming
They potentially need IHT advice as well, I doubt the assets are worth sufficient to fall foul of IHT limits but its worth considering.
A joint tenancy would need turning into a Tenancy in common before my mother can leave her share to me and my sister.
So it was worth asking
keep it coming
markiii said:
Her plan is to leave her interest to myself and my sister with a clause that allows my father to live there until he dies.
Her feeling being that this means should he ever need residential care only his half of the house is classed as an asset and her half will by then be owned by me and my sister and so cannot be touched to pay for his care.
But when you or your sister's marriage goes down the tubes, your other halves will have a claim on your share of your dad's house! Her feeling being that this means should he ever need residential care only his half of the house is classed as an asset and her half will by then be owned by me and my sister and so cannot be touched to pay for his care.
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