Council refused to disregard the property

[Katie_Fr]

Hello everyone!
My father-in-law (79) has advanced dementia, he was diagnosed in 2011, so it has been for a long time. He currently lives with my mother-in-law, who is 78. She was caring about him all these years, but it became impossible lately.

In August he went to the care home for 3 weeks, because my mother-in-law had an emotional breakdown. We called social worker, she organised a care worker to come in the morning for half an hour and half an hour in the evening, which was not enough. The care worker came too late in the morning and too early in the evening. They also sent a financial assessment team to evaluate his assets and he was estimated as a full cost.

He was only estimated as a full cost, because he owns a small commercial property (value of 50 000GBP), and he doesn't have any other money. I know we left it till late, but now my father-in-law really needs to go to the care home. He is incontinent, and my mother-in-law can't take care of him anymore. We asked the council to disregard the commercial property until the moment we will be able to sell it, however, they said that it is not the business (although he gets a small rent from it), and that's why refused to disregards.

We feel trapped and let down by the system. I am just wondering if anyone had the same situation and what did you do/recommend to do?

 

[Beate]

Just to clarify - a property someone doesn't live in cannot be disregarded. Were you asking for a deferred payment agreement and they said they can't do this on a commercial property?

 

[AlsoConfused]

I think this sounds like a similar problem we have.

Only thoughts are - is the commercial property his asset or is it more correctly a joint asset held by both parents-in-law? IF your father-in-law only owned half of the asset then he would more quickly drop to the level (about £23K) where he's entitled to some financial help with his care costs.

 

[Katie_Fr]

I contacted Age UK on Friday and I was told that based on Care and Support statutory guidance the business asset he owns should be disregarded for the time required for its sale. It is our intention to sell the share of the commercial property he owns together with my mother-in-law.

Other disregards
50) In some cases a person’s assets may be tied up in a business that they own or part-own. Where a person is taking steps to realise their share of the assets, these should be disregarded during the process. However, the person should be required to show that it is their clear intention to realise the asset as soon as practicable. In order to show their intent, the local authority should request the following information:

1. (a) a description of the nature of the business asset
2. (b) the person’s estimate of the length of time necessary to realise the asset or their share of it
3. (c) t statement of what, if any, steps have been taken to realise the asset, what these were and what is intended in the near future
4. (d) any other relevant evidence, for example the person’s health, receivership, liquidation, estate agent’s confirmation of placing any property on the market

 

[Katie_Fr]

I think this sounds like a similar problem we have.

Only thoughts are - is the commercial property his asset or is it more correctly a joint asset held by both parents-in-law? IF your father-in-law only owned half of the asset then he would more quickly drop to the level (about £23K) where he's entitled to some financial help with his care costs.

My father-in-law owns it together with my mother-in-law. The property value is about 100k, so 50k each. Although I am not sure that we will be able to sell his share for this amount, because who will wish to buy 50% in a small commercial property, sharing the ownership with unknown partner...

The council told me they consider this commercial property as his asset not business even though he gets some rent from it.

 

[jugglingmum]

I think the issue might be the interpretation of a description of a business.

Conventionally in the commercial world, a business is a trade or profession with assets which would be tied up in a trade. I presume this is a let commercial property and this would not be considered a business in this sense rather a rental activity.

Certainly from an HMRC perspective letting property, whether commercial or not, is not considered a trade. So the commercial property would not be a trade asset.

In order to try and establish if the intention was that the term business was to include let property I think you might need to delve into case law, but tax case law doesn't support it being a trade, with there being numerous casing stating that letting property is not a trade.

 

[Katie_Fr]

Thank you so much for your response @jugglingmum . So, that means we are in situation where the authorities won’t provide us with the deferred loan (because my MIL lives in the house) and they will not disregard jointly-owned commercial property either.

I guess to get the loan will be also impossible. What do people do in such situations, when all their assets are tied up in property?

 

[jugglingmum]

I'm sorry I can't help with that one - I feel rather mean explaining the interpretation of the wording to you.

I suspect its saleability very much depends on location. I suggest you start talking to the commercial property section estate agents to get a feel for things.

In reality the need to get FIL in a home outweighs the need to maximise the value, such that at least MIL can have some quality of life.

The rules aren't what we think they are until we are caught up in them.

 

[Beate]

It's a good thing though that the property MIL lives in is automatically disregarded as presumably that one is worth a lot more than £50,000.

The other property cannot be disregarded as it's not the main home, and you will have to sell it to free up the money unless the rent would cover the care home costs, but as FIL is allowed to keep £23,250 of his money, it won't be long until the council have to step in. Would they not consider a deferred payment agreement (DPA) on this property? Technically it isn't a loan as you aren't give any money - payment is just halted until it can be made. It is important to have the correct terminology when dealing with authorities. Of course this agreement will not come completely free, so it's best to arrange a speedy sale.

 

[Katie_Fr]

I suspect its saleability very much depends on location. I suggest you start talking to the commercial property section estate agents to get a feel for things.

The rules aren't what we think they are until we are caught up in them.

Thank you so much for the response @jugglingmum

We are thinking about selling my FIL share of the property in an auction. The only thing I am worrying about is the valuation then. Say, no one pays us 50000 and it will be less. Can the council come back to us and say that we decreased the price of the property, and make us paying more?

 

[Katie_Fr]

The other property cannot be disregarded as it's not the main home, and you will have to sell it to free up the money unless the rent would cover the care home costs, but as FIL is allowed to keep £23,250 of his money, it won't be long until the council have to step in. Would they not consider a deferred payment agreement (DPA) on this property? Technically it isn't a loan as you aren't give any money - payment is just halted until it can be made. It is important to have the correct terminology when dealing with authorities. Of course this agreement will not come completely free, so it's best to arrange a speedy sale.

Thank you so much for the idea about DPA @Beate

I haven’t asked the council about DPA, I have asked them about DLA (loan) and they said no.

As of the moment it doesn’t matter if it costs anything or not, because it will be all paid out of his money. My FIL worked hardly all his life, and now we feel absolutely let down by the authorities. It seems even that the council gets profit from family disasters.

 

[Bod]

Have a look at section 8, it might help.
://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs38_property_and_paying_for_residential_care_fcs.pdf
It would help if your fathers working status was clarified. Could he be a "Self employed landlord?"
Does he have a Self Assessment tax form each year?
Would this make the business property a business asset?
His interest in this would have to be sold, but might give a breathing space to allow sale.
Quite how this would be valued, is difficult, but a land agent should be able to have ideas, is his share an equal half or a minority share(one of say 3 owners)?
I had a similar situation over a divorce settlement, how do you value an asset that is in a minority share holding when the other parties will not sell. In my case it was ignored totally, but yours won't!

Bod

 

[Saffie]

Thank you so much for the idea about DPA @Beate

I haven’t asked the council about DPA, I have asked them about DLA (loan) and they said no.

As of the moment it doesn’t matter if it costs anything or not, because it will be all paid out of his money. My FIL worked hardly all his life, and now we feel absolutely let down by the authorities. It seems even that the council gets profit from family disasters.

I don’t think it’s a case of the council profiting from anything really. Local authorities are in dire straits and are cutting services including those for the elderly. Their money comes from the taxpayer either directly via council tax or indirectly from the government and I don’t in all honesty think we can expect taxpayers to pay for someone’s residential care while holding on to financial assets they own. I had to sell a holiday chalet we owned when my husband went into a nursing home even though it was bought with my money alone but I couldn’t prove that. I think that a DPA until the asset is sold is your most likely option as Beate has said and I wish you well with that. It would give you some breathing space.

 

[jugglingmum]

It would help if your fathers working status was clarified. Could he be a "Self employed landlord?"
Does he have a Self Assessment tax form each year?
Would this make the business property a business asset?

See my post above. He should have a self assessment return but rental income is not and never has been self employment. It is classified as an investment activity and is rental income and goes on the rental pages. A business asset for tax purposes would be used in a trade.

 

[Katie_Fr]

Have a look at section 8, it might help.
It would help if your fathers working status was clarified. Could he be a "Self employed landlord?"
Does he have a Self Assessment tax form each year?
Would this make the business property a business asset?
His interest in this would have to be sold, but might give a breathing space to allow sale.
Quite how this would be valued, is difficult, but a land agent should be able to have ideas, is his share an equal half or a minority share(one of say 3 owners)?
I had a similar situation over a divorce settlement, how do you value an asset that is in a minority share holding when the other parties will not sell. In my case it was ignored totally, but yours won't!

Bod

@Bod thanks for the link. I have seen it before. “Estate agent confirms placing property on the market” made me thinking that his commercial property could be disregarded for the moment.

We don’t ask to disregard it for the whole time. We need this breathing space for the time being until the moment we sell the asset. Taking into account that it’s commercial property, and the high street is in crisis, it’ll take more time to sell his share of the asset. I am not sure that he submitted self assessment tax form, because the rent he received was only 500 a month.

He doesn’t own minority, he owns 50% together with my MIL, who would prefer not to sell her share, because she doesn’t have pension and that’s her only income.

 

[Katie_Fr]

@Saffie If I can ask, why couldn’t you prove to the authorities that you bought chalet with your own money?

 

[Katie_Fr]

See my post above. He should have a self assessment return but rental income is not and never has been self employment. It is classified as an investment activity and is rental income and goes on the rental pages. A business asset for tax purposes would be used in a trade.

Originally, my FIL and MIL had a business there (shop), but they were to retire when my FIL was diagnosed with dementia, so they just get a rent at the moment.

 

[Saffie]

@Saffie If I can ask, why couldn’t you prove to the authorities that you bought chalet with your own money?

We bought the chalet years before mainly using money inherited from an aunt which was in my building society account. I transferred this money and more to our joint bank account and the bank sent the purchase price to the vendor via telegraph or something similar. (This was before online banking or online anything!)
It was only when I was selling it when my husband went into a nursing home from hospital after rapid dementia deterioration following a radical leg amputation that it came to light that, because we had payed for it via a draft from a joint account, we had been entered as joint owners on the Land Registry. It was a shock as it had always been thought of as mine by the whole family. It caused a lot of problems as I had a buyer waiting but had to obtain Deputyship and a Trustee to act for my husband in the sale which took months. Fortunately the buyer remained on board!
The financial assessor did say that if I could provide proof that I alone had paid for it they would reconsider but the building society said they didn’t keep records back more than a few years so I had no way of doing this. It was ok as I didn’t resent using this money to pay for my husband’s care at all though I had another issue with my council’s financial department which did rankle and still does!
Best of luck.

 

[jugglingmum]

Originally, my FIL and MIL had a business there (shop), but they were to retire when my FIL was diagnosed with dementia, so they just get a rent at the moment.

There might be some leeway if the asset was previously a business asset. It depends how long since they ceased to trade.

Don't forget that when the property is sold there will be CGT(capital gains tax) payable on any gain.

The rental income is taxable, so if he hasn't declared it and hasn't paid tax, and HMRC find out expect to have to catch up on the unpaid tax, interest and normally penalties. It might be the tax has been coded out. Personal allowance is normally set against state pension and then private pension so won't cover rental income. If he had a business he might have had an accountant who looked after this? HMRC are notorious at taking people out of self assessment when they shouldn't - the onus is on the tax payer to ensure they declare all income and pay all tax.

 

[Katie_Fr]

I checked with my MIL, they declared the money from the rent, even though it was a small amount.

The business was dissolved about 2011.

My FIL went into a care home yesterday, the first month will be paid by his Isa, while we will try to sort out his share in the commercial property.