Home Economics: Answering your property questions
Published 16/09/2016 | 02:30
Q: I've lived with my sister for over 30 years; she would be considered a vulnerable adult. Neither of us married and the house is mine. I'm worried about what will happen when I pass away - I'm 70 and she is 63. Can I leave the house to her and would she have legal capacity? I'm told there's a tax relief she can get, but my concern is as much to do with her status.
Sinead replies: Firstly, the tax issue is straightforward and it looks like your sister would qualify. 'Dwelling House Relief' applies where one has occupied the house as a main residence for at least three years prior to receiving the inheritance. Your sister cannot be beneficially entitled to any other house. Incidentally, the relief would not be withdrawn if your sister needed full-time residential care.
I asked Christine Keily of Taxback.com about legal status. "You may be considering leaving funds for your sister's care in the event that you pre-decease her. This inheritance would normally be regarded as taxable. However, CAT legislation provides specific relief for it, granted once the funds are exclusively for the purpose of discharging the "qualifying" expenses for reasons of physical or mental infirmity.
"Sometimes people in your circumstances consider trust funds for the purpose of caring for dependent loved ones when they are gone. Discretionary Trust funds are seen as particularly beneficial as a method for providing for vulnerable relatives as there can be some uncertainly as to the future cost of care etc.
"Discretionary Trusts do have specific taxes which need to be considered, however exemption from these taxes applies when they are set up for the benefit of incapacitated individuals with certain conditions.
"Do seek specific legal and tax advice before putting in place any of the above structures as it is essential the advisor has full visibility as to the complete circumstances of the case."
Q. I married into a farming family and the situation is complex. My sister-in-law lives in a separate annex of the house while me, my husband and our adult child live in the rest. My husband is extremely stubborn and won't make a will. The house was left to him by his father under the condition that his sister lives there for the rest of her life and my husband claims that I'll be 'looked after' and there's no need for a will. However, my sister-in-law and I had a serious falling out some years ago which my husband doesn't know about and my concern is that he is very unwell and what might happen me if he dies.
Family arrangements, often based on loose assurances and suggestions, are wholly unsatisfactory. Arguably, a will is even more important in such cases and I urge you to encourage your husband to make one. You could try enlisting the help of his GP for this.
Susan Cosgrove of Cosgrove Gaynard Solicitors says it sounds like the house is in your husband's sole name but with a 'right of residence' registered in favour of your sister-in-law.
"Should your husband die without making a will, his estate is divided up as follows: two thirds to you as his wife; one third to your children to be divided equally." Obviously, his estate may be bigger than just the house, so other assets, e.g. any share in the farm would be included in its valuation.
"Regarding the family home, whether it is able to fall entirely within your two thirds' share or becomes part owned by your children, the property is still subject to the right of residence in favour of your sister-in-law. It will be important to find out whether the right of residence relates just to the annex.
"It is important when checking this to ensure the house has actually been transferred to your husband under the will so that complex probate problems do not arise in the future", adds Susan.