Thursday 21 September 2017

Should we take over house to pay for mum's care?

siryan@independent.ie

My brother and I are worried about our mother who is in need of nursing home care after our father's death. We are hoping to rent out her house and use it to part pay the fees. Ideally we would like to take ownership of the house and manage it, as it will become ours after her death anyway. Is there a tax implication with this?

I wouldn't be so hasty. You have two issues here -- paying for nursing home care and rental income on the house. I can understand why you would like control of the house, but to be honest, it might cause more problems than it solves.

Sonia McEntee of www.apartmentlaw.ie explains.

"If the property transfers to you now, it's likely that there would be no capital gains tax implication for your mother, and stamp duty of 1 or 2pc. While you and your brother may avoid gift tax (unless you've already received significant gifts in the past), you would, however, be liable for income tax on the rent received, up to 55pc, depending on your circumstances, which may not leave you with enough to cover the nursing home fees."

A better solution might be to leave the house in your mother's name so that the liability is hers, but because her income would be so much lower, she would only pay 20pc on the rent coming in.

Your mum can leave the house to you under her will, which may avoid stamp duty, and possibly any capital acquisitions tax down the line.

"Whether nursing home fees are paid by you or your mother, tax relief may also be available at the standard rate of tax. To try to ease the burden further, you could look into making a Deed of Covenant in favour of your mother. The bottom line here is that you need to sit down, possibly with an adviser, with all the relevant information to make the best financial decision," adds Sonia.

I applied for a small top-up mortgage recently to extend the house and was turned down by my bank, even though I've made full repayments on the existing mortgage for 15 years and have a good job. They said my credit rating was not good due to a credit card debt, but I always pay it off -- can I do anything?

When banks check applicants for loans they use, among other things, your personal credit report produced by the Irish Credit Bureau (ICB) based on loans, bank accounts and other credit that you already have. You are "scored" every time you make -- or miss -- a repayment on a credit card, loan or mortgage and this, along with other information, is used to make a decision on a new credit request.

The ICB is an industry-sharing organisation which tracks how everyone deals with credit. If you're concerned you were refused the loan because of an error, then you should apply to see your personal credit report.

You can do this online at www.icb.ie or by calling 01 2600389. It costs €6. Make sure you complete all sections of the form, including old addresses, as it may be a loan relating to something long forgotten. What you will get is what the bank has seen of your credit history.

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