Property Inheritance and Care Home Fees
The client is dealing with the inheritance of a property located in Western Australia, which was held as tenants in common by their parents. The client's mother has passed away and left her half of the property to the client. The client is inquiring about whether renting out the property would result in all rental income being used towards their father's care home fees. The scenario involves aspects of Landlord and Tenant, Estate Planning, Elder Law, Inheritance Law, and Property Law. Further information about the father's care arrangement is required to provide a comprehensive answer.
Questions about this case
These answers have been verified by a lawyer in the LEAP networkIf I rent out the property, will the rental income be considered when assessing my father's care home fees?
In circumstances where your father resides in a care home, the local authority could assess his financial means to contribute towards his care fees. If you rent out the property, only your father's share of the rental income may be considered in this means assessment, not the entirety of the income. Since the property is owned as tenants in common, each owner's share is distinct. Therefore, only your father's portion of the property should directly impact his financial assessment, assuming he has an ownership interest in it. Local authority decisions will depend on specific financial assessments and guidelines set by applicable legislation.
What are the tax implications of renting out a property that is owned as tenants in common?
As a tenant in common, you are liable for Income Tax on your share of the rental income from the property. This means you will need to declare your portion of the rental income on your tax return. You can usually deduct allowable expenses related to renting out the property, such as maintenance costs, letting agent fees, and insurance, which may reduce your taxable rental income. Depending on the total income, you may also need to consider the impact on your Personal Allowance and the tax band you fall into.
How might the local authority determine how much of the property income is used towards care home fees?
The local authority will typically consider your father's financial means when assessing his care home fees. Since the house is owned as tenants in common, the share left to you may not be directly included in this assessment. However, if the property is rented out, the rental income generated from your father's share might be considered as part of his assets. This can influence the calculation of how much he needs to contribute towards his care home fees. It's important to disclose all income sources during a financial assessment.
Are there any legal obligations or considerations I should be aware of when acting as a landlord for a property I partly inherited?
As a landlord, you must comply with legal obligations under property law. These include ensuring the property's safety, such as gas and electrical safety checks, and keeping it in good repair. You must also provide an Energy Performance Certificate (EPC) and place the tenant’s deposit in a government-approved tenancy deposit scheme. You will need to declare rental income to the tax authority and may be liable for income tax. It is crucial to understand your responsibilities as a co-owner with your father's share in mind. Consulting a solicitor regarding your rights and obligations might be beneficial.
Is there a way to protect my father's share of the property from being used in the calculation of care home fees?
To protect your father's share of the property from being used in the calculation of care home fees, you could explore options such as placing the property into a trust. This strategy can sometimes shield assets from being considered in financial assessments. However, this must be done well in advance of any care needs, as deliberate deprivation rules may apply if the local authority believes it was done to avoid care costs. It is advisable to seek guidance from a solicitor specialising in trusts and estate planning for tailored advice.
