Question
In my dad’s Will, the house is left to me with the sale proceeds to be split 50/50 with my sister. It was made 10 years ago when my parents were estranged from my sibling. In the last few months, they have reconciled.
My dad is now widowed and has dementia. He lives in a care home and we have a Lasting Power of Attorney (LPA). My sister has not seen the Will.
I think it is fair to sell the house, put the money in dad’s name and then split the proceeds 50/50 with my sibling when he passes away. Can I do this? Are there any tax implications?
The house is worth approximately £150,000. We do not need to sell the house to fund the care home.
Answer
In this situation, the best thing to do may be to change the Will. A Will can be changed at any time as long as the individual has the mental capacity to make the change, this is known as testamentary capacity.
What is testamentary capacity?
Testamentary capacity means the individual must be able to understand the nature of making a Will, the extent of what they own, who they might be expected to provide for by their Will, e.g. spouse, children, and have no disorder of the mind which may affect their decision.
Although your father has been diagnosed with dementia, it may not affect his ability to change his Will. It would be advisable to seek the assistance of a medical practitioner to assess whether your father still has the capacity to change his Will despite his dementia.
How will the LPA help?
Your LPA document will come in very handy in this situation as your father has appointed you to assist him with his financial matters however, is it important to check if the LPA has any restrictions.
It is not uncommon for people to put a restriction on the sale of property under an LPA – the LPA also must be registered at the Office of the Public Guardian (OPG) before it can be used.
If there are no restrictions and the LPA has been registered, then you would be legally able to sell the property, you can instruct agents and sign contractual paperwork on behalf of your father.
However, it is important to ensure that where possible all decisions are made by your father whilst he is deemed capable – you can assist him but it needs to be his decision if possible. If your father is not able to do this then you can sell the property but you must ensure this is an action taken in the best interests of your father.
What about tax implications?
With regards to tax implications, there would be no capital gains tax implications provided that the property had been your father’s home for the entirety of his ownership.
You would be entitled to claim Principal Private Residence Relief, meaning you do not have to pay any capital gains tax on the sale. This relief would still be available in full despite the fact that your father is now living in a care home provided that the house is sold within 36 months of him moving into care.
What if the Will can’t be changed?
In the instance that your father is unable to change his Will or it is not in his best interest to sell the house then the best thing to do would be to leave the situation as is and then vary the Will on his death. As the sole beneficiary of the house it is ultimately up to you if you wish to split the house – you could prepare a Deed of Variation within two years of the date of your father’s death to amend the Will so that the house is split 50/50.
Finally, you need to consider if this action is following your dad’s wishes – despite reconciliation, would he still want your sister to have a share of the house? It is also worth bearing in mind if you do not split the house sale proceeds with your sibling she may be entitled to bring proceedings against the estate for lack of reasonable financial provision.
How can Nelsons help?
Helen Salisbury is a Partner in our expert Wills, Trusts and Probate team.
If you would like further advice in relation to the subjects discussed in this article, please contact Helen or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.