Media Article: Cash sweeteners to get elderly couples to sell family homes

johnnyskeleton

4ensic15 wrote: »

Many elderly people wish to remain in their own area and also need the financial security ownership of a valuable asset brings. The process of selling a house is extremely stressful and it is no surprise that elderly people avoid doing it.

IMO, a much greater factor is emotional attachment. People form emotional bonds to their family homes that outweigh any rational economic analysis or arguments about efficient use of space. It goes beyond the street or the area and relates to the actual bricks and mortar.

iguana

johnnyskeleton wrote: »

IMO, a much greater factor is emotional attachment. People form emotional bonds to their family homes that outweigh any rational economic analysis or arguments about efficient use of space. It goes beyond the street or the area and relates to the actual bricks and mortar.

So how about NAMA helping elderly people to sell to one of their children while working out a settlement that they feel is fair to their other children? So a widow with 3 adult children sells their family home to one of the children for 2/3s of it's value, essentially giving that child an early inheritance. Meanwhile specialist contracts are drawn up leaving the remaining estate to the other two children. Emotionally which is better, watching your family home fall into disrepair while your grandchildren grow up in an unsuitable apartment. Or downsizing to somewhere nearby and watching your old home come back to life as a wonderful home for your grandchildren?

It's not going to suit everyone but I'd say there are hundreds of families it would be an excellent solution for but worries about legalities and fairness to other children prevent it from happening.

newacc2015

newacc2015 wrote: »

A PPR is CGT free. That is obviously a massive sweetener. There is very few assets you can sell that you pay zero tax on

I cant understand why so many OAPs still live in their homes. They are often large and inefficient. They would have a higher quality of life in a smaller house or apartment with decent insulation. I know so many OAPs in massive houses that they cant afford to heat or just cant heat as the house has no insulation.

There is obviously the mental health benefits. So many OAPs are isolated living in big houses in the suburbs of our cities. They rarely have social interaction. If they were living in purpose built OAP housing with events and places like gyms/community halls. They wouldnt be as isolated.

What good is a massive house you cant heat and living isolated suffering from preventive mental health issues?

Where do family sleep when they are home for weekends or holidays etc, what about their friends and neighbours they have always lived beside. They may have spent years getting the house the way they want it why would they want to from it. What if they want to leave it to one of their children etc. Also plenty of pensioners are well able to afford to run a house, these poor pensioners who can't afford Heat are not that common.

A home is a lot more than blocks and a roof which appears to be lost on some people who think people should just up and move.

The mad rush some people are in to move out of home is a lot of the reason for empty houses too. If peope lived at home until they were buying their own place or were taking over the family home it would free up a lot of apartments and houses. It would be common a few years back for one adult child to stay living at home when they get married move in their husband/wife to the family home then inherit it but you don't see this much in recent years either.

Eric Cartman

the only way I could possibly see this even making any sort of financial sense is : no VAT or stamp duty on the purchase of the smaller property , some sort of grand for moving costs , furniture etc.. and an additional topup of the inheritance tax threshold to the full price difference of the properties so that the profits could be transferred to children for free.

Its not a terrible idea , once its completely voluntary. Some people would go for it, some wouldn't. But the sweeteners would have to be seriously sweet.

John_Rambo

I can see a good few people disagreeing with the concept, their long waited "inheritance" and "entitlements" going up in smoke. :rolleyes: It's a good idea for elderly people if they're cash poor but asset rich.

johnnyskeleton

iguana wrote: »

So how about NAMA helping elderly people to sell to one of their children while working out a settlement that they feel is fair to their other children? So a widow with 3 adult children sells their family home to one of the children for 2/3s of it's value, essentially giving that child an early inheritance. Meanwhile specialist contracts are drawn up leaving the remaining estate to the other two children. Emotionally which is better, watching your family home fall into disrepair while your grandchildren grow up in an unsuitable apartment. Or downsizing to somewhere nearby and watching your old home come back to life as a wonderful home for your grandchildren?

It's not going to suit everyone but I'd say there are hundreds of families it would be an excellent solution for but worries about legalities and fairness to other children prevent it from happening.

Why does NAMA get involved in that? Elderly people can do that right now i they like.

the_syco

There is apartments nearby me that are nice and warm. However, the paths to it are all slanted, and thus most elderly would be imprisoned to their houses during the winter.

There are a few granny flats in nearby estates, but to be of any use, you'd need an estate of granny flats, with parking and a decent public transport nearby. Said granny flats would need to have insulation in it already, and have all the rails needed for elderly people. Otherwise it'll be a case of move in, and spend thousands to get it up to standard, with the added grief of moving from their own home, etc.

Eric Cartman wrote: »

the only way I could possibly see this even making any sort of financial sense is : no VAT or stamp duty on the purchase of the smaller property , some sort of grand for moving costs , furniture etc.. and an additional topup of the inheritance tax threshold to the full price difference of the properties so that the profits could be transferred to children for free.

Agreed. If they sell the houses to help their children, the children may not benefit much after all the taxes are taken out?

The_Conductor

the_syco wrote: »

Agreed. If they sell the houses to help their children, the children may not benefit much after all the taxes are taken out?

I'm not sure how valuable people imagine these houses to be.
The current inheritance tax level- is 280k per child.
Presuming an average couple have two children (and it was as high as 3.5 in the 70s)- that means that the net between sale of asset 1 and purchase of asset 2- is north of half a million- and in addition- there is no cognisance of the elderly couple squirreling away funds for retirement homes or unexpected bills that they might encounter.

pablo128

John_Rambo wrote: »

I can see a good few people disagreeing with the concept, their long waited "inheritance" and "entitlements" going up in smoke. :rolleyes: It's a good idea for elderly people if they're cash poor but asset rich.

On your first point, my folks own a 4 bed house in Dublin and a 3 bed in Wexford. But that would be split within 6 children when they pass on. In essence, we would probably get the price of a new car each. I don't think any of us are holding our breath.

I agree with your second point alright.

Villa05

John_Rambo wrote:

I can see a good few people disagreeing with the concept, their long waited "inheritance" and "entitlements" going up in smoke. It's a good idea for elderly people if they're cash poor but asset rich.

Much better than these life loans that have been all over the Joe Duffy show this week.

Could there be potential for a swap scheme for growing families in smaller houses

gaius c

Serious mission creep from NAMA but this was always going to happen.

The_Conductor

gaius c wrote: »

Serious mission creep from NAMA but this was always going to happen.

Not really- NAMA own a sizeable majority of the development land in the Dublin area- and no-one will lend to developers- QED- if they want to unlock the value of the assets- they have to make them fit for purpose- in this instance- build residential units. Outside of this- whether they are social houses, for the elderly- or for any other special interest group- is immaterial- and indeed- is probably pure politics.

Living Off The Splash

So the elderly person sells their home. (What is elderly?). They realise €1m. They downsize to a €500k home. They now have €500k in the bank. Maybe earning .75% interest? Not keeping pace with inflation. But their house that they just sold is increasing in value by %.

Does this €500k move them in to a new tax bracket. Will their state pension, medical card be affected? They want to give generously to their children from this €500k. They are allowed to receive €3k tax free per annum.

Also worries about the future cost of nursing homes. Maybe keep the bigger house and get a home help to live in house?

Parky2

I paid for my house. The kids can pay for theirs. As for NAMA; we are all paying for that while the rewards go to the speculators.

Let this useless government build corporation houses, as they did in the past, and ownership remains with the state. The tenants may eventually but the house and the state pockets the money.

The_Conductor

Living Off The Splash wrote: »

So the elderly person sells their home. (What is elderly?). They realise €1m. They downsize to a €500k home. They now have €500k in the bank. Maybe earning .75% interest? Not keeping pace with inflation. But their house that they just sold is increasing in value by %.

Its not specifically targetting the elderly- its more a singleton- or a couple- living in a 'family home' with multiple bedrooms. It is not an 'age' thing- its the fact that you have underutilisation of the resource.

Also- there is absolutely nothing to say that if a person sold a property in Dublin and got a million for it- that it would increase in value. Much of South and West Dublin- is actively falling in price- and has been for the past 3-4 months. If you got your million and put half it in the bank- its well within the realms of possibility- that even a miserly 0.5% or 0.75% interest- could be worth more than a depreciating asset.

Inflation target is currently 2%- and the Department of Finance have stated they intend to take whatever actions are necessary to increase Irish inflation levels as near that 2% as possible (their actionable courses to try and achieve this target are limited though- and most commentators view these type statements as pure hot air).

Living Off The Splash wrote: »

Does this €500k move them in to a new tax bracket. Will their state pension, medical card be affected? They want to give generously to their children from this €500k. They are allowed to receive €3k tax free per annum.

The 500k sitting in the bank- wouldn't necessarily move them to a new tax bracket- and would have no impact whatsoever on state benefits that are not means tested (aka the contributory old age pension, the medical card, television license, free travel etc etc- none of which are means tested- would not be impacted). Any benefits that were means tested (such as non-contributory pensions)- would be reduced according to the amount of liquid assets.

Vis-a-vis the 3k tax-free limit per annum- this is to strangers- and is wholly independent of the inheritance rights of children (aka the children could inherit up to 280k each- and an additional 3k per annum thereafter- without generating any tax demand). Also- I'm not aware that it says anywhere that the 'inheritance' has to be on the death of an individual- its phrased such that its a lifetime limit on a 'gift' from a parent to a child (or other individual- or indeed a 'gift' to anyone from any other person- with limits depending on the relationship of the persons to one another).

So- instead of leaving the 500k in the bank earning a paltry interest rate- if your stated intention is to give the money to your children as an inheritance- why not pay a lump of their mortgages with the money.

Living Off The Splash wrote: »

Also worries about the future cost of nursing homes. Maybe keep the bigger house and get a home help to live in house?

Nursing home care costs- are already catered for via an end-of-life deduction from the sale of your property. Your property would now be the 500k apartment (which would be one hell of an apartment)- and the nursing home care costs would come out of this. Google- Fair Deal Nursing Home Scheme- it'll give you an idea of what I'm talking about.

Also- were you to keep the larger house- and get home help to live-in the property with you- how would you propose to pay them? You could be looking at as much as 700-800 a week- its damn expensive- have a ring around some of the providers- you'll be shocked to see the prices........

If you're only really beginning to think about these things- it would be helpful to do some retirement courses- which look at all these issues- including tax and inheritance and their implications- and give you ideas how to approach and deal with all of these things.

Parky2

The_Conductor wrote: »

Its not specifically targetting the elderly- its more a singleton- or a couple- living in a 'family home' with multiple bedrooms. It is not an 'age' thing- its the fact that you have underutilisation of the resource.

Also- there is absolutely nothing to say that if a person sold a property in Dublin and got a million for it- that it would increase in value. Much of South and West Dublin- is actively falling in price- and has been for the past 3-4 months. If you got your million and put half it in the bank- its well within the realms of possibility- that even a miserly 0.5% or 0.75% interest- could be worth more than a depreciating asset.

Inflation target is currently 2%- and the Department of Finance have stated they intend to take whatever actions are necessary to increase Irish inflation levels as near that 2% as possible (their actionable courses to try and achieve this target are limited though- and most commentators view these type statements as pure hot air).



The 500k sitting in the bank- wouldn't necessarily move them to a new tax bracket- and would have no impact whatsoever on state benefits that are not means tested (aka the contributory old age pension, the medical card, television license, free travel etc etc- none of which are means tested- would not be impacted). Any benefits that were means tested (such as non-contributory pensions)- would be reduced according to the amount of liquid assets.

Vis-a-vis the 3k tax-free limit per annum- this is to strangers- and is wholly independent of the inheritance rights of children (aka the children could inherit up to 280k each- and an additional 3k per annum thereafter- without generating any tax demand). Also- I'm not aware that it says anywhere that the 'inheritance' has to be on the death of an individual- its phrased such that its a lifetime limit on a 'gift' from a parent to a child (or other individual- or indeed a 'gift' to anyone from any other person- with limits depending on the relationship of the persons to one another).

So- instead of leaving the 500k in the bank earning a paltry interest rate- if your stated intention is to give the money to your children as an inheritance- why not pay a lump of their mortgages with the money.



Nursing home care costs- are already catered for via an end-of-life deduction from the sale of your property. Your property would now be the 500k apartment (which would be one hell of an apartment)- and the nursing home care costs would come out of this. Google- Fair Deal Nursing Home Scheme- it'll give you an idea of what I'm talking about.

Also- were you to keep the larger house- and get home help to live-in the property with you- how would you propose to pay them? You could be looking at as much as 700-800 a week- its damn expensive- have a ring around some of the providers- you'll be shocked to see the prices........

If you're only really beginning to think about these things- it would be helpful to do some retirement courses- which look at all these issues- including tax and inheritance and their implications- and give you ideas how to approach and deal with all of these things.

I bought my house with my money. The kids can buy theirs with their money. My house is my home. I put time and effort into it. It is not an investment, neither for me nor the kids. It is a home. I will eventually kick the bucket. In the meantime I will enjoy the fruits of my labours.

Let NAMA build houses for the state.

The_Conductor

NAMA is a finance organisation- charged with liquidating the assets on which non-performing loans of the Irish banks were offered. It is not a developer. It is funding some builders and developers- because no-one else will. It is *not* in NAMAs remit to build houses for the anyone, the state or otherwise.

No-one is forcing you or anyone else out of their home. The proposal is to offer cash sweeteners and inducements to people who move from 'family homes', freeing them up for use by families (largely- because we have only built very limited quantities of 'family homes' since the building regs changed in 1994.

Also- no-one is forcing you to leave any inheritance to anyone- you worked hard for it- you deserve to enjoy the fruits of your labour. However- tying up a significant chunk of your assets in an illiquid asset that you're not fully utilising- when you could get a financial inducement to downsize- just might be tempting for some people.........

Personally- I wish my parents had retired earlier- and enjoyed themselves- my Dad is still around- but my Mum passed away in her early 60s from lung cancer.

Life is short- live it..........but educate yourself and know what your options are- and make an informed decision about what you plan to do.

Also- and wholly independent to this- I'd support abolishing the TV license and adding it to property tax- and at the same time- increasing the tax- but with a specific proviso that it be used to fund local facilities and amenities- which are sorely lacking in most areas. An economic level of property tax- would see it rise almost 4 fold. It would hurt- but the one of the side effects- whereby you'd get a deduction for every fulltime resident in a dwelling- is a mechanism used in other countries- to manage this.

loyatemu

Living Off The Splash wrote: »

So the elderly person sells their home. (What is elderly?). They realise €1m. They downsize to a €500k home. They now have €500k in the bank. Maybe earning .75% interest? Not keeping pace with inflation. But their house that they just sold is increasing in value by %.

Does this €500k move them in to a new tax bracket. Will their state pension, medical card be affected? They want to give generously to their children from this €500k. They are allowed to receive €3k tax free per annum.

Also worries about the future cost of nursing homes. Maybe keep the bigger house and get a home help to live in house?

this is a good point, for means testing purposes the family home is generally ignored, but a big pile of cash in the bank is not (off-topic, this is total discrimination against people who choose to rent rather than buy their home). I'm not sure how Fair Deal works, but I suspect it would impact that also.

Eugene Norman

Living Off The Splash wrote: »

So the elderly person sells their home. (What is elderly?). They realise €1m. They downsize to a €500k home. They now have €500k in the bank. Maybe earning .75% interest? Not keeping pace with inflation. But their house that they just sold is increasing in value by %.

Does this €500k move them in to a new tax bracket. Will their state pension, medical card be affected? They want to give generously to their children from this €500k. They are allowed to receive €3k tax free per annum.

Also worries about the future cost of nursing homes. Maybe keep the bigger house and get a home help to live in house?

Your tax bracket is based on income not wealth. The medical care might be effected.

Boo hoo about the adult children.

Most importantly they will have 500k to spend. And somebody who needs it gets a house. Rather than live off the interest they can spend it. On travel etc.

Eugene Norman

Parky2 wrote: »

I bought my house with my money. The kids can buy theirs with their money. My house is my home. I put time and effort into it. It is not an investment, neither for me nor the kids. It is a home. I will eventually kick the bucket. In the meantime I will enjoy the fruits of my labours.

Let NAMA build houses for the state.

Well your kids might get that money anyway. After the bucket kicking. You could -and this may not suit you but it would others - sell the house and live off the capital.

quadrifoglio verde

Personally they should focus on utilising council housing stock so that the Granny living in a 3 bed council house by herself is moved into a one bed and the young mother living in a hotel is moved into the 3 bed

Parky2

quadrifoglio verde wrote: »

Personally they should focus on utilising council housing stock so that the Granny living in a 3 bed council house by herself is moved into a one bed and the young mother living in a hotel is moved into the 3 bed

That's fair enough if it is social housing. My house paid for by me so my decision!

The_Conductor

quadrifoglio verde wrote: »

Personally they should focus on utilising council housing stock so that the Granny living in a 3 bed council house by herself is moved into a one bed and the young mother living in a hotel is moved into the 3 bed

The problem with this is- tenants were offered significant reductions on the open market value of council properties (up to 40% in some cases) to buy them (admittedly with some stipulations). We no longer have the numbers of council properties to play around with that people imagine are there. This is largely why the government end up paying so much in RA and RS to private landlords for residential accommodation- because they have sanctioned the selling off of the housing stock that once belonged to the various local authorities.

The_Conductor

Parky2 wrote: »

That's fair enough if it is social housing. My house paid for by me so my decision!

What we have here- is a classical argument of whether we should be looking at the rights of society in general- or the rights of the individual.

Parky2 - you bought your house with your own money and are free to do with it as you please. The scheme being proposed- is a bribery system to try and often cash and/or favourable tax treatments to those with family homes- to vacate those homes. Whether they subsequently buy an apartment in Blackrock- or a nice cottage in the North of Spain- is not under the remit of the proposed scheme. Also- you don't pay CGT on your PPR already- so thats not a concern.

If you own a residential property valued at 1 million- it is most probably falling in value- no matter how you look at it- one of the other posters on this thread was making the argument that it had to be rising in value more than the interest rate they'd get on cash in the bank- well, no, it doesn't.........

It seems we have an entrenched 'castle' attitude here- and from the few comments here (and discussing it elsewhere)- I can't see the scheme working at all- regardless of how many incentives or inducements they offer to people to vacate family homes.........

Living Off The Splash

I wonder what would happen to all the large houses around the country that have been built over the past 30 years when the owners become empty nesters or are told that the number of bedrooms must reflect the number of occupants or you will be taxed accordingly?

It's never going to happen.

In my area, houses are increasing in value. Those on non contributory pensions would be affected if they had a large sum of money in their bank account. If interest rates increase, then the extra income from deposit interest might push people in to a higher tax bracket.

My father paid €1000 a week plus expenses for his nursing home. He didn't need to go for the Fair Deal Scheme. If my mother and father were both in the nursing home there was no suggestion of pay for one and get one free. It would have been €1000 each. I would prefer to pay this money to a carer and live in my own home. Especially if it covered both myself and my wife.

There are lots of reasons why having a large amount of cash is not necessarily a good thing.

Downsizing for some people is about releasing equity. For others it is for different reasons.

Each to their own but nobody should feel forced in to downsizing.

The_Conductor

All the large houses around the country that have been built in the last 30 years? The short and simple is- not very many have been built- and in addition- the shortage is predominantly in the larger urban areas and their conurbations- not down the country........

There have been over 14 times more apartments built since 1989, than there have been 'houses'- including some apartment blocks in completely inappropriate locations (look at some of the recent attempts to sell entire blocks of apartments in Donegal and Cavan- on the Allsops auctions for example).

In addition- if a hybrid manner of calculating property tax composed of-

1. The monetary value of the property
2. The size of the property
3. The number of occupants in the property

were initiated- those larger houses down the country- wouldn't necessarily be unfairly targeted- first off they're likely worth far less than a reciprochal property in Galway or Dublin- and secondly- they'd have a disproportionately higher number of occupants- than would family homes in Dublin.........

One way or the other- I don't see the proposal working- because the mentality of people is too entrenched- they do not want to move under any circumstance.

Also- look into the cost of private full-time care in the home for 2 adults- its a lot more than you're suggesting......... (the 1,000 a week you're suggesting might be from a few years ago?)

mirrorwall14

The one part of all the issues with social housing that I just cannot fathom is why on earth people were allowed to purchase them off the councils. Its makes absolutely no sense for the councils and for future generations who need social housing. I would have thought that a scheme that re-evaluated your needs every 5 years (assuming you have not applied for a reevaluation yourself) would have been far more appropriate. Your kids are adults? Ok so you need to be rehoused in smaller accommodation. You have a well paid job? Sorry you don't need this house anymore. You have 6 month to find your own accommodation.

Most in rental accommodation would jump at the chance of 5 years of security. These houses should have been seen as that, security in tough times. Not some sort of deal where you got to keep a valuable asset that you could not have afforded on the open market.

mirrorwall14

The one part of all the issues with social housing that I just cannot fathom is why on earth people were allowed to purchase them off the councils. Its makes absolutely no sense for the councils and for future generations who need social housing. I would have thought that a scheme that re-evaluated your needs every 5 years (assuming you have not applied for a reevaluation yourself) would have been far more appropriate. Your kids are adults? Ok so you need to be rehoused in smaller accommodation. You have a well paid job? Sorry you don't need this house anymore. You have 6 month to find your own accommodation.

Most in rental accommodation would jump at the chance of 5 years of security. These houses should have been seen as that, security in tough times. Not some sort of deal where you got to keep a valuable asset that you could not have afforded on the open market.

Parky2

The_Conductor wrote: »

All the large houses around the country that have been built in the last 30 years? The short and simple is- not very many have been built- and in addition- the shortage is predominantly in the larger urban areas and their conurbations- not down the country........

There have been over 14 times more apartments built since 1989, than there have been 'houses'- including some apartment blocks in completely inappropriate locations (look at some of the recent attempts to sell entire blocks of apartments in Donegal and Cavan- on the Allsops auctions for example).

In addition- if a hybrid manner of calculating property tax composed of-

1. The monetary value of the property
2. The size of the property
3. The number of occupants in the property

were initiated- those larger houses down the country- wouldn't necessarily be unfairly targeted- first off they're likely worth far less than a reciprochal property in Galway or Dublin- and secondly- they'd have a disproportionately higher number of occupants- than would family homes in Dublin.........

One way or the other- I don't see the proposal working- because the mentality of people is too entrenched- they do not want to move under any circumstance.

Also- look into the cost of private full-time care in the home for 2 adults- its a lot more than you're suggesting......... (the 1,000 a week you're suggesting might be from a few years ago?)

The mentality is too entrenched you say? Indeed, if you pay for a house then the other guy can pay for his. What is flawed in that mentality? Should we downsize to accommodate those who don't or won't make an effort to pay their way?

As for the government, perhaps one they they might have a shot at governing.

Eugene Norman

Parky2 wrote: »

The mentality is too entrenched you say? Indeed, if you pay for a house then the other guy can pay for his. What is flawed in that mentality? Should we downsize to accommodate those who don't or won't make an effort to pay their way?

As for the government, perhaps one they they might have a shot at governing.

It's about freeing up the stock of empty nest housing for those who can "pay their way".