Care Home Fees
The pitfalls of transferring away your property
A question we regularly get from clients who are retired or approaching retirement age is whether they should give their house to a son or daughter to avoid losing it in the future if they have to go into care.
There is a commonly held misconception that provided you transfer away your home at least seven years before going into care, it is automatically ring fenced from the Trust or Local Authority however this is not the case. The seven year rule relates to inheritance tax in that any gift whether it be property or otherwise, it will fall outside of your estate for IHT purposes if you survive it by seven years.
There is no such time limit when it comes to care home fees and if the local authority can prove that you gave away your house for the purpose of avoiding the cost of care (otherwise knowns as a "deprivation of assets") then they can take that property into account when assessing your means. The more time that elapses between the gift and the requirement for care, the more difficult it will be for the Local Authority to prove that was your intention however they can look into any property transfer regardless of when it took place.
It is also important to bear in mind that by gifting away your home, you are losing control over it and whilst we would always recommend that a right of residence is registered, you are still relying on your son or daughter to insure and maintain the property nor can you sell or mortgage it without their consent. Rather than an outright gift, you may consider putting the property in a trust which is a legal device that allows someone else to hold an asset on your behalf without having full control of it e.g. you can stipulate that they may not sell the property.
Trusts however are not a guarantee of avoiding care home fees either and the same test applies as to whether you put the property in trust with the aim of putting yourself in a better position in a local authority assessment.
If you would like more information on the issues raised above, please contact us to arrange a free initial consultation
