Virtually every day we see clients who think that it would be a good idea to give their home away – either as an outright gift to their children or into a trust, as a way of avoiding any future care fees. Of course every case is different and advice should be tailored to individual circumstances and requirements, but generally, my advice to them is that it is not as straightforward as they might think, and that it might not be such a good idea to give away their home after all. The risks involved are many fold and include the following:
- Gifting your home either outright to your children or into a trust may fall foul of the local authority’s deprivation of assets rules. If a person needing care does not own their own home, the local authority will make enquiries as to whether they did previously own the property, and will look into the circumstances of the ‘disposal’. If they can show that the property was gifted either to individuals or to a trust and that the purpose of that gift was to avoid paying care fees then they can treat the transaction as void and require the assets to be brought back into account.
- People generally don’t fully consider the risks involved in gifting their home, – what if they fall out with their children, what if any of their children divorce or are made bankrupt and their home is now just one of their children’s assets? What if their child dies before them – who will inherit their ‘share’? Who will be responsible for expenses, repairs etc?
- Similarly putting their property into a trust is a gift into a trust, the property no longer belongs to them to deal with as they might want. Trusts in the right circumstances are useful financial arrangements, but they are specialist areas requiring specialist advice. Anyone being advised to take this route should also be made aware of the tax implications of what they are doing and of the fact that they too can fall foul of the deprivation of assets rules.
- Importantly, most people will never need to go into care, and those who do and qualify for NHS continuing care will be paid for by the NHS irrespective of their assets.
However, the fact is that if you do need care but do not qualify for NHS continuing care and have personal assets of over £23,250 then you will be self-funding. Not a happy thought for most people, but on the other hand, what is your priority? Leaving money to your children or having sufficient means to provide for yourself in your old age?
There is a way of arranging a couple’s affairs to provide a balance that will allow them to ‘ring fence’ some of their assets to pass on to their children, but also to retain some to help with care funding if required, and where they retain control of their own assets, and will not be caught under the deprivation of assets rules. It involves them owning their property as ‘tenants in common’, and drawing up mirror wills where each leaves their half of the property to their children subject to a right of occupation to the surviving spouse. Maxwell Hodge can help you achieve this balance.
No scheme to alleviate the burden of care fees is fool proof or perfect. The real scandal is that nobody wants to be responsible for the care of the elderly. No government has ever taken the opportunity to address this issue in any meaningful way, and until they do expert legal advice should be sought before any decisions are made.