Legal News | 22.08.24
Gifting your home: ‘no strings attached’?
Clients often contact us to discuss gifting their homes to their children (or other family members). The idea, it seems, is that gifting your property ‘no strings attached’ means it no longer belongs to you and therefore, you will avoid or reduce the amount of care fees payable by you should you need to go into a care home. Ignoring the potential inheritance tax consequences, does this actually work, though?
The Local Authority performs financial assessments when deciding how much an individual should pay towards the cost of their care, considering both the capital (for instance property, or money in bank accounts) and income of the individual. As part of this assessment, the Local Authority can determine a ‘Deprivation of Assets’ has taken place, whereby an individual has disposed of their assets (e.g., by giving away capital or their home) so that they won’t be taken into account for the financial assessment.
When applying this ‘Deprivation of Assets’ rule, the Local Authority consider not only the assets that the individual currently owns, but also assets that they have previously owned, and whether the potential saving on care costs was a significant reason for their disposal.
There is no time limit on how far back Local Authorities can look when deciding whether a person has deliberately deprived themselves of assets to avoid care fees. However, the Local Authority must show that the individual knew that they may need care in the future, and avoiding care fees was a significant reason for the gift, when they disposed of their asset
If there was an intention to reduce care costs, the Local Authority have wide-ranging powers that include counting the gifted asset towards the individual’s capital, thereby treating it as if they still owned it. The value of the asset will then be included in the financial assessment when assessing care costs.
In other words, whilst you might think that a ‘no strings attached’ gift of your property will save you money should you go into a care home in the future, the reality is strings can very much remain attached…
If you wish to discuss this further please do not hesitate to reach out to your usual contact, or get in touch with us at mail@wansbroughs.co.uk.
