You will need to think twice before passing your home to children, especially if you need residential care.
The decision on whether you should pay for your own care home fees, and how much you should pay, is based on your assets and capital, such as your home, savings and investments.
It’s not surprising then, that people in failing health can sometimes be tempted to offload assets with the intention of reducing or eliminating their obligation to pay for care out of their own pocket.
It’s not unheard of for people to consider signing over their home to a relative when facing the assessment for residential care. But deliberately depriving yourself of an asset in order to avoid care fees can lead to some serious problems.
Past and present
If and when your local authority needs to conduct a financial assessment for your own residential care and support, they will not only check your existing assets, but also the ones that you previously owned, including property.
“The council will ask you if you own, or have ever owned, a property. If the answer is ‘Yes’ and you have given it away, they would make enquiries as to the reasons why you gifted the asset,” says Tony Müdd, Divisional Director at St. James’s Place.
Importantly, the local authority does not have to prove that ‘deliberate deprivation’ has occurred; it can just assume that it has. So the question is, how does a council decide whether the gifting of an asset was done deliberately to avoid paying for care fees?
“Fundamentally, it’s about intent,” says Müdd. “Could the person making the gift have known that they would need care? For example, if they signed over the deeds of their property when they were already ill, the council could view that as deliberate deprivation.”
Local authorities are likely to look at the time period between the person realising that they needed care and when they disposed of a high-value asset. But smaller gifts – like a £300 ring to a granddaughter for example – are unlikely to prompt further investigation.
There also has to be a notion of reasonableness. Care and Support Statutory Guidance, issued under the Care Act 2014, states that “it would be unreasonable to decide that a person had disposed of an asset in order to reduce the level of charges for their care and support needs if at the time the disposal took place they were fit and healthy and could not have foreseen the need for care and support”.
Anecdotal evidence suggests that councils are becoming increasingly wise to people trying to avoid paying for care costs.
If you are found to have deliberately transferred ownership of your home in order to improve your chances of receiving financial help, then the local authority can reverse the transfer. Moreover, they have the power to claim care costs from the person the assets were transferred to.
“It may seem tempting, but it is never advisable to place any large capital assets deliberately out of the reach of the local authority if you know you need care,” says Müdd.
Naturally, there can be perfectly good reasons for disposing of a capital asset, especially for the purposes of estate planning, so appropriate financial and legal advice is key to making sure everything is done properly.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.