Should you gift your home to your family to avoid potential care fees?
If you have to go into residential care, a local authority carries out a financial assessment to work out whether you have to pay for all or some of the costs. The local authority will ask about any assets you have previously owned, not only those that you currently own.
If you have given away your home/other assets the local authority will look to see whether you have deliberately deprived yourself of that asset with the intention of making yourself eligible for funding from the local authority.
The local authority can also look to see whether you have sold an asset for less than its true value – for instance, if you have sold your house to a relative for considerably less than it is worth. If the intention was to avoid possible future care costs, or if this was a signiﬁcant reason, it may be deemed to have been a deliberate deprivation.
The local authority will look at the following aspects to help them in their decision:
- Motive: when you disposed of the home/asset was this done mainly to avoid care fees?
- Timing: although there is no set time limit, the earlier in time any gift was made, the less likely it will be held to have been a deliberate deprivation. They would look at the time a person made the gift and when the person realised that they needed care
- Amount: the higher the value of the gift, the more likely it will be investigated. If you give away a property worth £200,000 this is likely to be looked at but making smaller gifts is unlikely to be considered a deliberate deprivation
The authority will look at your intentions when you made the gift. If you might reasonably have known that you might need care it would look like a deliberate deprivation.
There are risks in giving away your property/assets:
- It’s permanent: Once you have made a gift to someone, you can’t change your mind and have it back
- Loss of ﬁnancial security: if you give away assets you will not have these if you have future unforeseen needs – such as moving house or paying for care in your own home
- Loss of choice and control: the less you have, the more your choices could be limited in the future
- Situations/relationships can change: no-one can predict the future and things can often change very unexpectedly
- Divorce/bankruptcy: you might give your house to someone on the understanding that you can stay living there. But if the person receiving the gift gets divorced or goes bankrupt then the house may need to be sold and you could be left homeless
- Capital Gains Tax: if you give away your home to a relative and they already have their own home, this could give rise to a future tax liability
Before making any decision, always seek legal advice.
Contact Claire Wild or Ruth Brockett for advice and assistance
Posted on May 06, 2022Back to Latest News