Can I avoid losing my home if I go into care?
If a person is taken into care then with a few exceptions, the local council have the right by law to seize their home, put it up for sale and use the proceeds to support their long-term care costs. Obviously, if this happens then it might mean that when they eventually die there could be very little of their estate left for their surviving family.
Deliberately transferring your own property to relatives or to trusts is likely to fail, if your prime or only motive is to avoid paying long-term care costs. Local authorities may be entitled to treat you as still owning an asset with an equivalent value to the house given away, and so decline to fund your care. This is called the Deliberate Deprivation of Assets , a fairly recent set of legal rules that allow the government to seize assets.
However, it is entirely acceptable for you and your partner to each make a provision in a Will that upon the first death, the deceased’s half-share of the family assets and/or home is placed in trust for their children or other beneficiaries, instead of passing direct to the surviving partner.
Some people are ignorant of the laws concerning Deliberate Deprivation and choose to pass their property to their children while still alive. There are various risks associated with this; if the children die and leave your house to someone else or divorce or go bankrupt, then your home may be at risk, furthermore the children will also face a potential capital gains tax bill when the house is sold, since it is not their home, and so they are not exempt from the tax on its sale.
In addition, if the parents continue to live in the home rent free then it could be classed as a gift with lifetime benefits and still form part of the estate from an IHT perspective and if a rent is charged then tax will need to be accounted for and this could invite a query from the tax man if the tax paid shows the rental charge as being far below market value raising questions on why the gift was made?
There are however solutions which we’ll be happy to discuss.
