Paying for care

Paying for care is an issue that many people face, particularly in their later years. Many solicitors have seen increasing number of requests from clients wanting to give away their home to a family member in order to try and avoid the need to pay care home fees in the future and avoid paying inheritance tax. When advising clients on the gift of a property, we have to highlight issues surrounding these gifts. Below we have outlined seven important questions to ask before considering moving forward with your gift.

•           Will giving my home away mean I do not need to pay care home fees?

If you give away your property and the sole, or one of the main reasons, is to avoid care home fees, the Local Authority may deem that the sole or main aim of you making the gift is to intentionally deprive yourself of capital to avoid paying care costs. This could mean that the asset is still taken into account and funding could be refused.

•           What happens if I need residential care?

If the Local Authority decides that your intention was to create or increase your entitlement to means tested benefits, they could refuse to provide any financial assistance towards care home fees.  Although the Local Authority may still be obliged to provide care for you, this could result in a debt against you, meaning you could eventually face insolvency proceedings and be declared bankrupt. If this is the case, the trustee in bankruptcy could undo any gifts that you have made.

You should also keep in mind that the Local Authority may only apply a basic level of funding. This may mean that you cannot move into, or stay in the residential home of your choice and may need to live somewhere more affordable.
•           What happens if the person I give my property to dies first?

If you make an outright gift and the person receiving the gift dies before you, their share of your property will pass either in accordance with their Will or under the intestacy rules. This could result in your home passing to someone you would not have chosen to receive the property.

•           What happens if the person receiving the property gets into financial difficulty?

If you give your property away and the recipient of the gift gets into financial difficulty, the property will form part of that person’s assets. It could then be considered in their bankruptcy proceedings.

•           What happens if the person receiving the property divorces?

If sadly the marriage or civil partnership of the recipient breaks down, the property would form part of their assets.  This could then be considered in any divorce or dissolution proceedings. This means that all, or part of the property could be awarded to a spouse or civil partner, or it could mean that the property may need to be sold.

•           What happens if we have a disagreement?

Unless you have put into place an appropriate agreement prior to making the gift, if you and your family member have a disagreement in the future, they could effectively evict you from your property. If you have given your property away as an outright gift, then it is normally irrevocable. This means that you cannot assume that your property would be returned to you.

•           Will I still need to pay inheritance tax on the property if I give it away?

If you give an asset away but continue to receive any benefit from it, then this may be classed as “gift with reservation of benefit” for inheritance tax purposes. This means that HMRC could deem that it still forms part of your estate for inheritance tax purposes, even though you have given the legal title away. If you decide to give away your property but wish to continue to reside in it, you would need to pay a full open market rent to the person receiving the property for your continued occupation. The rent would need to be regularly reviewed as it would be an arm’s length transaction.

Ann-Marie Matthews is a solicitor in the private client team at Barker Gotelee, Ipswich Solicitors.

Suffolk Private Client Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email