24/02/2020
Emma Wood
Many people are confused about the effect transferring property has on care bills. Having a home you can draw funds from allows you the benefit of choosing how comfortable you want to be if you do end up residential care, but when it comes to paying for fees it’s a tricky area that can be fraught with difficulty.
One of the biggest misconceptions is that if you transfer your home more than seven years before going in to care, your beneficiary can keep the money. This rule, however, only applies to inheritance tax planning, so the local authority can still take the value of your home in to account when assessing your ability to pay, regardless of how long ago you gifted your property away.
At the moment, if your assets - money, property, shares or any other income you receive - total in excess of £23,250 you’re liable for all your care costs. Care for those who have less than this amount is calculated on a sliding scale means test and paid for in full, or in part, by the council. There are exceptions to this and a solicitor will be able to advise you, but in general if you need to be moved in to full time residential care, the council will include your property when valuing your assets.
Purposefully gifting away your home to reduce the amount of capital you have is known as ‘deprivation of assets’. If a local authority comes to the conclusion that you’ve done this deliberately to avoid paying for care fees, it's within its rights to include the value of your home when deciding how much it will contribute to the cost of your care, regardless of whether you still have your property or not. If the council decides you have, it can refuse to pay the fees, putting pressure on relatives to foot the bill instead.
When determining if deprivation of assets has taken place, the local authority will look at whether you were aware that you needed to go in to care and if you’ve given away your property intentionally. If you can prove that at the time of gifting your home, you were fit and healthy and didn’t think you would end up needing care, the council may view that deprivation of assets doesn’t apply. Other factors likely to influence it decision are the motive behind making the gift, its value and its size in relation to your total capital.
However, don’t be fooled in to thinking you can circumnavigate the rules by disposing of your assets in other ways. The local authority doesn’t just look at whether you’ve sold your home or transferred the title deeds to someone else; it will also investigate your spending patterns. For example, if your outgoings increase or you start buying jewellery or cars which are exempt from the means test. It will even look in to whether you’ve started gambling in order to detect whether you’re trying to reduce your assets to avoid care fees.
Whatever your circumstances, gifting assets and paying care fees is a complex area of law so getting specialist guidance is always recommended. Russell & Russell can provide advice on residential care home fees and offers a free, no obligation consultation so you can decide on what’s right for you.
Please note that this article is meant as general guidance and not intended as legal or professional advice. Updates to the law may have changed since this article was published.