I get lots of questions about giving away your home to avoid care fees – many people resent having to pay for their care. But can you give away your home to avoid paying for care? Find out.
Giving away your home to avoid care fees
The rules about how someone’s capital and savings (including their home) may be assessed if they need care are complicated. I’ve written about them in more detail in the article Care home funding; who pays if your parent needs to go a care home? but I’ve also summarised them here.
In basic terms, your home won’t be taken into account if:
- Your husband/wife/civil partner or partner lives there. There are other exceptions as well, such as if you share the home with some aged over 60 or below 16 or someone of any age who is disabled.
- The NHS pays for your care. The NHS will only fund your care if you need ‘continuing health care’ rather than social care.
- You have just moved into care. The value of your property should be ignored for the first 12 weeks that you need care in a nursing home, however not all local authorities volunteer this information.
Can you give away your home to avoid care fees?
You might think the easy way around this is to sell your house and give away your money or to give your house to your children, but it’s not that simple. Janet Davies of Symponia, explains:
- If you need care, one of the first questions the local authority will ask is ‘do you own your own home?’: If you answer ‘no’ it will then want to know whether you ever owned your own home.
- If you previously owned your own home but have since sold it: In this case, the local authority will ask a series of questions to try and establish if you gave away your house knowing you needed care. or if you sold or gave away your house when you had no idea you might need care.
SAVVY TIP: If you gave away your house when you knew you’d need care or thought you were likely to need care, and did so in order to avoid paying care fees, this is called ‘deliberate deprivation of assets’.
- If the house or proceeds of its sale were given away six months or less before you needed care, it is usually seen as a clear case of deliberate deprivation. In that case, the local authority would use the NHS and Community Care Act 1990 to reverse the transfer.
- If the house was sold or given away more than six months before you needed care, the local authority cannot use this act. Instead, it has to use insolvency laws to investigate what happened instead.
Deliberate deprivation investigations
If the local authority suspects that there has been deliberate deprivation of assets, an important part of its investigation is to establish why someone gave away their home. The motivation for giving away your home can be as important as when it happened.
It’s worth bearing in mind:
- Local authorities are becoming increasingly vigilant in following up cases where houses have been sold or transferred.
SAVVY TIP: The onus is in the local authority to do the investigating, but if you previously owned your own property, they will almost certainly ask follow-up questions and investigate further if necessary.
- There is no time limit on how far they can go back. Some people mistakenly think that local authorities can only go back for a few years but, under insolvency laws, there’s no limit on how far back they can go.
- Local authorities can request the notes of meetings. If you’ve met with financial advisers or solicitors to arrange the sale or transfer of the property the local authority can — and do — examine these notes to establish the motivation for giving away or selling the house.
SAVVY TIP: Janet Davies of Symponia says that the main reason why a transfer might be ignored is if someone wanted to downsize or give assets away to reduce their potential inheritance tax bill, but that’s by no means foolproof. “If your assets and property are worth more than the inheritance tax threshold it’s likely you’ll have other assets which would take you above the local authority limits for a contribution towards your care.”
- If you’ve given money away and it’s been spent, the local authority will simply refuse to contribute towards the funding of a care home until the ‘notional capital’ — namely the value of the money that was given away/transferred — has been used up.
What to think about
It is definitely possible to give away your house or to sell it and give away the proceeds, but you may fall foul of local authority rules. In addition, once you’ve given away your home, you may be restricting your choice of care homes.
SAVVY TIP: Local authority funded care may not be appropriate for you. Care homes can cost between £950 and £1200 a week, while the average local authority contribution is around £550 a week.
Your home isn’t yours anymore. I know that sounds obvious, but families do fall out. If you and your children (or whoever you gave your home to) don’t see eye to eye, you can’t ask for your home back. If, for example, you were to give your home away to your two children and one was to get divorced or dissolve their civil partnership, the value of that property could become part of the divorce settlement. Similarly, if your child was to go bankrupt, the value of your home (or the share given to your children) could be taken to pay your child’s debts.
Talk to a specialist before you think about giving away your home. Talk to an independent financial adviser or solicitor who specialises in this area. Nicola Plant, a solicitor, says some solicitors may not look at the implications of a transfer. “Talk to a solicitor who’s a member of the organisation Solicitors for the Elderly as they will be experts in this area.”
Symponia has produced a care fees planning handbook which you can download for free.
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