One of the most common concerns raised in later life and estate planning is how care home fees may affect the family home. Many people worry that, after a lifetime of work and saving, their property could ultimately be used to fund long-term care.
It is therefore unsurprising that families are often told there is a simple solution: transfer ownership of the property to children before care is ever needed.
At first glance, this can appear to make sense. If the property no longer belongs to you, many assume it cannot be included in a future care fees assessment. Unfortunately, the position is rarely that straightforward.
We regularly advise clients who have received informal guidance from friends, relatives or online sources suggesting that gifting a property will automatically protect it from care home fees. In reality, transferring your home can create significant legal, financial and tax consequences, whilst still failing to achieve the intended outcome.
The main issue is something known as “deliberate deprivation of assets”. Local authorities are entitled to investigate whether assets have been transferred for the purpose of reducing an individual’s liability for care costs. If they conclude that avoiding care home fees was a significant reason behind the transfer, they may still assess the person as though they continue to own the property.
This often comes as a surprise, particularly because of the widespread misunderstanding surrounding the so-called “seven-year rule”. Whilst the seven-year period can be relevant in certain inheritance tax situations, there is no equivalent rule preventing a local authority from examining historic property transfers when carrying out a care fees assessment.
In practical terms, this means an individual can give away their home, lose legal ownership and control over it, and still remain liable for care costs later on.
There are also wider risks which are frequently overlooked at the time the transfer is made. Once ownership passes to a child, the property may become exposed to circumstances affecting them personally. Divorce, financial difficulties, bankruptcy, creditor claims or family disputes can all have consequences for assets held in their name. Situations that seem unlikely at the outset can become very real many years later.
Tax issues can also arise unexpectedly. Property transfers may have implications for inheritance tax, capital gains tax and wider estate planning arrangements, particularly where parents continue living in the property after gifting it away. Many people are unaware of these complications until professional advice is sought much later.
Care home fee planning is rarely about finding a quick solution. Effective estate planning requires careful consideration of personal circumstances, family relationships, tax implications and long-term objectives. What may be appropriate for one family can be entirely unsuitable for another.
In some cases, reviewing an existing Will or putting Lasting Powers of Attorney in place may be the most sensible first step. In others, more structured estate planning or trust arrangements may be appropriate as part of a wider strategy to protect assets and plan for later life.
Our Private Client solicitors advise individuals and families on all aspects of care home fee planning, Wills, trusts, inheritance tax planning, estate administration and later life planning. We understand these decisions are often sensitive and emotionally difficult, particularly where families are trying to balance asset protection with future care needs.
Taking advice at an early stage can help avoid costly mistakes and provide clarity before significant decisions are made.
For further information or to arrange a confidential consultation, please contact our Private Client team on 01708 446781 or by email mail@mosco.co.uk
