The thought of losing your children’s inheritance to fund care home fees has prompted many people to consider signing over the deeds of their property to their loved ones. However, there can be some enormous pitfalls involved for those who choose this course of action, as Susannah Bower, a Partner and a Tax and Trust Specialist at WBW Solicitors in Exeter, explains.

If your capital is more than a certain amount, you may be asked to contribute to your care home costs from your savings or sell your home or other assets in order to do so.

You can apply for financial assistance for care home costs if your capital is below a certain amount. If you own your home, the value of the part you own will usually be counted as part of your capital. However, if your partner or a disabled relative still need to live in your home after you move into residential care, the value of your house will not be counted when the local authority assesses your capital.

Provided your other capital is less than £23,250 in total, you should get some help with your care costs; if it is less than £14,250 then the council will ignore your capital altogether.

Your capital includes:

  • savings;
  • additional property;
  • premium bonds;
  • stocks and shares;
  • trust funds; and
  • pensions.

Problems arise if you are the last surviving partner of a couple, in which case the value of your home will count towards your capital and you may be forced to sell to cover care home costs.

Some may be tempted to give away the family home to loved ones to make themselves eligible for more local authority funded help for residential care. However, if the local authority finds that you have ‘deliberately deprived’ yourself of assets to avoid care fees, they have the power to claim care costs from the person that the assets were transferred to.

In addition, if you do transfer ownership of you home to another family member well in advance of care home costs being an issue, this could cause problems if, for example, you and your spouse decide you want to downsize but the person you gave your house to disagrees.

Problems could also arise if you fall out with the person you gifted your home to, if they go bankrupt or fail to keep up mortgage payments, or if they divorce their partner who consequently is entitled to a share in your property. In any of these scenarios you could find your home being sold from under you.

You also would not be able to raise extra funds in the future by releasing equity on the property. If the recipient of the property receives state benefits, they may become ineligible to continue claiming.

How a solicitor can help

To avoid the perils associated with giving away your home to avoid care home costs, you should seek professional advice from a specialist adviser. They can outline your options when it comes to your care fees in later life and ensure that you hold onto your home, while minimising potential care costs. 

For more information on care costs, or any other private client issue, contact Susannah Bower at WBW Solicitors in Exeter on 01392 260112 or email susannahbower@wbw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.