Lifetime planning – care home fees

Published by Simon Levine on 12 October 2021

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Your home

One of the most common questions our lawyers are asked is whether clients should consider gifting their home to their children to protect the home from being used to fund care in the future. People often say “well my children are going to get it when we die, so why not do it now?”. But is it really a simple case of bringing their inheritance forward?

The short answer is, no. Gifting your home is littered with potential pitfalls, from serious inheritance tax consequences for your estate, to the real risk of losing the roof over your head. Giving away your home could have serious repercussions for you in the event your child dies, divorces or experiences financial difficulties.

If you are considering gifting your home it is essential to take advice on the legal, inheritance tax, income tax, and practical implications of the gift.

Making other gifts

So you might decide against gifting your home but what about your cash and investments?

This is certainly an option, depending on your circumstances. Local Authorities have wide powers to challenge gifts if a person is seen to have deliberately deprived themselves of an asset, especially if this is in contemplation of care being required.

Factors to consider will include the age and health of the person making the gift, the value of the gift, their overall financial position, and the intention behind the gift.

Any other options?

If you jointly own your home with a civil partner or spouse then a common way to preserve your assets is to separate your individual shares in the property (usually 50/50) so that your share cannot be used for the other person’s care when you die. Instead you can include a provision in your Will to allow the surviving partner the right to live in the property and once they are no longer living there your share in the property will pass to your intended beneficiaries.

This is a relatively common solution and a great way of protecting the surviving partner whilst ringfencing half of the capital in the property for the children.

Financial advice

If carefully considered in advance, steps can be taken to assist individuals, their families, or their attorney’s or deputies with funding the cost of care.

A Financial Planner with relevant expertise in this area will consider the support options that might be available, review state benefit entitlement and recommend investment strategies to meet the cost of care. A holistic view will be taken exploring risk preferences, capacity for loss and tax efficiencies.

Whilst technical ability and knowledge of the ever-changing legislation regarding Adult Social Care Funding is essential, there is of course a human side to giving advice in this area and our Society of Later Life (SOLLA) accredited adviser specialises in providing the hugely important aspect of the planning process.

To speak to our legal, tax and financial planning specialists further about this sometimes complex and emotive topic please contact us on +44 (0)330 124 1399 or complete our online enquiry form.

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice.

You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

Kreston Reeves Financial Planning Limited, Independent Financial Advisers. Authorised and regulated by the Financial Conduct Authority.

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