SPOTLIGHT ON: Can I avoid paying care costs
Can I avoid paying care costs?
As we get older, we start to think about what we can do to ensure that our loved ones will inherit as much of our wealth as possible.
For many people, their home is likely to be their most valuable asset and it is not unheard of for people to consider passing their property to their children whilst they are alive, to avoid things like care home fees and inheritance tax. There is a common misconception that by gifting property away and reducing the value of your overall assets, the local authority will be required to pay for any residential care you may require in later life.
However, there are complex rules surrounding this kind of situation, that must be taken into account. If you were to gift your property to your loved ones during your lifetime, you may be considered to have ‘deliberately deprived’ yourself of the asset, for the sole purpose of decreasing the amount that you are liable to pay towards the cost of meeting your needs for care.
If the local authority believes that you intentionally disposed of a property in order to avoid paying for social care, it may still take the value of the property into account when conducting a financial assessment. This could mean that you end up having to pay for your care, despite no longer having a house to fund these costs.
It is not only property that is covered by these rules – gifts to family or friends of large sums of money, or valuable possessions, could also be considered as a way of depriving yourself of valuable assets, and may still be counted as part of your assets within a financial assessment.
It is not only the deliberate deprivation of asset rules that often make lifetime gifting ill-advised. There are other risks to gifting large sums of money or assets to loved ones during your lifetime, such as:-
- It’s permanent – once you have given a gift to someone, you cannot change your mind and the recipient is in no way legally bound to assist you if you became financially insecure.
- Loss of financial security – you never know what life may throw at you, particularly as you get older and passing money to your loved ones could leave you in a difficult financial situation, limiting the choices that you have when it comes to moving house, or living your life in the way you would want.
- Circumstances can change – someone you previously trusted may not be in your life for the long haul. This could leave you in a very difficult situation, particularly if they are the owners of your property and decide to sell.
- Divorce/bankruptcy – you may gift your house to someone on the understanding that you can continue to live there. However, if the person who now owns the property gets divorced or becomes bankrupt, your house would be considered as part of their assets and may have to be sold as part of a divorce of bankruptcy settlement. Ultimately, this could leave you homeless without the financial means to acquire a new property.
Our expert Solicitors within the Private Client team can provide advice regarding everything outlined above, and tailor their suggestions to your personal circumstances. Please do get in touch for further information on 01530 510 666.
