A Tempting Idea?

We have many enquiries from people wanting to give away their home by transferring it into the names of the intended beneficiaries of their estate, normally their children. 

Listed below are 10 reasons why this may not be a good idea. 

Care Home Fees

1. If you have to go into care the Local Authority will do an assessment of your finances and may still take the value of your home into account. In making their decision the Local Authority will consider when your house (or any other asset) was disposed of and the reason why.

2. Some better quality care homes require a top up fee to be paid. If you are asking the Local Authority to pay for your care, you may have a limited choice and may not be able to go to the nursing home that you want due to lack of funds. 

Your Standard of Living 

3. Your property will often be your major asset. To lose control of it may have a significant impact on your standard of living.

4. You will lose the freedom to choose. What if you suddenly decided that after all you would like to take that round the world cruise, would you have the money?

Loss of Control over your Property

5. Your property will be owned by someone else. Even if that person is your child who you trust implicitly, what happens if they unexpectedly die? Who would then inherit the home that you wish to continue living in? What happens if they experience another change in their circumstances such as divorce or bankruptcy? Your property will be at risk of being taken into account in any assessment of their finances.

6. Relations may change between you and your children. They may decide that they want to realise the capital within the property and could force a sale.

7. You may lose the opportunity to adapt to your changing circumstances perhaps by adding a stair lift or other aids to help you remain at home. You may wish to downsize or release equity from your property. These may not be options available to you. 

Inheritance Tax implications 

8. If you die within 7 years of the gift your estate may still have to pay tax on the value of the property.

9. If you continue to live in the property after the gift your estate will still pay tax on its value for an indefinite period of time.

10. If you do not continue to live in the property you may lose the Capital Gains Tax main residence exemption.

Further Advice

In most cases the motivation behind it is to avoid their home (often the only or main asset) being used to pay for the cost of care home fees.

If you intend to continue living in the property meaning the transfer will merely have been a paper exercise, then the Local Authority may look further into why the property was transferred. If they conclude that it was done solely to avoid paying care home fees then they may seek to undo the transfer and recover the property. Alternatively, they may treat you as still having the property and refuse to pay for your care.For further information please see Age Concern UK – Fact Sheet 40, Depravation of assets in the means test for care home provision.

For many people funding the cost of care does not in fact present a problem. It might be possible to rent your house out, or sell it and invest the sale proceeds. The income produced together with your pensions might well meet most of the cost of care home fees. You may want to consider making a Power of Attorney appointing someone to manage your financial affairs in case you become unable to do so.

There is a draft Care Bill currently before parliament that contains changes to the assessment of care funding and a recommendation that a ‘cap’ be implemented, limiting the amount people will have to pay towards their care. However, it may be 2016 before any changes are implemented.