The Dangers of Gifting Property to Avoid Care Fees

Paying for care fees in later life is something most of us worry about. With many people failing to qualify for state support under current means testing thresholds, an increasing number of us could be expected to contribute towards the cost of our care. 

Your home is usually your most valuable asset and, as such, often plays a major part in your local authority’s care funding assessment. However, many homeowners feel aggrieved by the idea that, having worked hard to buy a home, they now face the prospect of seeing their most precious asset eaten up by care fees, instead of being able to pass it on to their children.

As a result, the issue of gifting your property to avoid care fees has come to the fore in recent years. While it may sound like a simple solution, it could result in significant problems for you and your family.

Signing ownership of your property over to someone else

While you might be tempted to sign your property over to someone else while you’re still living in it, there are a number of drawbacks to consider, for example:

  • What happens if the person who you have gifted the property to dies, divorces, fails to keep up any mortgage repayments or goes bankrupt? You could find yourself with nowhere to live.
  • Relationships can always change. If you fall out with the person you’ve signed your home over to, they could make life very difficult for you or ask you to leave.
  • If you need extra funds in the future, you wouldn’t be able to release equity on the property.
  • You won’t be able to sell your home or move to another property unless the person you have gifted it to agrees.
  • If the recipient of the property receives state benefits, they may become ineligible to continue claiming.

Relinquishing control over your home is not only a precarious position to put yourself in but it may not even accomplish your goal of avoiding the payment of care fees. With squeezed social care budgets and mounting pressure to cut costs, councils are increasingly likely to investigate whether a homeowner has deliberately sought to avoid paying care fees by gifting their property, known as ‘deprivation of assets’.

Deprivation of assets

When carrying out a financial assessment to determine what level of state-funded care you may be entitled to, the authorities don’t simply consider the assets you currently own. They will also want to know about any property you have owned in the past. The transfer of any previously owned property will be closely scrutinised to determine whether it could be seen as a deliberate attempt to reduce the value of your total assets to avoid paying care fees.

When determining whether there has been a deprivation of assets, the local authority will consider:

  • The motive behind the transaction - does avoiding care costs appear to be a significant reason for the transfer of ownership?
  • The timing – was there already a need for care or was it foreseeable that you would need more care and support at the time the property was gifted?

If it’s decided that your gift was intended to help you avoid care fees and qualify for state-funded assistance, the Local Authority could treat your home as ‘notional capital’ – meaning it’s still considered your property for the purposes of the care assessment and its value is added to your total financial assets. They could also use their powers of recovery to claim care costs from the recipient of the gift.

Getting the right legal advice

While you can challenge a Local Authority’s finding of deprivation of assets through their appeals process, it’s far preferable to avoid becoming embroiled in such legal complications in the first place. When exploring your options when it comes to funding your care in later life, it’s always a good idea to get the right advice from the start.

At Rowberry Morris, our specialist private client solicitors are here to help you with every aspect of care fee planning. You may not even have to sell the family home, as is often thought, as there are other funding options if local authority financial assistance is not available to you.

For prompt, professional advice you can trust, contact your nearest Rowberry Morris office today.

The contents of this article are intended for general information purposes only and shall not be deemed to be or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.