Probate Partner of
Bridge Sanderson Munro, Solicitors.
In the previous two articles I have set out the background to long term care and the way in which the Local Authority assesses your ability to fund your own costs on entering into a residential or nursing home. If you are assessed as having over £23,250 in savings and investments (which may in some circumstances include the value of your home) then you will be required to fund the full cost of care from your own resources. If you have between £23,250 and £14,250 you will be required to make a contribution.
One option to consider is giving away your home so that its value will not be taken into account in any subsequent assessment by the Local Authority.
The first point to bear in mind if you intend to give away your home is that, if you subsequently enter permanent care, the Local Authority may want to know the reason why you gave away your home. If they are of the opinion that the main reason was to avoid paying nursing home fees then they have the power to set the gift aside or to asses you as if you still owned the property. There is no set time limit involved here – if you cannot convince the Local Authority that you had some other good reason for giving away your home then they can effectively ignore the gift regardless of when it was made. However, in practice, the longer the gap between making the gift and entering care the less likely the Local Authority are to challenge the gift.
The second point to note is that if you give away your home you are no longer the legal owner and you will have to rely on the recipients if you wish to continue living in the property after making the gift. Typically, parents gift their property to their children and are quite confident that the children will “do the decent thing” and not try to force the parent out of the property at some later date. However, I would always ask the children to enter into a legally binding agreement with the parent setting out the terms of continued occupation to avoid any problems in this regard. Even then, the property could be at risk if the children have financial or matrimonial difficulties in which case a third party could exert pressure on them to force a sale of the property which would effectively render the parent homeless.
The potential pitfalls can be reduced if, instead of an outright gift to the children, the property is placed in some kind of Trust i.e. the house is transferred to two Trustees who will allow the parent to continue living there undisturbed for as long as he wishes and then the house can be sold and the proceeds divided equally between the children (or possibly grandchildren etc.). As the Trustees do not own the property themselves, and the children have no right to the property until it is sold, the parent’s occupation of the property should be safe even if the Trustees and/or the children experience financial or matrimonial difficulties. The choice of Trustees is obviously of paramount importance, and many of my clients appoint my self and another partner to act as impartial Trustees.
The Trust option has also proved useful for clients who have some savings and are prepared to place these in trust together with their home. There is also the benefit that the home will then pass automatically to the children on the death of the parents without the need to obtain a grant of probate, which can save a considerable amount of time and money.
In future articles I will consider the tax implications of giving away your home and also alternative ways of preserving assets for future generations without having to give your assets away. Please note that the contents of this column are for general information only and should not be relied on in individual cases. If you require legal advice on a particular matter then please do not hesitate to contact me at my firm.
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