Will gifting a home affect eligibility for state assistance?
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My mother is getting old and has finally accepted that she can no longer live on her own. We’ve agreed that she should go into a care home nearby. Her current home is worth about £500,000 and the plan is for my wife and I to move into it. She wants to put the house into my name so that its value isn’t counted if her savings are depleted by care fees, in which case she might then be eligible for state help. What do you think?
Jeremy Woodruff of Smith & Pinching responds:
There are a number of points to make here. First, if your mother gives away her home specifically to avoid paying future care fees, then it is likely that her gift might be considered as 'deliberate deprivation of assets' – and so would still be counted in the means-tested assessment of her wealth. The means-testing process is carried out by the local authority, which has a duty to ensure that those who can afford to pay for their own care do so. I recommend you take legal advice if you want to go down this route.
However, it might make sense for her to make the gift for other reasons, such as part of a plan to mitigate Inheritance Tax (IHT), if your mother’s estate could potentially be liable for this tax. Such a plan might justify her decision to make the gift, but again you should seek legal advice on this matter.
Another point to consider is that it is possible to limit the total amount that your mother needs to pay in care fees by taking out a special care fees annuity, also known as an Immediate Care Plan. This entails purchasing a top-up to income for the rest of your mother’s life. It requires a cash outlay at the outset but will mean that you know what the total figure impacting her estate will be. This route is tax-efficient, as the money is normally paid direct to the care home, rather than being assessed as the individual’s income.
It is also important to remember that paying for her own care fees does mean that your mother has the greatest choice and flexibility in which home she selects and the services she receives. Local authority help with care fees is limited to a standard amount and could feasibly mean that your mother would have to move to a cheaper residential home if her money were to run out.
I strongly recommend that you seek advice to plan for your mother’s needs now and in the future. A Chartered Financial Planner will use tools such as Lifetime Cashflow Planning to demonstrate what additional income she might need to generate, how that can be achieved and whether her remaining assets will be able to provide for her financial needs in the long term.
Any opinions expressed in this article do not constitute advice.
For more information, please visit www.smith-pinching.co.uk
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