Should we transfer home ownership to avoid care fees?
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My mother is getting increasingly frail and I suspect we’ll have to think about her going into a care home soon. She has very little savings but her house is worth about £450,000. My father died some years ago so she lives alone. We’ve been talking about her putting the house into my name, so that it doesn’t get swallowed up in care fees. Is this a good idea?
Jeremy Woodruff of Smith & Pinching responds:
I’m afraid that this is not something that is normally recommended if the principle reason for transferring ownership is to avoid paying care fees. If the Local Authority, which provides support for care fees for those who qualify, deem that this is the reason for your action, then they are likely to consider the transfer deliberate deprivation of assets and still count the value of the property as part of your mother’s wealth.
There are other good reasons why a family might opt to transfer ownership of a property down the generations, the most common of which might be to manage a future Inheritance Tax liability. However, this might be difficult to justify if the transfer is very close to someone going into care.
The value of your mother’s home would be disregarded for the first 12 weeks of her stay in care to allow for the property to be sold, but after that it is possible to delay selling the house by entering into what is known as a deferred payment agreement. Under the agreement, the Local Authority place a legal charge on the property, to be redeemed on your mother’s death, or when the property is sold, whichever is the soonest. There may be administration charges and interest payable under the agreement.
It's important to remember that there are many advantages of being a self-funder for care fees. In particular, paying for the care yourselves will ensure that your mother has the widest possible choice of home in terms of location and facilities.
I should mention the planned changes to care fee support that were announced last year which come into force in October 2023 and included a cap on the cost of care. However, the cap will only apply to a portion of the cost of being in care – the care elements themselves rather than accommodation, meals, etc. In practice, it may take many years for an individual to reach the cap.
I suggest you and your mother talk to a Chartered Financial Planner about managing the impact of care fees: there may be ways to adjust her pension income, for example, plus there are certain plans and trusts that might benefit, by ringfencing the erosion of the estate.
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Any opinions expressed in this article do not constitute advice and is based on our understanding of the legislation as announced, which takes effect in October 2023.
For more information, please visit www.smith-pinching.co.uk