The cost of care, residential care homes in particular, can be very high, so it’s understandable that some people might be tempted to ‘offload’ assets so that they are excluded from the financial assessment.
You might think that ways to reduce assets could include:
- gifting money or expensive items, such as jewellery, to family or close friends
- putting money into a trust or tying it up in some other way
- spending out on extravagant holidays
- gifting property by transferring it into someone else’s name.
But be warned – there are implications to ‘gifting assets’ in any of the above ways for both the person/s giving away the asset and the person/s receiving them. Here we explain the rules for gifting assets, the consequences of doing this incorrectly, and the legal implications of transferring property.
Money – You can give away £3000.00 per annum without any tax complication, however there are implications in relation to any sums in excess of this. You should seek both legal advice and the advice of an Independent Financial Adviser (IFA) before embarking on this course action.
Property - Gift the property to your child/children. There are rules regarding the deprivation of assets and therefore the property may or may not be protected, you should seek legal advice before disposing of any assets; Whole of the property should be protected,
- If you dispose of your property and subsequently enter residential care, the Local Authority may try to argue that the gift was made “knowingly and with the intention of avoiding charges for accommodation” if this is the case they can seek to set aside any such gift or transfer of the property.
As a rule of thumb, Gifting of property must exceed 7 years from the date of the gift to fall outside the calculation of Inheritance Tax (IHT).
There is no specific time limit on assets that are disposed of when considering the gift and means tested care charges, however, if for example a disposal was made and the person subsequently went into care 10 years later the likelihood of this being set aside is lower than if for example a disposal had taken place say two years prior to the person requiring means tested care.
When determining whether or not a person has disposed of an asset with the intention of depriving themselves of the asset for means tested care purposes the question is whether or not the person/s did this with the requirement of foreseeable expectation that they were likely to require such care.
Be aware – once a property has been gifted, it no longer belongs to you and therefore belongs to the benefactor. Should the benefactor fall into financial problems or their marriage/relationship fail, then the property will form part of their assets and could be used to settle their affairs.