An individual may dispose of their assets in any way they choose. However, there are dangers in transferring the legal ownership of your home to another person in the hope to avoid the payment, or a contribution towards the payment, of any future care fees and preserve an inheritance for your family members.
If you were to need to reside in local authority care after transferring the legal title to your home to another person, the local authority may look to see whether you have deliberately deprived yourself of the home in order to avoid care fees. If the local authority challenged the disposal of the property as such, and was successful in their challenge, the value of the property would be taken into account in any means test assessment made for your contribution towards the cost of your care. This could mean that you are faced with a bill for the cost of your care and no asset to realise to meet this cost.
It has recently been reported in the local newspaper of such an instance; where Dudley Local Authority has determined that an elderly lady deliberately deprived herself of her home to ‘avoid foreseeable future care costs’ by transferring the legal title of her home to her son.
Her son disputed this and asked the Social Care Ombudsman to look at the Local Authority’s decision. He argued that the transfer was for the purposes of effective estate planning and to reduce the liability to inheritance tax on his mother’s death. The Ombudsman agreed with the Local Authority and the son was asked to make the payments towards the cost of his mother’s care.
Both the Local Authority and the Ombudsman undertook thorough investigations into the elderly lady’s health and the time frame at which she transferred her home to her son. Both decided that at the time of the transfer, the elderly lady had been diagnosed with an illness that meant she was likely to need increased support in the future. This then provided her with a ‘reasonable expectation’ that a contribution towards the cost of her care would be required at a future point.
It is therefore essential that legal advice is sought before gifting your home to a loved one. This transaction can make good sense for estate planning purposes, it can provide a reduction or elimination to any liability for inheritance tax and Probate fees, but, it can be very costly when the transaction is challenged as a deliberate deprivation to avoid any contribution towards the cost of your care.
