A client came to us with instructions to transfer their home to their son and daughter. The client wanted to remain living in their home after the transfer.
We discussed the matter with them in detail and the client explained that they had friends who had been advised to transfer their homes to their children and assured that this would prevent them from being forced to sell their homes to fund their future care needs. The client now wanted our assistance to make the necessary transfer to obtain this protection for their home.
We helped this client by explaining to them that the information which their friends had received was potentially incorrect and warning them that the transfer of their home was not necessarily a good idea for many different reasons.
The main reason for not transferring their home was that the transfer was unlikely to achieve their main objective.
We explained that, generally, when assessing whether the client was entitled to state funded care, the local authority would take into consideration all of the assets owned by the client to determine whether the value of those assets exceeded a certain threshold above which the client would be required to fund their own care.
However, if the client was still living in their home and did not need residential care, then their home would not be included as part of the assessment. Only their other assets, such as savings or investments, would be considered. Additionally, if residential care was needed, but a spouse or other elderly relative was still living in their home, then again the home would not included as part of the assessment.
If an individual gives away a significant asset at a time when residential care is a real possibility due to their age or ill health, then the local authority could treat the gift as a deliberate deprivation of assets because they consider the sole purpose of the gift to be the avoidance of paying for your own care. This is particularly the case if a home is given away and the individual remains living in it afterwards. If the client was treated as having deliberately deprived themselves of assets which could have paid for their care, then the local authority can disregard the gift and still include the asset as part of the assessment.
The danger for the client would then be that the local authority could refuse to pay for their care and the client would no longer be in a position to sell their home and use it to fund their care as they would no longer be the legal owner of their home. This could leave the client without the ability to pay for the care needed if they did not have sufficient other assets and/or their children refused to provide them with financial assistance.
We advised the client that, because they were quite elderly and in poor health and intended to remain living in their home after the transfer, it was likely that the local authority would consider the gift of their home to their children to be a deliberate deprivation of assets.
Sometimes there are good reasons for giving away your home and situations were it would be possible to show that there has been no deliberate deprivation of assets. These reasons would include genuine inheritance tax planning or maybe providing some security for a child who has come to live in your home to provide care. However these reasons need to be considered carefully on a case by case basis and were not applicable to the client.
We also explained that there were other reasons why giving their home to their children may not be a good idea. After the gift was made, their home would become part of their children’s assets for the purposes of any divorce or bankruptcy proceedings and also be part of their children’s estates on death. The client may be able to remain living in their home while their children where alive and financially secure, but serious thought would need to be given to what would happen if one of the children passed away before the client or divorced and needed to sell the property.
In the end, the client decided not to proceed with the transfer. TS&P provided good advice to the client by advising them fully on the implications of the transfer of their home to their children and explaining that a lot of the advice which is given on this matter is often misleading or simply incorrect which is why it is always important to take proper legal advice before making significant transfers of property.