Should I transfer my home into the names of my children to ensure I don’t have to pay care home fees?

I am often asked this question by my clients and although there is no “one size fits all” answer, there are some general points to consider:

Not everyone will need residential care

Only 16% of people aged 85 and over live in care homes
The number of people living in a care home aged 65 and over has not increased since 2001 despite  population growth of this age group increasing 11%

It’s just an advance on their inheritance

By transferring the property into your children’s names you are giving them the legal title and you are losing control over that asset permanently
Whilst you may have total confidence in your children, what about third parties?  In the event that any of your children get divorced, your child’s ownership of your home is an asset of that marriage and can be sold to provide finances for the other party.  If any of your children become insolvent or bankrupt, the trustee in bankruptcy will have a claim on your home as an asset belonging to your child.  These are serious considerations.

It will mean I can avoid Inheritance Tax

If you remain living in the property after the house has been transferred into your children’s names then you will still be deemed to have owned the property upon your death and it will still count for inheritance tax.  This is termed a “gift with reservation” by the Revenue regardless of how long ago the property was transferred.  There are exceptions to this rule but the majority will be subject to tax.

The local authority won’t be able to say I own it

There is a wide discretion given to local authorities in relation to a person’s assets.  If it appears that an asset has been given away with the intention of depleting someone’s capital then this will be termed a “deprivation of assets” and the local authority will still assess you as if you owned that property regardless of the fact that you no longer do.  In some cases, where you are fit and healthy with no prospect of moving into care, or there are other valid reasons for the transfer of the property, then the property will not form part of your assets and the local authority will assess you without taking into account the capital of your property.

Choice of care homes

A really important factor, and one that is often overlooked, is that by limiting your capital so that you are solely local authority funded, you are seriously limiting the choice of care homes available.  Not all care homes will accept local authority funded residents and quite often will require additional monies as the local authority payments are insufficient.

So, yes, it is possible to avoid care home fees by transferring your property but you must consider all of the implications.  Whatever your motivation, it is essential that legal advice is sought to ensure that your rights are not being compromised in any way.  We take very seriously our client’s welfare and can provide thorough, well researched advice as well as practical help with choices of care available.  For more information or to request an appointment please telephone our South Street office on 01243 790532.