Can you avoid care home fees?
Very often we are approached by clients or their children asking what they can do to avoid paying care home fees. Even more often we receive calls asking for an appointment to discuss transferring a client’s property to their children ‘to avoid care home fees’. Dagmara Kulczykowska, Head of Private Client Services looks at some of the key points for consideration.
So, can care home fees be avoided?
The first question you should be asking is – are sure you sure that you want to avoid care home fees?
You may decide that careful financial planning during your lifetime so as to ensure that you can afford the type of care you would want for yourself in later life is better than trying to avoid paying care fees and receiving the type of care that is NHS funded. Is it, in fact better that you are well looked after in later life and pass on a smaller inheritance to your family?
If you decide that you do want to try to avoid paying care home fees here are a few things you need to consider:
- If you give away your house or sell it to your relatives for a nominal fee this could be seen as ‘deliberate deprivation of assets’. This means that the gift or ‘sale’ is reversed by the local authority and they have the power to claim back care costs from the person the house was transferred to. The local authority will look at the timing of the transfer as well as the motivation and intention of the transfer. If it is clear that the only reason the transfer took place was to avoid care fees, the transaction will be set aside.
- Once the house has been transferred into someone else’s name, it is theirs to do with as they please. It also means that you have no legal right to remain resident in it. If you have given/transferred the house to your son or daughter it means that it forms part of their assets and if they get divorced their husband or wife may have a claim to it, if they become bankrupt the trustee in bankruptcy may use the house to pay off their debts or if they die before you the property will form part of their estate and will go to their beneficiaries. Your home is at risk!
There has been much in the news about placing your house into a trust as a means of avoiding care fees but don’t be too hasty.
Placing your house into a trust essentially means that you are transferring the house to someone else (changing the title deeds). So you no longer own your house! The trustees of the trust control your house and again if the local authority think that the purpose of the trust is to get out of paying care fees, the transaction will be set aside.
There are also inheritance tax, capital gains tax, stamp duty and other tax consequences of gifting your property, selling it for a nominal fee or placing it into a trust. So make sure you seek legal advice before you do anything to avoid falling into any traps and losing money.
If you would like further advice call 01908 689341 or email firstname.lastname@example.org