A common question we are asked when our clients are lifetime planning is “Can I gift my house to my children to protect it from being used to fund care in the future?”. Although this may seem like a good idea, as your children are likely to inherit it anyway when you pass away, we explore the possible tax implications which may arise from gifting assets before your death.
Gifting cash and investments
If you are thinking about gifting your cash or investments to prevent them from being used for care fees in the future, keep in mind that local authorities have the ability to challenge the gift if a person is deemed to have ‘purposefully deprived themselves of an asset’, especially in consideration of care being required.
They will consider:
- the cost of the gift
- the intention behind the gift
- the age and wellbeing of the person making the gift
- their financial standing
Gifting your home
You may also consider gifting your home to your children to protect it from being used as care funds in the future. However, gifting your home may lead to some serious inheritance tax implications, or you could be in danger of losing your home entirely. It’s important to consider the repercussions you may face in the event your child experiences financial hardship, divorces or dies.
To make an informed decision when gifting your home, take advice on the legal, inheritance tax, income tax, and practical implications of the gift.
Tenants in common
If you jointly own your home with a civil partner or spouse, you can preserve your share by holding the property as Tenants in Common. This is when the equity of the property is held by the owners as individual share, whether this be equal or unequal.
Should you pass away, you can include a provision in your Will that permits the remaining partner the right to live in the property. Once your partner dies, your share of the property will go to your intended beneficiaries.
If one owner was to go into residential care and there are no additional cash assets, the council are only able to claim against the owner’s share of the equity.
Not only does this solution protect the surviving partner, but also ringfences half of the remaining capital for your beneficiaries. This is essential if you do not want your co-owner to inherit your interest in a property and can be particularly beneficial for unmarried couples, or when a property is owned by a partnership.
Get in touch
If you need some support with planning for care home fees or would like to speak to ensure you are making the right decisions for your future, contact our financial planning team (firstname.lastname@example.org) who will happily arrange a meeting at no cost to help you achieve more from your long term financial plans.