Long term care fees and gifting the family home

One of the reasons for wanting to make a gift of your home is that your house will not have to be sold to pay for care fees. Care should be taken before deciding whether or not to make a gift of your home as ordinarily it is not going to be a good idea to give away the ‘roof over your head’.

The gift of a home raises as many questions as answers and you should take specialist advice before going ahead. The issues that arise include:

• Maintaining your right of occupation, as you do not want to risk being forced to leave your own home.
• Whether any gift should be outright or to a trust.
• What are the taxation implications in respect of Capital Gains Tax, Inheritance Tax, Income Tax, Stamp Duty and Pre-owned Assets Tax for either the person giving away the house or the relative receiving the house? These can vary depending upon the way the gift is done.
• What happens if the relative falls out with you or they are influenced by others? You may think it unlikely, but we know from experience that things can change.
• What happens if the relative dies before you, gets divorced or becomes bankrupt? There is a risk of a third party having a claim on your home. If the relative dies then they could have an inheritance tax liability of their own and the house may need to be sold to pay for it.
• The gift may affect the relative’s own entitlement to means tested benefits.
• Any gift may not, in any event, result in the house being outside of any means test for the payment of long term care fees as there are anti-avoidance provisions that may mean the authorities challenge the gift.