We often advise people who are concerned that their assets, the most important one usually being the family home, will be used up if they have to go into residential care. It is clear that there is a great deal of misinformation circulating about this issue. These are some of the things that we hear.

“If I give things away it won’t count after 7 years”

It seems that many people are confused about the ‘7 year rule’. It is important when trying to reduce liability for Inheritance Tax, but it has nothing to do with care home funding. If you give something away and the local authority can show that you did so in order to make yourself eligible for funding, then you may be treated as still owning the property for funding purposes, and there is no time limit. In some circumstances, the authority may try to recover the property from the person who received it.

“If I give it to my children I’ll be fine”

Some people can afford to make gifts to their children but, if it is something you cannot do without – such as your house, great care is needed. Unfortunately, even children who are motivated by the best intentions are affected by, for example, financial problems or divorce. If the property is legally theirs and your rights have not been protected, it can be sold to pay off (in these examples) creditors or former spouses.

“They are looked after in my will”

Apparently some think that because property is promised to particular people in a will the local authority cannot take it into account when making a funding assessment. This is not true.

“I have heard of a scheme that will solve all my problems”

There are schemes which are being aggressively marketed which promise to provide a solution to all worries about care funding, and tax liability and probate costs for good measure. Unfortunately, if it sounds too good to be true, it probably is too good to be true. In our experience, the information provided about these schemes is inadequate and there is a serious lack of transparency.

Real solutions

It is possible to make gifts of property with one of the objectives being to preserve your estate against care home funding liability. There are sometimes other strategies which do not involve gifts. Whatever choices you make, these need to be based on careful consideration of all your circumstances and on specialist advice. We have particular expertise in this area and we would be very pleased to assist you in making your decision and putting it into effect.