The above statement is one which I hear frequently. Clients often wish to protect their most valuable asset, their home, from being taken into consideration in means assessments by gifting it to their loved ones during their lifetime.
The most common drive for a client to want to do this comes from, in my experience, care home fee planning. There is no escaping the fact that care, whether it be residential or nursing, is expensive and clients do not want their loved ones’ inheritance to be swallowed up by this when they could potentially get financial help from the authorities.
An example would be as follows.
Homer and Marge own their home, 43 Evergreen Terrace, Springfield. They have three adult children, Bart, Lisa and Maggie. Homer and Marge are in their late 70s and they are concerned that their cash assets are not enough to pay for care if they require it and therefore, 43 Evergreen Terrace would be taken into account in a financial means assessment. Homer and Marge therefore want to gift their home to their children now but continue to live in it until such time as they no longer can.
There are however many considerations which Homer and Marge must bear in mind when making this life altering decision. These considerations may not be applicable to all clients however, it is important that they consider the following.
Firstly, if the client is at a time in their lives where care assistance is right around the corner for them, and they then decide to gift their property, they could be seen to be deliberately depriving themselves of their property to avoid paying for their care. In this event, the local authority could disregard the gift and take the value of the property into consideration when carrying out their financial means assessment.
The client should also consider the individual circumstances of their loved one. Is the loved one financially stable, or is there a risk that they could be declared bankrupt? If the loved one married and is their marriage stable? These questions should also be considered as if they are declared bankrupt or if they begin divorce proceeds, the house will be their asset and would be brought into those proceedings.
There is however, one factor that the client never considers. If they gift their property, meaning that the legal title vests with their loved one, and they wish to remain in the property until such time as they no longer can, they are putting themselves in a vulnerable position. The property would no lover be theirs and their loved one could sell the property leaving them homeless. This is a real possibility albeit an extreme one.
Legal implications aside however, the client’s property is theirs. No doubt they have worked so very hard in their lifetime to own their home. Does it not follow therefore that they should enjoy the benefits of having financial security? One such benefit is having the best care that their money can buy, being comfortable and well looked after in their later years.
For more information on the article above please contact Daisy Peskett.