What can you do to protect your home when planning for the future?

08 November 2018

With the estimated annual cost of care home fees being £41,000 it is not surprising that many people are considering their own positions to try and protect their assets which they have worked their whole lives to build up. The most valuable asset usually being the family home. Northern Ireland residents with savings, investments and or property, to include the value of their home, with a value greater than £23,250 will not be eligible for financial assistance from their local Health and Social Care Trust and will be obliged to meet the full cost of their residential or nursing care. The main concerns for these individuals and their families is that they will have to sell their home to pay for their care and that their children's inheritance will be reduced.

What can you do to protect your home when planning for the future?

After a period of 12 weeks in a residential or nursing care home, an individual’s home may be counted as capital.  However, it is important to note that the value of the home is ignored in certain circumstances:-

  • If the spouse, partner or civil partner still lives there or;
  • If a child in their care aged under 16 or a relative over 60 resides in the home or;
  • If there is a relative living there who is incapacitated

 It can seem like an obvious solution to give away assets by transferring them out of your name to bring your capital amount below the threshold of £23,250.  However, unfortunately, it is not that simple as the Trust have the power to investigate an individual’s personal circumstances to include historic transfers of property.  In order to set aside the transfer and include the full value of the asset, in the means testing assessment, the Trust need to prove a deliberate deprivation of assets by the individual.  This can be by way of disposing of assets by gift, by sale and the individual spending or giving away the proceeds, or, selling the assets at an undervalue.  There must be a clear intention by the individual to reduce their assets to increase their entitlement to help from the Trust. Retaining a right of residence in the property which the individual has transferred, could be interpreted as evidence that the intention at the time of the transfer was to avoid care home fees.

Even transfers of property which took place a number of years ago can be challenged by the Trust, as they have the power to investigate previously owned assets and transfers when it carries out their assessment.  There appears to be a general misconception that if the transfer was done seven years prior to going into care that it is exempt from scrutiny by the Trust.  This is not the case.  The seven year rule is in relation to inheritance tax which is a tax payable on death.   Transfers which took place shortly before the means test are the ones most likely to be challenged as the Trust can argue the sole purpose of the transfer was to avoid paying care home fees. However the overriding factor in the assessment, notwithstanding when the transfer took place, is the intention of the individual at the time of the transfer. 

A possible solution is to be proactive and plan for the future, when there is no imminent need for care and you are in good health.  It is also prudent to regularly assess your position as unforeseen costs of care can have devastating financial and emotional ramifications.   A family trust could be set up which would transfer the ownership of a property or other assets to someone else while you are still alive in order to protect it.  Another consideration could be to make full use of your annual income tax exemption.

Janeen McKay is a solicitor in the property and private client department of Worthingtons Solicitors.  She can be contacted on 02891811538 or email janeen@worthingtonslaw.co.uk  


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