There are many myths and misconceptions in relation to Estate Planning. Have you stopped to think about whether there is any truth to any of them?
Estate Planning Myth #6: Gifting my home or writing it into trust for my children is a good way of avoiding having to pay care home fees.
This is a commonly held belief, but one that needs to be treated with a good deal of caution.
Ideally, we would all like to leave our entire estate to our children, including the family home. Many people are understandably concerned about the costs of potentially having to go into residential or nursing care when we get older. Care is expensive, and the costs go up every year. Many people have to sell their homes to raise the cash to pay for the care.
Many people believe that if their home has been gifted to someone else, or if it has been written into trust, this means its value will not be taken into account when the authorities assess eligibility to pay care home fees. It seems simple. You no longer own the property; therefore it can’t be taken into consideration. Or can it?
If the local authorities find that you have disposed of your home (or any other property) with the sole or main intention of avoiding care home fees, you will be treated as if the property still forms part of your estate and still have to pay the fees. Local authorities are becoming increasingly starved of cash from central government, and they have an ageing population to look after. This means that everyone is going to be assessed going forward, and there is no limit to how far back in time your finances can be investigated.
Once your property has been gifted, it becomes the new owner’s asset. Therefore, it will be tied up in their affairs. What if that person experiences financial difficulty, has a relationship breakdown or dies? It may be that someone you did not intend suddenly has an interest in the home you still live in!
There are many factors to consider before taking the drastic step of disposing of your home, and it is imperative that you take proper advice from a solicitor or financial advisor before doing so.
View more Estate Planning Myth Busters in our Blog