When is the right time to gift your house?
There are lots of people that discuss gifting their home to save on care home fees. When is the right time? – after you’ve taken some detailed advice from a solicitor about the risks and are making a fully informed choice in respect of the specific details of your case.
I get a lot of people ask about this and almost all of them choose not to when they know the risks.
Once gifted it is gone and no longer belongs to you, if you still intend to live in it, you are putting your home at risk for all sorts of factors, not least that you may fall out with the person you transferred the house to.
I call them the 3 D’s – Death, Divorce & Debt. What if the new owner dies, who will own it then? Will they allow you to continue to live in it? What if the new owner gets divorced, it will be taken into consideration by the Family Court, do you want the new owner having to live with you, as they lost their home in the settlement? What if the new owner discovers the joys of gambling or shopping and gets into debt? The Trustee in Bankruptcy will has a duty to sell the house to settle the debts and you’ll be homeless.
It may not work, as there are 3 time frames to take account in respect of care fees: 6 months – the Local Authority can pursue the receiver of the gift. 5 years, the Local Authority can potentially make the donor bankrupt and the Trustee in Bankruptcy has the power to undo the transaction. Finally unlimited, which is the hard one to get over, if the Local Authority consider that avoidance of care home fees was a “significant purpose”, therefore not the only purpose, then for an unlimited amount of time, they can assess the individual financially as if they still owned the asset. The donor would be left in a very poor financial situation.
Lots of people ask me about gifting the house and most change their minds once they understand the risks of becoming homeless. I’ve done a couple of transfers of property and the donors have always had a good reason, which is not solely about saving care fees.
Even if the sole purpose is to save care fees, there is nothing stopping you doing it, but you need to realise the risks, that it won’t work and that you may become homeless. It is also vitally important to remember that most people don’t end up in care, so the donor is taking on a lot of risk for an event that it statistically unlikely to happen. If the person already knows they will end up in care, then the transaction would be a deprivation of assets and they are at risk of the Local Authority taking the above action.