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Inheritance Tax Planning

I am worried about care home fees as I want to gift my house to my son. Someone has told me that this is okay for me to do and that it will fall out of calculation after seven years is this true?

The first thing to say is that the seven years you speak of actually refers to the rules around inheritance tax and gifting of assets for calculation of payment of tax; and not in respect of gifting under regulations for care assessments and calculation for care purposes.

Under the Care Act 2012, the rules state that a local authority can calculate back in a gift (no time definition) if they believe that the primary reason of the gift was for the deprivation of capital for the avoidance of care fees.
So, it is the reason for the gift which is critical here not the timing of the gift.

There may be many reasons why you may want to gift your asset down the line to a loved one, but if it is your sole intention to do so in order to avoid payment of care fees, and therefore go under the capital care assessment threshold, then there could be a risk that the local authority can make a claim against the gift at some stage in the future.

You need to consider when deciding to gift a large asset away, your security for the future and the possible need for that asset later down the line. You would not wish to be made homeless due to perhaps your son divorcing or going bankrupt and a claim made against the property by another party. So, you need to carefully weigh up whether gifting is the right course of action for you and to seek some independent specialist legal advice.

To speak to Karon Walton about any aspect of Trusts and Probate Law call 01733 295 557 or email karon.walton@hegarty.co.uk.

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