Lifetime Planning and Wills specialist Jenny Greenland answers this increasingly common question and debunks some myths.
Contact Jenny on 01225 755656 or via the Contact Form below.
I frequently encounter this question, particularly among older clients, and fully understand their concerns. For most of us, our home is our most valuable asset. But with the average weekly cost of residential care in the UK now £704 and nursing care £888, it’s easy to see how quickly assets we have worked hard for over a lifetime are eroded.
In particular, the demand for dementia care is growing fast. A report commissioned in 2019 by the Alzheimer’s Society estimated there are currently around 900,000 people living with dementia in the UK. And that figure is projected to rise to 1.6 million by 2040. Of those with dementia, around a third are in residential or nursing care.
Your eligibility for help with social care costs from the local council depends on you having less than £23,250 in savings. However, from October 2025, that will rise to £100,000.
Giving away property before death
If your home has no mortgage or other debt secured upon it, nothing prevents you from giving it away, even if you are still living in it. But you should exercise considerable caution before doing so.
The focus of this article is the cost of care, but among the many issues to consider before giving away your home are the following:
- Future liability for Inheritance Tax.
- Any immediate or future liability for Capital Gains Tax (for you or the recipient of your gift).
- Loss of your primary residence exemption.
- Increased Stamp Duty for the recipient of your gift.
- Loss of control of the property.
- Meeting maintenance costs on a property you no longer own.
- The uncertainty of what happens if the person you gift it to dies before you, gets divorced, or becomes bankrupt.
- The Department for Work and Pensions (DWP) viewing your action as deliberate deprivation of assets to qualify for means-tested benefits.
Signing over house to avoid care costs
The rules governing local authority funding of care home costs are complex. But, as you would expect, they are very alert to people gifting their homes in an attempt to avoid liability.
Upon receiving an application for care funding, the local authority conducts a thorough financial assessment. If you have given away your home and they believe your action amounts to an intentional deprivation of assets, they can nevertheless take the property’s value into account even though you have transferred ownership to someone else. The same applies if you have put your property into a trust. This means you may end up paying for your care, even though you no longer have your house available to sell to fund those costs.
You should also remember that it’s not only a gift of your home that’s covered by these rules. Gifts of any other asset can equally be deemed an intentional deprivation and their value taken into account. So, that includes savings, equities, premium bonds, art, antiques etc. Taking legal advice before giving away any significant asset means you will be far better placed to make an informed decision.
Deprivation of assets 7 year rule
It’s commonly believed that if you gift an asset and then survive for 7 years (referred to colloquially as the deprivation of assets ‘7 year rule’), the gift is not considered an intentional deprivation of assets. However, this is a complete myth. The local authority can go as far back as they wish when considering deliberate deprivation.
Jointly owned property
One factor that people often overlook when considering their liability for care home fees is that if your partner is still living in your jointly owned home, it’s not included in the local authority’s financial means test.
Are next of kin responsible for care home fees?
On a related point, I’m often asked, are next of kin responsible for care home fees?
Legally, no matter how closely related you are, there’s no obligation to pay another person’s care fees. But if a particular care home is beyond your loved one’s budget, you can voluntarily agree to pay a top-up fee. If you do, the care home will expect you to sign a contract obligating you to pay the monthly top-up amount.
Signing such a contract is a huge commitment, and you should consider carefully whether it’s affordable. For example, are your financial circumstances likely to change? Also, care home fees rise annually, and there’s no guarantee that local authority funding will keep pace with the increase. That could leave you to find even more each month.
When a care home resident dies, the home issues an invoice for outstanding fees. However, there’s no obligation on the family to settle this account. Instead, the deceased person’s estate is responsible, so the invoice is passed to their executors.