This sounds like a silly question. Surely owning your own home gives you security and protects your wealth whilst giving you something to pass on to your children.

Well it does to some degree. For example, if you get into serious financial difficulty, then your house may well end up being sold by you (or the courts) to settle up with your creditors.

But a greater threat comes from the government via the tax man and the local council.

Taking good independent tax and financial advice can go some way to mitigating the threat to your wealth from HMRC.

But there is the less known impact on what happens to your assets (including your house) and therefore any inheritance you wish to pass on, should you need to go into a care home. With more and more people likely to end up in one and the costs ranging from £25,000 to £45,000 depending on where you live the vast majority will be asking their local council to provide the service. The truly wealthy of course can afford the fees through investment and/or  pension income.

Councils are now coming under intense funding pressures and will, understandable, be looking to use the current rules to the full to minimise the cost for taxpayers. Those rules are based on the Charging for Residential Accommodation Guide (CRAG).

Under these rules anyone with assets (including their home) worth over £23,250 must pay the full fees until their wealth is reduced to that figure. The Telegraph today reports that the government, that normally increases this in line with inflation, now intends to freeze this figure to allow councils to recoup more.

Many people will think that they can simply sign over their assets to their children then apply for the home. But that will not work. Their are some very wide ranging powers the council has under the 'deliberate deprivation of assets' clause in the CRAG document.

This allows councils to take these into consideration when charging you for the home.

The council can look at:

  • lump sum payments you have made
  • any transfer of the title deeds of a property
  • any irrevocable trust you have set up
  • any 'conversions' you make
  • expenditure you have made that has reduced your capital base,
  • any assets sold at less than market value

The rules say that if any of this occurred where a significant factor (not the only factor) was an intention to avoid paying care home fees then the council can take these into account.

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Timing of these is also very important, as if you did this when you were fit and healthy with no thought of going into a home then you should be OK.

There are also significant tax implications should you sign your house over to someone else but continue to live in it.

So, you slave all those years for a house then find that its worth erodes over a few years while you live in a care home leaving you with nothing to pass on but twenty grand or whatever the government of the day decides. Wouldn't it have been better to spend as you go giving to friends, family and charity and living in a rented house?

For more information on these issues please visit ageuk. And also make sure you get the best independent advice you can for your individual circumstances.

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