Can I Give My House to My Children to Avoid Care Fees?
Many people consider giving their home to their children to protect it from care fees, reduce inheritance tax, or ensure it stays within the family. While this is possible, it is often far less effective than people realise and can create significant legal, tax and practical issues.
Will Giving Away My House Avoid Care Fees?
Not necessarily.
If a local authority believes you transferred your property to avoid paying for care, it may regard this as deliberate deprivation of assets and still assess you as if you owned the property. There is no fixed seven-year rule for these assessments, and each case is considered on its own facts.
In short, giving away your home may not achieve the protection you were hoping for.
What Are the Risks?
Before transferring your property, consider that:
You may never need residential care.
You lose control over an asset that may be your most valuable possession.
Your children’s divorce, bankruptcy or financial difficulties could put the property at risk.
Family circumstances can change unexpectedly.
You may limit your own financial security and flexibility.
What Are You Really Trying to Achieve?
Many clients discover there are better solutions available.
If You Want the House to Pass to Your Children
A professionally drafted Will can ensure your estate passes to your chosen beneficiaries without giving away ownership during your lifetime.
If You Want Help Managing Your Affairs
A Lasting Power of Attorney (LPA) allows trusted individuals to assist with property and financial matters if you lose capacity or need support.
If You Want to Protect Part of Your Home’s Value
There may be estate planning options that provide greater protection without requiring an outright gift of your property.
Inheritance Tax Considerations
Giving away your home does not automatically remove it from your estate for inheritance tax purposes.
A gift of property is usually a Potentially Exempt Transfer (PET). If you die within seven years of making the gift, inheritance tax may still be payable on some or all of the property’s value.
Gifts With Reservation of Benefit (GROB)
A common mistake is giving a property to children while continuing to live there rent-free.
Under HMRC’s Gift With Reservation of Benefit rules, the property may still be treated as part of your estate for inheritance tax purposes if you continue to enjoy the benefit of living in it.
This means the expected inheritance tax savings may not materialise. Indeed, it has been reported recently that between 2021 and 2026 HMRC uncovered nearly 2,500 failed gifts worth £840 million, resulting in a tax bill of £336 million.
An Alternative: Life Interest Trust Wills
For many couples who jointly own their home, a Life Interest Trust Will can offer a more effective solution.
Typically, when the first owner dies:
Their share of the property passes into a trust.
The surviving spouse or partner can continue living in the home.
The deceased’s share is preserved for their chosen beneficiaries.
At least part of the property’s value may be protected from future care fee assessments affecting the survivor.
This can help ensure that some of the family’s wealth ultimately passes to the intended beneficiaries.
Take Advice Before Giving Away Your Home
Giving away your home can affect:
Care fee assessments.
Inheritance tax.
Capital gains tax.
Family relationships.
Your long-term financial security.
What appears to be a simple solution can often create unexpected complications.
Our experienced Private Client Team can advise on Wills, Life Interest Trust Wills, Lasting Powers of Attorney, inheritance tax planning and asset protection strategies.
Before transferring your home, speak to our Private Client team in Leicester and Market Harborough to discuss the alternatives and find the best solution for your circumstances.
Written by Laura Brown, Senior Associate Paralegal, checked by a qualified Solicitor and enhanced by AI.
