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Don’t mix up time limits

Over recent months our team has spotted a concerning trend. As people are increasingly worried about care home fee funding, they are confusing a time limit which applies to rules around inheritance tax, with the regulations for care home funding.

It’s important to see a specialist who can advise on the alternative options

Frequently people are quoting to members of our Wills & Estate Planning team: “If I give my house to the kids, provided I live 7 years, it will be safe from care home fee funding.” They are then crestfallen to learn this isn’t correct. The 7 year rule only applies to gifts which you wish to fall outside your estate upon death. It has no impact upon a change in circumstances during your lifetime.

In contrast, regulations relating to care home fee funding have no time limitation. The funding authority can investigate gifts that were made in excess of 7 years if they suspect it was motivated by a desire to avoid care home fees.
It’s important to see a specialist who can advise on the alternative options to consider and who can explain the funding rules. Solicitors can highlight any unforeseen risks and prevent clients from making a costly breach of the regulations.

Furthermore, the 7 year rule for Inheritance Tax is only successful if a person ceases to receive any benefit from the gift. Consequently, the common plan to gift the family home to children and allow Mum and Dad to continue to live in it, is ineffective.

It is common misunderstandings such as these which lead unsuspecting families into difficult and costly situations which can be avoided with getting the correct specialist advice.