As we grow older, making provisions for the future becomes increasingly important in protecting our assets, getting the care we need and ensuring that our family are provided for. While making gifts, including the family home, to loved one is a gesture that will undoubtedly be met with much gratitude to those set to benefit, the process isn’t always straightforward.

Considering the complexities involved and the strict laws that govern such processes, it’s important to speak to your trusted solicitor about gifting the family home to ensure your children or grandchildren feel the maximum benefit from your property.

Making gifts and tax planning after losing mental capacity

An individual must have mental capacity to prepare a will or make a gift. However, where an individual is assessed as lacking the capacity to prepare a will it may still be possible to make an application to the Court of Protection to authorise making gifts which can be helpful for estate planning.

The Court of Protection safeguards the rights of vulnerable people and has the authority to appoint a deputy to manage someone else’s affairs when they lack  the mental capacity to do so themselves. You can also ask the Court of Protection for permission to make a statutory will, which can be used as part of inheritance tax planning and to avoid the estate being distributed by the government under the Intestacy Rules.

Attorneys’ powers to make gifts

If you are appointed as an attorney under an enduring power of attorney (EPA) or lasting power of attorney (LPA) then it is essential that you are aware of the extent of your powers. Without understanding your role, it is possible to contravene those powers, and trigger a Court of Protection intervention, because of an innocent misunderstanding of the rules.

Attorneys must act in the best interests of the person granting the power of attorney (“the donor”). Under the relevant law, attorneys only have limited ability to make gifts. Gifts can be made on the occasion of births, marriages, anniversaries and on “seasonal occasions” such as Christmas. Gifts can also be made to charities to which the donor made gifts while they had capacity or to charities which it is thought that they might have supported if they still had capacity.

In every case, these gifts must be reasonable taking into account all the circumstances and, in particular, the size of the donor’s estate. If a large gift (i.e. one that is not covered in the definitions above) – is considered to be in the donor’s best interests, it is possible for the attorney to apply to the Court of Protection for consent to make the gift.

Can I gift assets to avoid care fees?

Considering the cost that comes with long-term health and social support, it’s understandable that you might be looking into protecting your assets from care home fees. If you are moving into residential care, you may be wondering whether you can gift assets before going into a care home so as to avoid the costs. In short, the law states that you cannot deliberately gift your property or put it into trust to avoid care home fees.

By purposely gifting the family home, for example, you may be seen as deliberately depriving your assets in order to remove them from the calculation. There are, however, valid reasons as to why you can gift assets such as property or put them into a trust – preventing future family disputes, for example, or wanting to see the recipient benefit from the gift. Perhaps you want to help a child or grandchild to get on the property ladder or start a business; maybe you wish to thank a person or charitable organisation for their support and contribution to your life.

If you make gifts of your assets and your local authority decides that it is a legitimate gift or trust, the value of these assets may not be counted when an assessment is made to determine whether you will pay care fees. In any case, it’s highly advisable to speak to a member of our team to ensure the trust you set up is valid in the eyes of the local authority and those you wish to benefit from the gift can enjoy what is passed on to them.

Can I gift my home to my children to reduce inheritance tax?

Gifting your home to your children can be transformational for their future and, depending on the value and how long you have lived there, it could mean paying no inheritance tax on the transaction. However, careful assessments and planning should be undertaken before proceeding. It may sound simple, but there some pitfalls that could result in your beneficiaries being landed with an unexpected bill upon your death.

If you wish to remove the inheritance tax liability altogether, the gift must be made unconditionally. If you are set to benefit from the gift in any way, it will be deemed as a “gift with reservation of benefit” or ‘GROB’ and will remain in the estate. This could arise if you gift the home to your children or put it into a trust while still living in the property.

Specialist legal advice

Done correctly, gifting assets can make a significant difference to someone’s life and be highly beneficial to the recipient.

Whether you wish to give your grandchildren a head-start on the property ladder by gifting them the family home, you wish to put your savings into a trust for the next generation or you’re looking to make a gift to a charitable organisation who has contributed to your life, we can help you to navigate the process with ease and gain a full understanding of the options available to you as well as the risks involved.

If you are acting on behalf of a loved one as an attorney or an appointed deputy, we can advise you on the best approach to making gifts on behalf of the individual.

Get In Touch

Specialising in future planning, Heledd provides expert advice and guidance in respect of wills, powers of attorney, long-term care, and asset protection to both private individuals and business owners.

Written By

Published: 3rd November 2022
Area: For the individual

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