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Planning for your and your family’s future
06 Mar 2018

With the UK now home to a growing ageing population, more and more people are realising the wisdom of planning for their financial future so they can enjoy a good quality of life or care in their later years.

For many, their home will be their biggest asset and, without careful forethought, their hard earned investment in bricks and mortar could get swallowed up to pay for care fees.

Michelle Monnes-Thomas, an Associate in our Wills, Probate & Lifetime Planning department and our Dementia Friends Champion, looks at the issues:

More than 420,000 people aged over 65* are believed to live in residential and nursing homes across the UK and some of them will be, or have been, homeowners.

Rising house prices over the years means some people, even without substantial cash savings, may cross the threshold for inheritance tax (IHT). IHT kicks in if your estate is worth more than £325,000 (or £650,000 for married couples) and your estate could then be liable to pay 40 per cent IHT.

One option people ask about is gifting their home to their children. In inheritance tax terms, as long as you live for another seven years or more, the property won’t form part of your estate for IHT purposes.

However there are a few things to bear in mind. You can’t gift the property and continue to live in it, as you’ll be deemed to be ‘benefitting’ from it and it will stay as part of your estate.

You can continue to live in the property but you would have to pay the market rent to the new owner. Your children would have to pay income tax on that rent too. If you gift your home to your children and they move in with you, the house still remains part of your estate. You also can’t sell it to your children at lower than the market price.

Although there are ways to mitigate, save and plan for IHT, you do have to be careful how you dispose of your property when it comes to care funding.

There is no set time period time, such as the seven-year rule for IHT, when it comes to a Local Authority deciding if you have intentionally given away your home to prevent paying for care.

And it’s not just property that a council will look at if it’s checking to see whether you have deliberately disposed of assets to avoid paying for care – giving away large sums of money for instance could be viewed as trying to reduce your liability of paying for care.

If you are anticipating needing residential or nursing care in the future, careful planning of how you dispose of your property is therefore required.

Michelle advises on a range of private client related matters including wills, powers of attorney, trusts and estates. Michelle is also part of the Community Care team, which advises on challenging care decisions and reviewing assessments for care and long-term care planning. She is also our Alzheimer’s Society Dementia Friends Champion.

If  would like further information please contact Michelle on 01902 392484 or

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Meet Michelle Monnes-Thomas