Page 4 - Guide To Planning for Care Costs

the principal private residence of the owners of the house. All of these factors must be carefully considered
before proceeding. Please ask about Homegift for further information.

To protect your own right to occupy the house, it may be necessary to retain a Liferent or right to occupy the
property rent free. IHT and POAT, if applicable, may make this unattractive. In addition, one of the effects of
such an agreement may be to reinforce the impression that the gift was not in fact a genuine and outright
gift but rather an attempt to avoid nursing home fees.

For recipients of a "Homegift" as described above, there are two potential problems. Firstly, the possibility that
they may have to pay care costs or sell or mortgage the house to pay care costs or convey back the house if the
DWP successfully establish that the transactiononly took place to enable the giver to qualify and it was within
six months before benefit was claimed. Secondly, there is the potential Capital Gains Tax problem. Please ask
about this if you think it may affect your situation.

In summary, this option may work but it is not possible to know for certain until the assessment is being
made. This can be a complicated exercise, especially if it involves Inheritance Tax Planning, but it is something
that you have to do while you are well and in full possessionof your faculties.

OPTION 2–TRANSFEROFHOUSEINTO TRUST

A Discretionary Trust can be set up and the house transferred into the Trust. This puts ownership of the
house beyond your own reach and therefore the asset does not belong to you. At the same time your own
right to occupy the house is protected as the Trust will not become bankrupt, divorced or die. There are
various other benefits from completing such trusts and these may include taking the property out of an
assessment for care costs, therefore avoiding the need for it to be sold. However Capital Gains Tax may well
arise on a future sale of the property and the local authority might seek to attack the arrangement as a ruse
intended primarily to try to avoid nursing home fees as in Option 1. Please ask about Discretionary Trusts if
you think one may benefit you. IHT and POAT, if applicable, may make this unattractive.

OPTION 3–LIFETIMEMORTGAGE

Lifetime mortgages have become more common as a means of releasing funds prior to your death to
supplement your income after retiral, to pay for luxuries such as cars or holidays or, to release funds to be
gifted to your children. Lifetime mortgages are particularly popular with individuals whose wealth is mainly
tied up in their home but who do not wish to sell their property as they are designed to enable you to
continue living in your own home without having to pay mortgage interest and at the same time to release
monies early. There are various schemes available. As this is a commercial transaction, it is unlikely to be
attacked as depriving you of your own assets in order to qualify for assistance with care costs.

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