Gifting property to children or other family members may seem like a logical way to reduce future liabilities, secure inheritance plans, or simplify estate administration. But when it comes to the family home, particularly in the context of later life care, the implications are far from straightforward.
In the eyes of local authorities, gifting a property can raise serious questions about deprivation of assets, a legal principle designed to prevent individuals from deliberately reducing their wealth to qualify for state-funded care. Misunderstanding this rule can result in costly delays, refused funding, and unintended consequences for the entire family.
This article explores what homeowners over 50 need to understand before transferring ownership of their home, and how structured financial planning, including later life lending, can provide alternative solutions without risking regulatory scrutiny.
What Is Deprivation of Assets?
Deprivation of assets occurs when someone intentionally reduces their wealth to avoid care fees or gain access to means-tested support. This could involve transferring savings, selling a home for less than its value, or gifting property outright.
In practice, if a local authority believes an asset was disposed of to avoid paying for care, they are permitted to disregard the gift and assess the individual as though they still owned it. This can lead to:
- Refused funding support
- Legal disputes with the recipient of the gift
- Financial pressure on family members during a period of stress
Importantly, no fixed time limit for when a gift becomes safe from scrutiny. The authority’s focus is on intention at the time of transfer. If it can be shown that care needs were foreseeable, even gifts made years earlier can be questioned.
Common Gifting Scenarios, And the Risks Involved
The following examples illustrate situations where gifting the family home may unintentionally trigger a deprivation assessment:
- A healthy retiree gifts their property to their children at 65. At 71, they develop care needs.
- The gift could be viewed as a deprivation if care was a foreseeable risk at the time of transfer.
- A parent transfers the house but continues to live in it rent-free. This may not only raise deprivation concerns but also fall foul of tax rules around ‘gifts with reservation of benefit’.
- An individual gifts their home, believing it removes the asset from their name entirely.
While legally correct, the local authority may still treat the asset as “notional capital” for care funding.
These situations highlight the importance of not acting on assumptions or informal advice. Gifting property, particularly the family home, should never be a reactive decision.
Alternatives to Gifting: Lending and Liquidity as Strategic Tools
For those looking to support children, manage future care costs, or structure their estate more efficiently, gifting may be just one part of the picture. Other options, many of which preserve both control and flexibility, should also be considered.
Equity Release (Lifetime Mortgages)
Releasing a portion of your home’s value while retaining ownership can offer a tax-free lump sum or drawdown facility. Funds can be used to assist family members, adapt the home for future needs, or pre-fund care without triggering deprivation rules, provided the capital is not then gifted with the intent of asset reduction.
Retirement Interest-Only Mortgages (RIOs)
For clients with ongoing income, a RIO mortgage allows access to capital while managing interest payments during life. This preserves more equity for the estate, which may suit those wishing to balance giving with longer-term security.
Structured Gifting Within a Wider Estate Plan
In some cases, gifting may still be appropriate, for example, when done early, as part of a clear estate strategy, and with full professional guidance. Complementary tools such as trusts, deeds of variation, or family loan agreements can help align gifting with both care funding and inheritance goals. It is essential, however, to involve legal and tax advisers before proceeding.
Preserving Control and Family Wealth
At the heart of this issue lies a common tension: the desire to help family, avoid unnecessary loss to care costs, and retain autonomy later in life. There is no perfect solution that satisfies all objectives simultaneously, but with thoughtful structuring, a balanced outcome is achievable.
Homeowners over 50 should begin by asking:
- What is the likelihood of needing care in the next 10 to 15 years?
- How much liquidity would I need to remain financially independent if that happened?
- Am I giving for the right reasons, or reacting to fear or misinformation?
- Have I considered alternatives to outright gifting that might preserve more flexibility?
By reframing the discussion around access, planning, and preservation, rather than just reduction, families can avoid the pitfalls of deprivation while still taking meaningful steps toward intergenerational wealth transfer.
The Value of Integrated Advice
At Henry Dannell, we work with homeowners who are navigating exactly these crossroads, whether considering how to help a child onto the property ladder, release equity for tax planning, or prepare for care needs with dignity. Our role is not to provide legal or tax advice, but to ensure that any mortgage or lending strategy supports the wider aims of your estate plan.
By collaborating with your solicitor or financial planner, we ensure your options are not only viable but aligned, safeguarding both your intentions and your legacy.
If you’re considering gifting property or supporting a family member financially, we invite you to speak with a Henry Dannell adviser. We offer confidential, strategic guidance to help you avoid common pitfalls and explore lending solutions that preserve your home, your choices, and your plans.
Please note: To understand the features and risks, always obtain a personalised illustration.
Please note: tax treatment is based on individual circumstances and may be subject to change in the future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. Please also note: the Financial Conduct Authority does not regulate will writing, inheritance tax planning, and trust planning.
