Your home is likely your biggest asset — and naturally, you want to pass it on to your loved ones. But rising house prices, inheritance tax thresholds, and care home costs can all threaten that intention. The good news? With some forward planning, you can take steps to protect your estate.
The Threats: Inheritance Tax and Care Fees
- Inheritance Tax (IHT) is charged at 40% on estates above the current threshold (£325,000 for individuals, plus a possible £175,000 allowance for passing on your home).
- Care fees can exceed £50,000 per year, and if your assets (including your home) exceed £23,250, you may be expected to pay in full.
Strategies to Protect Your Home
1. Placing Property in a Trust
By transferring your home into a trust — such as a lifetime property protection trust — you may be able to protect it from care assessments or reduce IHT exposure. However, trusts must be set up carefully to avoid falling foul of “deliberate deprivation” rules.
2. Gifting Your Home
You can gift your home to your children during your lifetime. If you live for seven more years, it may be exempt from IHT. However, this has risks — you lose legal ownership, and if relationships sour or circumstances change, you could be vulnerable.
3. Tenants in Common & Wills with Trusts
If you and your spouse own your home as tenants in common, you can each leave your share in trust in your will — protecting half the home from care fees if the other enters care.
4. Using the Residence Nil Rate Band
Proper planning ensures you make full use of the additional IHT allowance for passing your main residence to children or grandchildren.
Seek Professional Advice
Estate planning isn’t one-size-fits-all. Each family’s circumstances are different, and poorly executed plans can backfire. That’s why working with a specialist can help ensure your arrangements are legal, effective, and aligned with your goals.
A Legacy Worth Protecting
Your home represents more than bricks and mortar — it’s your legacy. With the right planning, you can pass it on with confidence, minimising the tax burden and protecting your loved ones from unnecessary stress.