Michelle Cochrane, a specialist Estate Planning solicitor, takes a look at a frequently asked question: "can I avoid care home fees?". Michelle also explains how gifted items can be considered a Deliberate Deprivation of Assets, especially where care fees are being assessed.
If your Local Authority agree that you need care and support, they will carry out a financial assessment of your assets to decide how much you will contribute to care fees. The financial assessment looks at your income, your capital and your owned property, including properties overseas. However, your home will not be included in the assessment if you require care at home or your partner/spouse is to remain living there.
The asset threshold in England at which you are required to pay for care is £14,250. Between £14,250 and £23,250 you are expected to pay a tariff income; in this case, to contribute £1 per week for every £250 of capital you own, toward care costs. If you own assets above £23,250, you will be liable for the full cost of your care. Care costs can reach tens of thousands of pounds and so it is no surprise that people seek to try and protect their assets from being sold to fund care fees.
Many people think that if they dispose of some of their assets, they will then avoid having to pay so much towards their care fees. There are some unregulated advisers proposing schemes that seek to achieve this aim. If choosing to use an unregistered advisor for this purpose, we would urge caution.
Call 01206593933 and ask to speak to a specialist trust solicitor of can advise you on the specific issue of care home fees, and the deliberate deprivation of assets.
If you intentionally gift your assets away for the purpose of lowering the value of assets which will be included in a care home fees financial assessment, this will likely be seen as a deliberate deprivation of assets. If a local authority concludes that it was your intention to deprive yourself of assets in order to get financial help with care costs, they can continue to treat you as owning the asset(s) for assessment purposes and even in certain circumstances, reclaim a gifted asset from the person who has benefitted from your gift.
Unusual spending patterns and purchasing items which are not included within the assets considered in a financial assessment, such as cars and jewellery, are examples of other activities which can be seen as deprivation of assets, where such activities are carried out within close proximity to the financial assessment being undertaken. As such, this could be seen as an attempt to avoid paying care home fees.
It is important to note that there is no time limit on how far back a local authority can look at transactions. However, the authority has to be able to prove that at the time you disposed of your asset, you reasonably imagined needing care in the future. Obviously therefore if this is done in later life, the transfer of the asset is more likely to be investigated and potentially set aside by the local authority.
The legal authority relied upon by Councils (the Care and Support Statutory Guidance) includes the following provision:
11) There may be many reasons for a person depriving themselves of an asset. A local authority should therefore consider the following before deciding whether deprivation for the purpose of avoiding care and support charges has occurred:
(a) whether avoiding the care and support charge was a significant motivation in the timing of the disposal of the asset; at the point the capital was disposed of could the person have a reasonable expectation of the need for care and support?
(b) did the person have a reasonable expectation of needing to contribute to the cost of their eligible care needs?
If it is found that you have deliberately deprived yourself of assets, the value of those assets will still be included in the financial assessment, and you will be treated as owning more assets than you actually do. This could result in you having to pay for care costs despite no longer having access to the asset(s).
A local authority could simply issue invoices for the care you are receiving and rely on you finding the funds to pay the required amount(s). Ultimately though, they may seek a court order seeking to set aside the previously gifted asset. If a gift of assets is made within six months of an application for financial support for care, then the gift is set aside by the local authority.
Of course, you may have other reasons for having disposed of your assets other than wishing to avoid care fees, such as wanting to see the recipient enjoy the gift whilst you are able (rather than provide for them within a Will which will only be received by the recipient upon your death). You may also have concerns about inheritance tax.
Some advisers propose creating “lifetime family trusts” whereby the family home is put into a trust during lifetime. Mum and dad are trustees together with their children. Mum and dad retain a right to live in the property, but because the property is placed in a trust, it is argued that they do not own it, so it does not form part of the financial assessment. Such an arrangement is prone to be challenged if it is established at some point that mum and dad might reasonably have imagined that they might need care in the future. There is no time limit by which a local authority has to make a challenge. You can therefore make a gift of your home and find the gift challenged 20 years later.
One scenario which is unlikely to be challenged under the deprivation of assets rules (as legislation stands) is creating a property life interest trust in your Will. Under this arrangement, when the first spouse dies, their share of the home is left in trust for the surviving spouse for his/her lifetime. This is not considered a deliberate deprivation of assets to avoid care fees by the spouse that has passed away, as clearly, they do not need care.
In the event that the surviving spouse needs residential care, and in the event that they have continued to occupy the home, the deceased’s share of the property will fall outside of a financial assessment of the surviving spouse. If the surviving spouse does need to go into care, then the family can rent out the property and use the rental income towards care fees.
If the value of your assets exceeds the threshold amount of £14,250, there are alternative ways of funding your care rather than selling your home. Equity release on your property, taking out an annuity or purchasing a care bond, agreeing a deferred payment scheme with your Local Authority or renting out your property could generate enough income to pay the care costs.
The important point is to take legal advice.
Call 01206593933 and ask to speak to a specialist trust solicitor. Or complete the form below.
* All information is correct at the time of publication but may be subject to change in the future.
A Mackman Group collaboration - market research by Mackman Research | website design by Mackman
