The demand for social care is higher than ever before, and despite repeated assurances by the government that there will be an overhaul in the social care system, we are still left without a clear plan as to when, or how, this may happen. Not only is there a crisis for those already in a position where they need social care, the daunting prospect of having to fund long term care later in life is now having an effect on how people are managing their finances when it comes to estate planning.
Now, when it comes to making substantial gifts during your lifetime, you not only need to consider the “7 year rule” (the time that must pass after making the gift for it to fall outside of your estate for inheritance tax purposes), you must also consider whether any such gift could be deemed a “deliberate deprivation of assets” by the Local Authority. If the Local Authority believe that you have deliberately given away money or property to reduce your capital in an attempt to avoid paying care fees, they have the ability to include the value of the gifted assets in a financial assessment, meaning you could be treated as if you had never given them away. Examples of deliberate deprivation of assets are: gifting large amounts of money; transferring the ownership of your property into someone else’s name and putting assets into Trust for the sole purpose of avoiding fees.
With the cost of care homes ranging from £350 to over £1,500 per week, it is easy to see why clients becoming more concerned and raising questions about both the imminent need to meet these costs for family members and what they themselves can to do forward plan and manage their assets. A common subject raised is how to avoid selling the family home, which is usually the most valuable asset, and puts the value of an individual’s capital well above the lower threshold before you can apply for Local Authority funding (£23,250). Unfortunately, if you or someone close to you is already in need of long-term care then there is little that can be done to try and mitigate fees. The Local Authority is becoming more attune to attempts made by individuals to conceal, reduce and dispose of their assets to try and avoid paying care fees.
Timing is therefore key. You are able to take steps earlier on and take advice on how to forward plan to try and ring-fence assets for the benefit of your children should you ever need to go into long term care. If you are considering gifting large sums of money or changing the ownership of your property whilst still living there, you should seek legal advice to ensure you aware of any possible factors to consider.
Similarly, if you are managing assets on behave of a relative or friend and need advice on what you can or cannot to, there is guidance available to ensure that you do not end up in a difficult financial situation.