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Avoiding Care Home Fees
If you are worried about the possibility of paying residential care
fees at some point in the future, then we can help.
Please call us for a free no obligation chat on 01536 276322

Do You Worry About Paying Residential Care Fees?

If you are worried about the possibility of paying residential care fees at some point in the future, then we can help.

Contact Us for a Free Initial No Obligation Chat

We can offer you a free initial no obligation chat on the telephone to discuss if and how we might be able to help you. Whether you take things further will be entirely up to you. Please call us on 01536 276322 or contact us online.

Avoiding care home fees is a question that is on many peoples’ minds nowadays.  In particular, people want to avoid selling their house to avoid paying care home fees and to consider how not to sell their property when going into care.  Some people consider gifting their property, either to their family or children might work but sadly, it doesn’t.  Others might consider avoiding care home fees by setting up a Trust and that is something that can sometimes work but only if specialist legal help and advice is obtained.

Changing Demographic Trends

In the UK we have an increasingly ageing population, as health care and lifestyle has improved.  This greater life expectancy in turn has resulted in greater numbers of elderly people requiring long-term support and care later in life.  An estimated one in five elderly people will suffer some degree of disability or long-term illness and will eventually require care.  As our ageing population continues to grow, and more people enter residential care homes, the system now struggles to cope with paying the increasing care costs.  Local Authorities are now, as a result, becoming more aggressive and pro-active in forcing people who have property, savings and other assets to pay for their own residential care fees.

The Rising Cost of Care

Depending upon where you live, the quality of the care home and the location, the cost of residential care could be anything from £600 per week up to in excess of £1,000 per week.  If you enter into a care home for even just two years you could end up paying over £80,000!

My Family Will Look After Me…

You may believe that you will never go into a care home because your family will look after you, and hopefully that will be true.  However, you may at some stage in your life struggle to care for and look after yourself either due to mental and/or physical incapacity, and whilst your family will do all they reasonably can to help, often it can become impossible to look after an elderly person, particularly if your family have other commitments such as work or children to look after as well.   In those circumstances you would probably not want to be a burden on them.

Who Pays Residential Care Fees?

If you enter into a residential care home, you will be required to make an arrangement with your Local Authority to repay the full cost of residential care accommodation if you are financially capable of doing so.   The Local Authority will first of all claim most of your state pension and other income you receive and use that towards the cost of paying for your residential care.

If you are in receipt of social security benefits or are on a low income and have little in savings, you are unlikely to have to pay very little else other than handing over any income you receive.   However, if you have worked hard through your life and own your own home and built up a savings nest egg, you will be required to use your savings and possibly to also sell your home to pay for your residential care and could, as a result, potentially lose most of your property, savings and assets.

Take Action Now

The current approach to care fees in the UK is in some people’s eyes, unfair, particularly to those who have worked hard through their lives and paid their taxes and mortgages and scrimped and saved to build up a nest egg and, generally done the right thing, are then being penalised, whilst those who haven’t fully paid their way and generally wasted away their assets potentially end up getting residential care for free.  This is arguably unfair.  However, you don’t have to sit back and accept this situation.  You can take action and protect some of what is rightfully yours.

So What Action Can You Take?

There are all sorts of different actions you can take. The key is taking actions that are legal and legitimate and falling foul of the laws and regulations that exist in this area. Therefore, obtaining specialist advice is crucial. The various actions you can include some of the following: –

Current Situation

  • Doing nothing – after all, you hopefully will never go into care..!
  • Avoid going into a Residential Care Home – e.g. staying with your family
  • Pay up care fees in full if enter Residential Care Home
  • Choosing the right care home for you

1. NHS Care and Contributions

  • Considering free NHS care
  • Claiming any nursing and social care contributions

2. Income and State Benefits

  • Maximising your income
  • Claiming your full welfare benefits entitlement

3. Capital and Savings

  • Reducing your capital and savings to below £14,250
  • Considering Insurance policies and home income plans
  • Re-investing a proportion of savings and assets into investment bonds
  • Consulting an Independent Financial Adviser

4. Exempt Assets

  • Identifying Fully exempt assets
  • Being aware of the Personal possessions exemption
  • Being aware of the Business assets exemption

5. Deprivation of Assets

  • Not deliberately depriving yourself of assets
  • Disposing of assets in the right way
  • Making small gifts
  • Inheritance Tax planning and gifts

6. Home and Property

  • Being aware of the Initial and Temporary Stay in Residential Care
  • Being aware of the Property exemptions
  • Considering renting out your home
  • Considering Deferred payment agreements
  • Considering Equity release schemes

7. Legal Solutions to Protect Your Assets

  • Seeking legal advice from a specialist solicitor
  • Making a Will to include a Will Trust
  • Making a Lasting Power of Attorney
  • Considering setting up Discretionary Trusts
  • Considering Interest in Possession Trusts
  • Considering Personal family loans and legal charges
  • Being aware of Proprietary estoppel

8. Property Trusts

  • Property Trusts
  • Reasons for Setting up a Trust
  • Trusts Information
  • Benefits
  • Disadvantages
  • Administrative Matters

9. Frequently Asked Questions

  • What is a deprivation of assets?
  • Can I transfer a property into a Trust to avoid care fees?
  • Can I gift a property to avoid care fees?
  • Can I gift my property to my children whilst I am alive?
  • What does putting a house into Trust mean?
  • What is a Property Protection Trust?
  • Can I make gifts to avoid care home fees?
  • How do I avoid selling my house to pay for care?
  • Is deprivation of Assets a Criminal Offence?
  • What is a Property Trust Will?
  • Putting a House in Trust

Residential Care Fee Protection Podcast

Adrian Chambers - Seatons Solicitors

Residential Care Fees Protection Specialists

I’m Adrian Chambers and specialise in Residential Care Fees Protection matters. We aim to provide our clients with an outstanding legal service.

We will help and support you and most importantly we work hard for you.

Please call us for a free, initial, no obligation chat on 01536 276300 or contact us online.

Free NHS Care and Contributions

One way of avoiding residential care home fees is to apply for free NHS care.  You may be entitled to free NHS care if your “primary need” is for health care or if you end up being sectioned under the Mental Health Act.

General Principles of NHS Care

If you receive nursing care and if your primary requirement is a continuing health care need, or if you are sectioned under the Mental Health Act, then your care will be provided and funded in full by the NHS local Primary Care Trust.  This care should be provided irrespective of what assets you hold and without seeking payment from you for the care you receive.

NHS Assessment

It is crucial you arrange an assessment for NHS continuing care and compare your “Care Plan” with the eligibility criteria for NHS funding.  The criteria for assessment is different in certain areas of the UK, as each Primary Care Trust has its own interpretation of the basic national guidelines for eligibility criteria. We can help you with the assessment process. Please call us for a free initial telephone chat.

The Couglan Case

The availability of free NHS care has been the subject of court litigation over the years. In the case of Couglan in 1999, the court decided that patients whose primary needs were nursing care were the responsibility of the NHS, and therefore the care must be provided free of charge. The Local Authority was only responsible for nursing care that was incidental to the main provision of accommodation. This principle was confirmed in a further important case of Grogan in 2006.

Challenging NHS Decisions

If you believe that you are entitled to free NHS care, but the Primary Care Trust has decided otherwise, then you can challenge the decision.  However, you need to be fully prepared and ensure that you provide as much information and evidence as possible in support of your arguments.  Make sure that you obtain the full details of the Primary Care Trust decision and you obtain all of your relevant medical records.  It is possible to claim a refund on care fees after a loved one has died if you believe a decision that was made when they were alive was incorrect. We can help you with the assessment process. Please call us for a free initial telephone chat.

Summary

Arrange a free NHS assessment to see if you are entitled to free NHS Care.

Obtain copies of the Care Plan and compare with the eligibility criteria for NHS funding.

Challenge the decision – If the decision is that you are not entitled to free NHS care.

Re-apply for funding – If there is any deterioration in your condition.

Please call us for a free initial no obligation telephone chat.

Registered Nursing Care Contribution

If you receive a mixture of nursing and social care, then you can claim a contribution towards the care fees.  This can help reduce or avoid a care home fee claim.

Mix of Care

If you require a mixture of nursing and social care in a nursing home, a registered nurse will assess the level of care needed.  If the nursing care is incidental to the accommodation required and you are in the nursing home primarily as part of a social care package, you may be charged care fees by the Local Authority.  You may however, be able to claim a contribution towards the care fees which will depend upon the level of nursing and social care needed.

Non-Residential Care At Home Services

If you are receiving care at home the Local Authority has discretionary powers and may charge only a reasonable amount for providing those services.

Respite Nursing Care

If you stay in a nursing home for a short respite period then it is also possible to claim a NHS nursing care contribution.

Health Deterioration Claims

If you are unable to claim for NHS contributions at the moment, this can change in the future.  If your circumstances alter, then it may be possible for you to lodge a new application for free NHS care to cover any changes that occur.

Summary

  • Arrange a free assessment to see if you are entitled to a contribution towards the care costs.
  • Obtain copies of the Care Plan and compare with the eligibility criteria for NHS funding.
  • Challenge the decision – If the NHS decides that you are not entitled to a contribution towards NHS care.
  • Re-apply for funding – If there is any deterioration in your condition.

Please call us now on 0800 3 10 11 12 for a free, initial, no obligation 15 minute telephone chat or video conference call.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Income and State Benefits

Treatment of Income

Another way of avoiding care home fees is to look to maximise the amount of income that you are entitled to and in addition, to claim your full welfare benefits entitlement.  If you enter into Residential Care then usually almost all of your income (except certain state benefits) will be fully taken into account in any Local Authority assessment.

Treatment of Income

As a general rule any income you receive is taken fully into account and has to be used toward paying the cost of residential care fees.  There are some circumstances in which your income is partly disregarded or can be totally disregarded.

Tariff Income

Tariff income is deemed to be income, even if it is not actually received.  It includes income that you may have deprived yourself of, income that would be available if claimed or income due to be received but not yet paid.  Capital can be treated as a source of income by the Local Authority.  If you have capital of between £14,250 and £23,250 then each £250 (or part of £250) over £14,250 of capital produces a “tariff income” of £1 per week.  For example, if you have £15,250 in capital you’ll be treated as if you had an extra £4 of income a week.  You may have to pay the “tariff income” from your capital, which over time will reduce your capital levels.

Disregarded Benefits

Certain benefits can be disregarded.  For such as Disability Living Allowance (“DLA”)  mobility component, income from the Independent Living Funds (“ILF”), special payments for war widows/widower, some income from the savings credit part of Pension Credit and 50% of an occupational or personal pension.

Personal Expenses Allowance

If you are in residential care accommodation and receiving help from a Local Authority you are entitled to only a very small allowance of just £24.90 (as at 2018) for personal expenses e.g.  clothing, toiletries, treats and presents for relatives and friends.

The Local Authority sometimes has discretion to allow you a larger personal expenses allowance.  This is relevant if you have a dependent child or/are a temporary resident and need to meet the costs of your own property.  If you are likely to experience hardship, you should complain to the Local Authority and ask them to increase your allowance.

Summary

Use your full personal expenses allowance – Check to make sure that you use the full amount of your Personal Expenses Allowance.  If you are likely to experience financial hardship then ask for an increase.

Beware of tariff income.  If you have savings between £14,250 and £23,250, be careful of any tariff income that might be included in any assessment.

Treatment of Social Security and Welfare Benefits

Introduction

If you go into care, then the Local authority will claim most of your income and State Benefits to help pay for your care. Make sure you claim your full entitlement to any social security and welfare benefits. This can offer significant opportunities to increase the income available to be used to help pay for any residential care fees.  Visit your local Citizens Advice Bureau or Welfare Rights Organisation for information and advice.  The main benefits you might be entitled to are Pension Credit, Income Support, Attendance Allowance (over 65) and Disability Living Allowance (under 65).

Retirement Pension

Retirement pension can of course be claimed by you but will be used to help pay for your care.

Pension Credit

It may be possible to claim for Pension Credit, if you are over 60 but will be used to help pay for your care.

Attendance Allowance

This benefit is tax free for people over 65 and who need help with personal care due to physical disability or mental disability.  There are two rates, dependent on the level of help required.  This will be used to help pay for your care.

Disability Living Allowance

Disability Living Allowance is similar to Attendance Allowance for people under 65 who need help with personal care due to physical disability or mental disability.  This is currently in two parts, a Care Component and a Mobility Component.  This will be used to help pay for your care.

Income Support

It may be possible to claim Income Support, if you are under 60.  Under 60’s should have capital of less than £16,000.  If you are over 60 then you should claim Pension Credit instead.

Summary

Visit your local Citizens Advice Bureau or Welfare Rights Organisation for a fee assessment to see if you are entitled to any social security and welfare benefits.

Challenge the decision – If the decision is that you are not entitled to certain social security or welfare benefits, then challenge the decision.

Re-apply for benefits – If there is any change in your personal or financial circumstances apply for a new re-assessment.

Please call us now on 0800 3 10 11 12 for a free, initial, no obligation 15 minute telephone chat or video conference call.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Treatment of Capital and Savings for Residential Care Fees

Introduction

Savings under £14,250 are completely exempt per individual.

Savings between £14,250 and £23,250 are partially taken into account.

Only savings over £23,250 can be fully claimed by the Local Authority.

Definition of Capital and Savings

There is no firm definition of capital.  Generally, capital refers to property, land, National Savings, Premium Bonds, stocks and shares, savings in bank and building society accounts, SAYE schemes, unit trusts, cash and trust funds.

Capital less than £14,250

Where you have capital of £14,250 or less, (as at April 2018) it will be fully disregarded and would not be treated as generating any income.  Capital and any interest from it is that of yours alone.  You will be able to avoid paying care home fees if your capital and other assets and savings are below £14,250 (subject to your income being taken into account).

Capital between £14,250 and £23,250

Where you have capital between £14,250 and £23,250, (as at April 2018) then an income means test will be applied and you will be deemed to have “tariff income”.   You may have to pay the “tariff income” from your capital, which over time will reduce your capital levels.

Capital over £23,250

At present, if you have capital over £23,250, (as at April 2018) then you will pay the full standard fee for your residential care, regardless of income.  Various sources of income will be either fully or partially disregarded in a means test.  For example, personal expenses of £24.90 per week are disregarded.

Prepay Your Funeral

If your cash assets are in excess of either the upper or lower limits, then consider prepaying your funeral to help reduce the value of those assets.

Summary

Organise your savings – So that you have only £14,250 or no more than £23,250.

Have separate bank accounts – If you have joint accounts with your partner try and split the savings into separate accounts (with ideally £14,250, or no more than £23,250, in each name).

Prepay your funeral and pay off all outstanding loans and debts – If you have capital over £14,250 and reduce the capital in your account.

Consider other types of investments – Converting some of your savings over £14,250 into other forms of investments, such as Investment Bonds (see later) that are potentially exempt from residential care fees.

Insurance Policies and Home Income Plans for Residential Care Fees Protection

Introduction

To avoid care home fees, then consider funding your potential residential care fees by paying a lump sum in advance into an insurance policy or a Home Income Plan.

General Principle

If you are thinking about formally and properly planning for your potential admission into residential care then you may want to consider funding the care through a suitable investment vehicle.  Specialist advice should be sought from an Independent Financial Adviser (“IFA”) who can provide details on the most appropriate investment options.  The two main types of planning for long term care investment are the following:

Insurance Policy

The types of insurance policies that can be used for residential care fees planning are called “Long Term Care Insurance” or “Immediate Care Fee Payment Plans”.  They can be purchased by instalments or by paying a single lump sum premium.  They are a useful way to purchase cover for future residential care fees should you have to go into residential care.  This can sometimes provide a tax-free income higher may normally be achieved from traditional investments or annuities.  With this type of investment, it is possible to cover the costs of residential care for life, while still leaving an inheritance for your family.

Home Income Plans

The second type is cover for future care costs comes from using a “Home Income Plan”.  This involves the payment in advance of a lump sum in return for a charge over your home.  That is then used to purchase an annuity, paying you a fixed income which can be used to pay towards any residential care fees.  If you are on a low income this can be a useful solution.

Summary

Seek advice from a specialist Independent Financial Adviser (“IFA”) – To help and advise you on whether investing a lump sum into an insurance policy or Home Income Plan might be suitable for you.

Investment Bonds for Residential Care Fees

Investment Bonds are often treated as exempt assets by the Local Authority.  Converting some of your assets into Investment Bonds, as part of an overall investment strategy, can be a useful way of protecting some of your assets from being taken into account in any future residential care fees assessment.

Investment Bond

Investing some of your capital assets into Investment Bonds, as part of an overall investment strategy, can be a useful way of ring fencing and protecting some of your capital, while still retaining access to those assets if you ever needed to go into residential care.  This is because Investment Bonds are treated as a life assurance policy rather than a capital investment.

The Technical Position

Schedule 4, Paragraph 13 National Assistance (Assessment of Resources) Regulations 1992 states “The surrender value of any policy of life assurance” is a capital asset, which is normally disregarded under the Local Authority means-test.  Sadly there is no clear legal definition of what is a “policy of life insurance”.  This has led to confusion, particularly in relation to Investment Bonds, which carry an element of life cover.

Deprivation of Assets

Paragraph 6.061 of CRAG states a deprivation of capital may occur if “capital has been used to purchase an Investment Bond with life insurance.  This means that if you deliberately convert some of your capital into Investment Bonds solely to protect them from residential care fees, then it will be treated as a deliberate depreciation of capital.  If however, you convert assets into Investment Bonds as part of a wider general reorganisation of your financial affairs, then it might not be treated as deliberate depreciation of capital.

Be Careful

You need to be careful when investing in Investment Bonds.  It is essential that you seek specialist advice from a solicitor and an Independent Financial Adviser (“IFA”).  Converting some of your capital assets into Investment Bonds is a good way of protecting some of your assets so long as it is part of an overall investment strategy.  Investment Bonds should not be relied upon as an easy way to protect assets at the last moment before entry into residential or nursing care.

Summary

Seek advice from a solicitor and an Independent Financial Adviser (“IFA”) – Who specialises in these matters and is able to properly help and advise you on whether this might be suitable for you.

Re-invest some of your capital assets into specialist Investment Bonds – Investment Bonds are generally not taken into account in any Local Authority assessment.

Consulting an Independent Financial Adviser (“IFA”)

Arrange for a financial health check and re-organisation of your financial circumstances to be carried out by an Independent Financial Adviser (“IFA”).

Why Choose An Independent Financial Adviser (“IFA”)?

Independent Financial Advisers (“IFA’s) are the only type of financial advisers who are independent and able to select from all the investments available on the marketplace – making sure you get the right product for your individual needs.  Many banks, building societies and other financial institutions are “tied” and can only recommend investment from one particular source.  IFA’s are not tied and can advise you on all the investments that are available.

IFA’s are bound to the Financial Services Authority rules, which oblige them to provide advice most suited to your personal requirements and your risk outlook.

When recommending a particular investment IFA’s provide written reasons why they think it is right for you, making sure that you are fully informed before committing yourself to any decision.

Deliberate Deprivation

If you have invested or reorganised your assets with a view to avoiding paying residential care fees then this will be treated by the local authority as a deliberate disposal or deprivation and will be successfully challenged and the assets reclaimed.

We can Help

We can recommend an IFA that will help you and who will offer you a free initial no obligation chat with no pressure.

Summary:

Find a specialist IFA – We can recommend an IFA who has the right levels of experience and expertise in the matter to help you.

Please call us now on 0800 3 10 11 12 for a free, initial no obligation 15 minute telephone chat or video conference call. Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face. You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email. Wherever you live in the UK, we can help. Distance is not a problem.

Exempt Assets

Certain types of assets are fully exempt from a residential care fees assessment and therefore care home fees can be avoided.

Capital That Is Disregarded Indefinitely

Certain types of capital and assets can potentially be disregarded indefinitely by the Local Authority in my residential care fees assessment.  These include:

1.  Personal possessions;

2. Surrendering value of a life insurance policy;

3. Capital value of an annuity;

4. Capital value of an occupational pension;

5. Value of a Reversionary Trust (Trust Fund not land);

6. Value of a Life Interest (Trust Fund and land).

Personal Possessions

Personal possessions such as jewellery, paintings, antiques, cars and other personal possessions are exempt from assessment, unless the Local Authority believes they were purchased with the intention of deliberately reducing your capital.

Capital That Is Disregarded For a Specific Period

In some situations, capital may be disregarded for a specified time.  For example, during the first 12 weeks of a permanent stay in a care home.  If you are self-employed worker, business assets will be disregarded for stays of 26 weeks or longer.

Assessing Separate Bank Accounts

When considering income and capital, the Local Authority should only be looking at your own assets not of anybody else.  Only your share of any joint accounts will form part of your assessment.  Joint accounts will pass by survivorship on death of a joint owner, and severance of a joint tenancy is not classed as a deliberate deprivation.  Prior to any Local Authority assessment, joint accounts should be closed and separate new ones opened, and it is advisable to split financial resources and open separate bank and building society accounts as soon as possible.

Deliberate Deprivation

If you convert your savings or other assets into “exempt assets” with a view to avoiding paying residential care fees then this will be treated by the local authority as a deliberate disposal or deprivation and will be successfully challenged and the assets reclaimed.

Summary

Check if you own any exempt assets –  If you hold any assets that are exempt make sure they are not taken into account when the Local Authority carry out an assessment.

Business Assets – Residential Care Fees Protection

If you own a business and can still take some small part in running that business then your business assets can be disregarded in any care fees assessment.

Self-employed Business Assets

As a general rule, the business assets are included in any Local Authority residential care assessment.  If you are resident in a care home and you can continue to provide key important business information and advice from the care home, even for a couple of hours each week, then those business assets can be for that period of time exempt.  Business assets will be disregarded for a reasonable period to allow them to be sold and disposed of.

Joint Business Assets (excluding land)

If any business assets (except land) are owned jointly with another person, then that person will be treated as owning their share equally and will be deemed to own one half of the business assets.

Joint Business Assets of Land and Buildings

If any business assets of land or buildings are owned jointly with another person then the value of the residents share in the land or buildings will be deemed as one half of the land or property, less 10% joint ownership discount.

Summary

If you are able to spend even a small amount of time helping to run the business (e.g.  a couple of hours a week providing key advice from your care home) then you may be able to claim that those business assets can be exempt.

Allow for a reasonable period of time to sell the business assets – The business assets will be disregarded for a reasonable period of time to allow them to be sold and disposed of.

Make sure that all properties and land owned jointly with another person are taken into account.

Please call us now on 0800 3 10 11 12 for a free, initial no obligation 15 minute telephone chat or video conference call.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Deprivation of Assets for Residential Care Fees

If you deliberately deprive yourself of an asset then the Local Authority can still take the asset into account in any assessment even if you no longer own or possess that asset.

Deprivation of Assets

Deprivation of assets is an important concept to understand when considering how you can shield your assets from being claimed by the Local Authority.  If you deprive yourself of an asset then the Local Authority can treat the deprivation of that asset whereby the asset is still treated as belonging to you for the purposes of assessing your entitlement to care fees.

What is Deprivation?

Deprivation is where you take steps so that an asset previously owned or possessed by you is no longer in your ownership or possession.  The Local Authority will consider evidence about the deprivation and whether you in their reasonable opinion deliberately set about reducing the level of your assets to avoid paying for residential care.  Unless the Local Authority believes there was a valid reason for disposing of the assets (not related to residential care fees) then they have the legal right to assume that the disposal was a deliberate deprivation related to residential care fees.

Examples of Deliberate Disposal/Deprivation

The following are examples of deliberate deprivation:

1. Making a lump sum gift or payment to someone else;

2. A substantial expenditure has been incurred (e.g.  an expensive holiday);

3. Transferring ownership of a property to someone else;

4. Money placed into a Trust that cannot be revoked;

5. Converting assets to a disregarded form (e.g.  personal possessions);

6. Signs that capital has been reduced by living extravagantly.

Timescales of the Disposal/Deprivation of Assets

When considering the timescales for deprivation, there is no time limit that can be imposed.  However, as a general rule, the longer the time between the disposal of an asset and liability for residential care charges, the less likely it is that the disposal will be challenged.  It is arguably unreasonable for a Local Authority to challenge if you disposed of an asset in order to reduce care charges, if the disposal took place at a time when you were fit and healthy and could not have foreseen the need for a move to residential accommodation.

Summary

Have a valid reason – If you do dispose of or give away an asset, make sure that you record a valid reason (not related to avoiding residential care fees) for disposing of or giving away that asset.

If you are looking to avoid paying care home fees, then seek legal advice. Call us for a free initial no obligation telephone chat.

Significant Operative Purpose for Residential Care Fees

If you dispose of an asset for a genuine reason not in any way related to avoiding paying residential care fees then the Local Authority should not be able to take the disposal of that asset into account in any means assessment.

Test of Significant Operative Purpose

The test of significant operative purpose considers whether you deliberately set about disposing of assets, with or without the intent to avoid paying residential care charges.  Unless the Local Authority believed there was a valid reason for disposing of assets (not related to residential care fees) then they have the legal right to assume that the disposal was related to residential care fees.  The Local Authority can then treat the assets as still belonging to you as notional capital.

Factors That Must Be Taken Into Account

If you have disposed of assets, then you must make it clear if there were legitimate reasons for the disposal.  All relevant factors must be taken into account.  For example the reason for the disposal, the timing of the disposal, the state of your health and personal needs, as well as whether you could have reasonably foreseen any need to move into residential care.

Examples of Genuine Disposal/Deprivation

The following are examples of genuine disposal of an asset:

1. Prepaying your funeral;

2. Repaying outstanding debts or loans;

3. Incurring reasonable expenditure on yourself (e.g.  holidays, treats, etc.);

4. Spending money for health care reasons, such as paying for a carer or buying equipment to assist with a disability;

5. Spending money to supplement your lifestyle, for example if you needed money to help supplement a low pension;

6. Making better provision for you and your family’s future such as Inheritance Tax planning.

Summary

Have a good valid reason – For disposing of the asset.  Ensure that if you do dispose of or give away an asset away that you have and record a valid reason (not related to avoiding residential care fees) for giving away that asset.

If you are looking to avoid paying care home fees, then seek legal advice – From ourselves or a solicitor that specialises in this area, and be able to assess and advise on whether this might be suitable for you.

Gifting to Preserve Assets for Residential Care Fees

Some people give away assets to family and friends in an attempt to reduce their own assets and avoid paying care home fees.  If you make a gift the Local Authority will argue that without a very good reason for making the gift, the assets forming that gift will still be treated as belonging to you and taken into account in any Local Authority assessment for residential care fees even if you no longer own or possess that asset.

Deliberate Deprivation

Gifting to family and friends is a strategy that some people use for preserving assets and keeping inheritance within a family.  The problem of gifting any assets is that it is often seen by the Local Authority as an act of deliberate deprivation.  This will then result in the Local Authority treating the gift as a notional asset that still belongs to you for the purposes of carrying out an assessment for residential care fees.

Other Risks of Gifting

Other issues that can arise if you decide to gift money is that you have the risk that the person you gifted the asset to becomes bankrupt, gets divorced, dies, falls out with you or disposes of the asset themselves.  If this happens, you could lose your assets completely or lose control over the money that you have gifted, potentially ending up worse off than if you had declared it.

Gifting Your Home

Much like gifting money, you can put yourself at risk if you gift your home to try and preserve this asset.  This used to be a popular strategy of disposing of a home but it is a strategy that no longer works, because the Local Authority will regard the gifting of the home as deprivation of an asset and will still treat it as a notional capital asset belonging to you.

Summary

Identify a valid reason for making the gift – Always think very carefully before making a gift and try to identify a valid reason for making the gift that the Local Authority might accept.

If you are looking to avoid paying care home fees, then seek legal advice. Please call us for a free initial no obligation telephone chat.

Please call us now on 0800 3 10 11 12 for a free, initial no obligation 15 minute telephone chat or video conference call.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Gifts for Inheritance Tax Purposes – Residential Care Fees

Making gifts during your lifetime for Inheritance Tax purposes can be a useful way of reducing your assets without the Local Authority challenging them.

Inheritance Tax

Inheritance Tax is a tax payable on your estate after you die.  The tax is at a rate of 40% on all your estate assets over £325,000 (as at April 2018).  Fortunately, there are several ways to avoid or reduce paying Inheritance Tax.  You can use some of these ways to reorganise your assets to reduce paying Inheritance Tax which might also avoid paying residential care fees.

Lifetime Gifts for Inheritance Tax Purposes

It is possible to make a number of small gifts to your family, friends, charities and so on to reduce the value of your estate for residential care fees purposes.  These include:

  • Potentially exempt transfers – If you survive for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value;
  • Annual allowance – It is possible for Inheritance tax purposes to make gifts up to a total of £3,000 in any year either as a single gift or several gifts adding up to that amount;
  • Small gifts – gifts of up to £250 per year to any one person;
  • Marriage gifts – gifts in consideration of marriage of up to £5,000 by any parent to their child or up to £2,500 by a relative of the married couple or up to £1,000 for any other non- related person;
  • Other gifts – gifts to charities or political parties or Housing Associations or for public benefit or historic buildings maintenance funds or employee trusts can also be made.

Seek Specialist Advice

This can be a complicated area and it is advisable to seek advice if you are thinking about gifting money or assets for inheritance tax purposes, to discuss whether any gifting could be seen as deprivation and hence counted as notional capital when being assessed by a Local Authority.

Summary

Seek advice from a solicitor such as ourselves and an Independent Financial Adviser (“IFA”) that specialises in Inheritance Tax matters and is able to properly assess and advise you on whether this might be a suitable option for you.

Please call us now on 0800 3 10 11 12 for a free, initial no obligation 15 minute telephone chat or video conference call.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Home and Property

Initial and/or Temporary Stay In Care Home

Introduction

The first 12 weeks of a permanent stay in a care home is free (and your assets will be disregarded).

If your stay in a care home is temporary it should also be free (and your assets will also be disregarded).

General Principles around Disregarding Assets

As a general rule, if you are admitted into care then your property, savings and other assets will be taken into account in a Local Authority means assessment.  There are two exceptions set out below.

1. 12 Week Property Disregard Conditions

The value of your property, savings and other assets will be ignored during the first 12 weeks staying permanently in a care home.

2. Temporary Stay in a Care Home

If you are staying in a care home temporarily, then the value of your home is ignored if there is a significant likelihood that you will at some stage be returning to your property.

Summary

Check that the first 12 weeks of any permanent stay in a care home is free and that your assets are disregarded.

If your stay in a care home is temporary check and make sure that your care is free and that your assets are disregarded.

Home and Property Exemptions 

Your property will be exempt from a residential care fees assessment if it is occupied by your spouse/partner or by relatives under the age of 16 or over 60.

Occupancy by Spouse

If you enter into a residential care home and your spouse or partner continues to reside in the property, then it will be exempt from any residential care fees assessments for the duration of their occupancy.

Occupancy by Relatives under 16 or over 60

When a property has occupants who are relatives under 16 or over 60, then the value of the property will be disregarded as an asset.  Occupants can include spouses, partners, relatives over 60 or incapacitated, or dependent children under 16.

House Sharing

It may also be possible to enter into house sharing arrangements with an eligible person to prevent the property from being taken into account as capital, however house sharing arrangements would only be a practical solution in a minority of cases.

Local Authority Discretion

The Local Authority also has the discretion to disregard the value of a home if someone who lives in it doesn’t fall into one of the above category e.g.  a long-term carer or housekeeper, who has given up their own home to care for the resident.

Jointly Owned Property

If you jointly own a property with another person who is not your spouse, then the Local authority can take your share of ownership of that property into account. The value of your share will be dependent on a number of factors including when, and under what circumstances the property was purchased, whether the other joint owner is residing in the property and other factors. Usually a reduction of ten percent is allowed for allow for the costs of selling.

Summary

If you have occupants aged under 16 or over 60 that are rightful residents in your property then your property will be disregarded.

Ask the Local Authority to exercise its discretion – If you have unusual or exceptional circumstances then ask if the Local Authority if it will exercise its discretion to disregard the property.

Renting the Home – Residential Care Fees Protection

You may find it more financially advantageous and beneficial to rent out your home and use the rental income to help pay for your care fees.

Check Your Finances

You need to be careful with this option as it is unlikely that the rental income from your home will cover all the residential care fees and you will need to make sure that you have sufficient income from other sources to cover any difference between the care fees and the rental income.

Property Still Treated As an Asset

If the home is rented out then the rental income being received will still be taken into account on a financial assessment.

Summary

Carry out some research to identify the likely rental income you might receive and to what extent that income will help cover the cost of care fees.  Unless you have an exceptionally large home it is unlikely your rental income will be enough to cover all of your care fees and you will need to make sure you have income or capital from another source to cover any shortfall.

Seek advice from a solicitor that specialises in these matters and also from a reputable estate agent and is able to properly assess and advise you on whether this might be a suitable option for you.

Deferred Payment Agreements – Residential Care Fees

Introduction

Deferred Payment Agreements are a useful way of arranging for residential care fees being paid.   You enter into an agreement with your Local Authority to provide you with an interest free loan in return for the Local Authority securing a charge against your property and for your care fees to be repaid when your property is eventually sold.

How Deferred Payment Agreements Work

Since 2001 Local Authorities have been able to offer deferred payment agreements.  The Local Authority (at their discretion) will allow the payment of some care fees to be deferred by effectively giving an interest free loan that is repaid when the property is sold.   This is done on condition that you grant the Local Authority a charge over your property.  This secures the loan and ensures that it will be repaid when your property is sold.  It is also possible to arrange a discount on the amount of council tax payable.

Advantages of Deferred Payment Agreements

There are a number of advantages that come from the deferred payment option.  When using this option, you are able to make a saving by paying the block rate for care.  You also retain ownership of your property.  This gives you the opportunity to rent out your home and generate an ongoing income to offset the cost of care.  Possibly the property may even appreciate over time, and hopefully there will still be some money that can be passed on to your family as an inheritance.

Disadvantages of Deferred Payment Agreements

It is unlikely that the rental income generated by renting out your property will provide sufficient income to cover the costs of your care so you will need to ensure that there are funds elsewhere that cover any shortfall between the costs of care and the rental income.  Some Local Authorities might not offer this option in any case.

Summary

Ask your Local Authority if they offer a Deferred Payment Agreement – If so on what terms.

Seek advice from a solicitor such as ourselves.

Equity Release Schemes – Residential Care Fees Protection

Introduction

An equity release scheme is a mortgage you take out against your home and release some of the equity/profit in your home, and you can use those loan proceeds to spend on things you want (e.g. improvements, holiday, new car etc.) and/or even to pay for residential care fees.

What Is Equity Release?

Equity release is a way of re-mortgaging a property and using the money released for other purposes without having to sell up and move.  A loan is made against the value of your property, usually of around 50%, and a mortgage charge is secured against the property.  You receive a lump sum of cash or a steady flow of income while you remain in your home rent free as long as you like.  With an equity release scheme, the interest on the loan is deferred and the loan and accumulated interest is repaid when the property is sold, usually upon you going into residential care, or after your death.

Long Term Care Fee Risks

Having money locked up in your property can work against you should you go into long term care.  Equity release schemes can provide you with a lump sum or an income that can be used to pay for your residential care fees, either in advance or whilst you are in care, or even to spend on other areas such as holidays, new car, etc.

We Can Help

If you are looking for an extra source of income but want to stay in your home, call us for a free, initial, no obligation chat to and we can refer you to a specialist Independent Financial Adviser (“IFA”) in your area.

Summary

Seek advice from a solicitor such as ourselves and from an IFA that specialises in these matters and are able to properly help and advise you on whether this might be suitable for you.

Please call us now on 0800 3 10 11 12 for a free, initial, no obligation 15 minute telephone chat or video conference call.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Legal Solutions

Seek Specialist Legal Advice

Free Initial No Obligation Telephone Chat

If you are considering any of the legal options below, then you need to seek specialist legal advice. Please call us on 01536 276322 for a free no obligation initial telephone chat. The main options include: –

  • Will Trusts
  • Personal Family Loans
  • Discretionary Trusts
  • Life Interest Trusts
  • Property Trusts

Will Trusts – Residential Care Fees

Will Trusts are a good way of protecting and ring fencing your half share of your home and your other assets from being claimed by the Local Authority if you die and your spouse/partner/beneficiary subsequently goes into residential care.

Make a Will

Making a Will provides you with the peace of mind that your family and loved ones will be protected and taken care of properly in the event of your death.

Will Trusts

Will Trusts are an excellent way of protecting your half share of assets if you die and your spouse/partner/beneficiary subsequently goes into residential care.   The most common way is to create a Will Trust specifically in relation to your home.   Most properties are held by couples on what is called a “joint tenancy”.   If that joint tenancy is severed, then a “tenancy in common” is created.   This then means that on the first death, instead of the property automatically transferring to the surviving spouse or partner (as it would on a joint tenancy), the property instead falls into deceased’s estate and is disposed of in accordance with the terms of their Will.   Therefore, you serve the joint tenancy and create a tenancy in common, and you then make new Wills including a “Will Trust”.  A “Will Trust” will leave your half share of the property not to your spouse or partner, but instead direct to your children or grandchildren, but will give your spouse a right to occupy and continue to live in the property until their death, at which point your half share then possess to the children/grandchildren.

Protect Half of Your Property

The benefits about setting up a Will Trust in the above way is that you can protect and ring fence your half share of the property if you die and your spouse/partner/beneficiary subsequently goes into residential care.  Your share is then protected and prevented from falling into the hands of the Local Authority if you die and your spouse/partner then subsequently enters into residential care.   This way of preserving your assets is far less complicated and expensive than some of the other options that are available.  However, using this route only protects half of your assets and not all of them.

Cash Assets

Other assets such as building society accounts, bank accounts and so on can be protected as well by using the same principles.  However, you need to take more care when dealing with cash assets so that your surviving spouse has the capital they need to continue living in the manner that they have been accustomed to.

Summary

Make new Wills with a Will Trust included – If you are married or cohabiting with a partner then make new Wills that include a “Will Trust” to ring fence and protect your half of the assets. Please call us for a free initial no obligation telephone chat on 01536 276322 or contact us online.

Personal Family Loans and Legal Charges – Residential Care Fees

If a family member or close friend has provided you with help, care and assistance for an agreed fee, and has not been paid yet, then consider securing any outstanding sums owed to your family or friends as a mortgage or legal charge against your property.

Repayment of Loan

If you have agreed with a family member or close friend for them to look after you for an agreed fee that has not been paid then you could consider repaying any sums due to them or securing the sums against your home as a mortgage or legal charge.   If you ever enter into residential care then the loan or charge would reduce the value of your assets and would have to be taken into account by the Local Authority.

Example

For example, you might have agreed that your adult son will spend 3 hours a week doing your gardening and DIY at a rate of £10 per hour.  If your son has carried out this work for say 3 years and has not been paid, then he would be owed the sum of £4,780.  You might have agreed for that sum and all future similar sums to be not paid to your son straight away, but to instead be legally secured against your property, and to be repaid when the property is sold.  This means that if you ever went into care and your property had to be sold then your son should receive his money back first before the Local Authority could claim anything from your home.

Summary

Seek advice from a solicitor that specialises in these matters such as ourselves and is able to properly assess and advise you on whether this might be a suitable option for you. Please call us on 01536 276322 for a free initial no obligation telephone chat or contact us online.

Discretionary Trusts

Setting up a Discretionary Trust and placing your assets into that Trust can (depending on the reasons and your personal circumstances) sometimes protect and ring fence those assets from being claimed by the Local Authority.

Reasons for Setting Up a Discretionary Trust

If you set up a Discretionary Trust for genuine reasons that are not related to avoiding paying residential care fees, then there is a chance that it might not be challenged. However, if the Discretionary Trust is deliberately set up to avoid paying residential care fees or if you are already in receipt of some sort of support or care from the Local authority then there is a very good chance that it will be successfully challenged and claimed by the Local authority to pay for your residential care fees.

Deprivation of Assets

Placing assets into a Discretionary Trust can be regarded as deprivation of asset and could be assessed by the Local Authority as notional capital.  However, if you are named as one of the beneficiaries of the trust and your interest is discretionary, then it becomes difficult to accurately quantify and the residential care notional capital rule could be excluded.  It is however essential that some other positive purposes and reasons are stated in the trust deed, such as you wanting to make better provisions for your family.  If you wish to proceed with this option, it is essential that you seek specialist legal advice. Please call us for a free initial no obligation telephone chat on 01536 276322 or contact us online.

Discretionary Trust Benefits

A general Discretionary Trust is a very flexible arrangement.  If you have identified a particular group of people you want to benefit but are unsure which of them, in the future, will need help or in what proportions, e.g. you might like to set aside capital for your children and/or grandchildren then this sort of trust could be useful.  Some might be more in need than others and family and financial circumstances could change from year to year.  Being a beneficiary of a Discretionary Trust gives no entitlement to receive anything from the trust.  Who receives capital advances or the income arising would normally be at the trustees’ discretion.  A Discretionary Trust can last for up to 80 years and income can be accumulated for up to 21 years.

Summary

If you are looking to avoid paying care home fees, then seek legal advice from a specialist solicitor such as ourselves to assess and advise on whether setting up a discretionary trust would be of use to you. Please call us for a free initial no obligation telephone chat on 01536 276322 or contact us online.

Interest in Possession Trusts

Placing your property into an Interest in Possession Trust can help protect and ring fence your home from being taken into account by the Local Authority for residential care fees.

Interest In Possession Trusts

Setting up an Interest in Possession Trust is a useful way of making provision for estate planning and asset protection.  An Interest in Possession Trust is often used in a Will when a person dies leaving a surviving spouse e.g.  “To my wife for her life and then to my children.” The wife/ widow can enjoy the assets placed in the trust (shares, cash etc or the use of the family home) but is prevented from dissipating the trust capital.  This can ensure that the children receive their inheritance.

How an Interest in Possession Trust Works

An Interest in Possession Trust can be set up so that your property and other assets are placed in to the trust, the trust would own your property.  This means that you no longer technically own your home or assets and therefore they might not be taken into account in a Local Authority assessment.  You would then include permission that your spouse could occupy the property rent free for the rest of their life.  Also, that any income generated from the trust is used for your spouse’s benefit.  On your spouse’s death the trust property then passes onto other relatives, such as your children.

Reasons for Setting Up a Interest in Possession Trust

If you set up an Interest in Possession Trust for genuine reasons that are not related to avoiding paying residential care fees, then there is a chance that it might not be challenged. However, if the Trust is deliberately set up to avoid paying residential care fees or if you are already in receipt of some sort of support or care from the Local authority then there is a very good chance that it will be successfully challenged and claimed by the Local authority to pay for your residential care fees.

Summary

Seek advice from a solicitor that specialises in these matters such as ourselves and is able to properly help and advise on whether this might be a suitable option for you. Please call us for a free no obligation initial telephone chat on 01536 276322 or contact us online.

Proprietary Estoppel

Proprietary Estoppel is a legal concept where it is possible for somebody (e.g.  a close relative) to claim that as a result of money they have spent or given you, or work they have carried out or something they might have given up that they now have a prior right to your assets and therefore might be able to prevent the Local Authority from being able to claim and sell that asset or property to pay for your care fees.

Proprietary Estoppel is a complicated area which can provide assistance in specific circumstances.  In basic terms, this refers to a situation where one person “A” has acted to his or her determent on the faith or belief which was known and encouraged by another “B” that he either has or is going to be given a right in or over “B’s” property.  In this situation “B” cannot insist on his or her strict legal rights if to do so would be inconsistent with “A’s” belief.

Residential Care Application

Sometimes this principle can be applied in relation to protecting property from being taken into account in relation to residential care fees.  For example you may have agreed with one of your children that if they lived with you and spent time and money looking after and caring for you, that in return you promised that you would hold the property that you own on trust on their behalf.  In this example you and your child could enter into an agreement to legally reflect that arrangement.  Because your child has a prior right to the home that should then prevent the Local Authority from taking it all into account in any residential care fees assessment.

Summary

Consider if this might apply to you. Seek advice from a solicitor that specialises in these matters such as ourselves and is able to properly help and advise you on whether this might be a suitable option for you. Call us for a free no obligation initial telephone chat on 01536 276322 or contact us online today.

Important Disclaimer

Taking actions with the deliberate sole intention of avoiding paying residential care fees rarely works and will be treated by the local authority as a deliberate disposal or deprivation and will be successfully challenged and the assets reclaimed.

However, if you dispose of an asset for a genuine reason that is not related to avoiding paying residential care fees then there is a chance that it might not be challenged. Therefore, by taking actions for other reasons that are unrelated to residential care fee protection that can work.

Basically, there are legally right and wrong ways of taking actions to reduce paying residential care fees, within the law, and of not falling foul of the deliberate disposal or deprivation rules. However, we can only advise and help on using the legal and legitimate ways of doing this. If we are uncomfortable with a potential action, then we will tell you if it’s not a good idea.

It may be legal to take certain actions to protect certain assets from being claimed to pay for residential care fees, but that doesn’t mean that those actions will be effective. The effectiveness of these actions will not be known with certainty for potentially years and possibly much longer. Anyone who believes that there are guaranteed ways of reducing the payment of residential care fees either don’t understand our legal system or is deliberately trying to deceive you. Rarely can anybody say for certain that any actions you might want to take will prove successful, without it being tested by a court. We inform you of the risks, the consequences. Ultimately though, it is important to form your own understanding of the risks and downsides.

Please call us now on 0800 3 10 11 12 for a free, no obligation initial 15 minute telephone chat or video conference call. Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face. You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email. Wherever you live in the UK, we can help. Distance is not a problem.

Property Trusts

Setting up a Property Trust and placing your home into that Trust can be an effective strategy for sheltering and preserving your assets and it is an option that many people consider. If you set up a Property Trust for genuine reasons that are not in any way related to avoiding paying residential care fees, then there is a chance that the property trust might not be challenged by the Local Authority. However, if the Property Trust is deliberately set up to avoid paying residential care fees or if you are already in receipt of some sort of support or care from the Local authority, then there is a very good chance that the property trust will be successfully challenged and claimed by the Local authority to pay for your residential care fees.

Property Trust Information

A typical Property Trust is usually set up so that the trust owns your property, but you would include the right to continue to reside in the property rent free for the rest of your life. It is a very flexible arrangement.  A property trust could be set up either as an Interest in Possession trust or a Discretionary trust or even combining both. It is often set up as a Flexible Interest in Possession Trust. You obviously need to own your own home and ideally you need to have paid off your mortgage.

Reasons for Setting Up a Property Trust

Most people who set up property trusts have various specific reasons for doing so. These reasons might include some of the following:

  • General affection – You may want to recognise the love and affection you have for the proposed recipient in a significant way. This is sometimes done by way of lifetime giving instead of by will.
  • Moral obligations – You may want to feel that you have fulfilled your moral obligations. If the recipient might be expected to be your carer in the future it may be appropriate to recognise that. It may also be appropriate for certain family promises to be met in a formal way.
  • Financial obligations – You may wish to formally recognise the contribution which a family member has made (directly or indirectly) to your property and/or to your lifestyle and personal choices. For example, a house purchase, mortgage payments, an ex-tension, a patio or double-glazing may have been funded by the recipient.
  • Family harmony – Even in the best of families there can be potential for disputes, especially over property and money related issues. It may be necessary to avoid problems on death by recognising the issues now by making a gift of the family home during lifetime.
  • Avoidance of delays on death – You may be concerned to reduce delays on sale of your property if you die. Without a grant of representation, the property cannot be sold. The obtaining of that grant of representation (by the executors if there is a will or by certain specified relatives if there is no will) can take time.
  • Passing on the burden of property ownership – You may want to pass the burden of owning a property on to the next generation. This can be the financial burden as the cost of insurance, upkeep and particularly major repairs may be difficult to fund from pension and interest payments. It can also be a psychological burden. As people grow older they may find it adds to their peace of mind to be ‘free’ from property ownership.
  • Administrative efficiency – As people grow older some feel that all the paperwork relating to property ownership is simply ‘too much’. They want to pass that obligation on to others who will be responsible for it.

Deprivation of Assets

Placing a home into a Property Trust can be regarded as deprivation of asset if you have created the trust and therefore cease to have a beneficial interest in the property and the trust could be assessed by the Local Authority as notional capital.  However, if you are named as one of the beneficiaries of the trust and your interest is discretionary, then it becomes difficult to accurately quantify and the residential care notional capital rule could potentially be excluded.  It is however essential that various positive purposes and reasons unrelated to residential care fees are stated in the trust deed, such as you wanting to make better provision for your family.  If you are considering this option, it is essential that you seek specialist legal advice. Please call us for an initial free no obligation telephone chat.

Exercise Caution

If you are considering setting up a Property Trust in respect of the family home, then you will have your own reasons for that. This raises a very important question: Am I certain I want to do it? It is important to ask this in all cases but even more so when the family home is concerned. It may be your main asset. It may represent your personal and financial security and your care choices. There are many reasons to be cautious. It is very important you are aware that we do not usually recommend that clients set up a Property Trust in respect of the family home, even to their children.

Trusts Information

What is a trust?

‘A trust’ is a relationship which is recognised and enforceable in the courts. Its details are contained in a ‘trust deed’ which is rather like a rule book.

What are trustees?

Where there is a transfer of a home into a property trust then that property becomes ‘the trust fund’. It is put into the names of persons called ‘the trustees’. The trustees have certain powers over the handling of the trust fund for the benefit of ‘the beneficiaries’ named in the trust deed.

You may be a trustee but that is not recommended. It defeats the objective of passing on responsibility properly. Beneficiaries can be trustees but sometimes this can create a conflict of interests. You will need to choose your trustees. A minimum of two and maximum of four should be chosen. It is vitally important that you choose your trustees wisely. The trustees have certain discretions although they must act in accordance with the trust deed.

What must the trustees do?

Trustees do not have any power to go beyond the terms of the trust deed. Most things which a person would want to do with his own money can be done by the trustees for the benefit of the beneficiaries. For example, at an appropriate time the trustees can, upon taking appropriate advice, open and operate a trust bank account, invest money, buy and insure property and purchase help and assistance for the beneficiaries. Standard trust provisions are also used in the trust deed. They provide provisions necessary for the administration of the trust.

The terms of the trust deed

The beneficiaries will usually be you as the person(s) placing the home into the family trust for the duration of your life or lives (or until the trustees–for some good reason–consider otherwise) and then your children. Other options are possible depending upon your circumstances. We can discuss these with you in detail.

Can you continue to live in your home as you do now?

During your lifetime you can have the benefit of what is presently your home. The home can be sold if you need to move with the proceeds being reinvested in another property for you. Alternatively, the proceeds can be invested to generate an income for you as necessary. You do need to be aware that having a property in a trust is not the same as having it in your own name. The trustees can override your interest in the property (and any sale proceeds) if they have a good reason to do so which can be justified at law. This is another reason why we recommend that at least one professional trustee is appointed.

Benefits of a Property Trust

General affection and moral obligations

These can be fulfilled by founding a property trust. You can set matters in motion before you die similarly to an outright gift.

Financial obligations

Founding a family trust can formally recognise the contribution which a family member or other person has made (directly or indirectly) to the property and/or to your lifestyle and care.

Family harmony

It may be desirable to avoid problems on death by recognising the issues now and by doing something about them during your lifetime. A trust can do this as well as an outright gift.

Knowing where the property will pass on your death

Having founded a property trust, you will be able to tell where it will go upon your death. It passes upon the terms of the trust which is already in motion when you die. This can add to your peace of mind.

Avoidance of delays on death

A property in a property trust can be sold without a grant of representation. The trustees can sign all the paperwork.

Passing on the burden of property ownership

You can pass the burden of owning a property on to the next generation using a trust:

The financial burden can be met by the trustees and beneficiaries if they agree to that. They may be more willing to do this once the commitment of a trust is put in place by you.

The psychological burden can be lifted from you. It will become the trustees’ responsibility to deal with the property and not yours.

Administrative efficiency

As you grow older you can rest assured that all the paperwork relating to property ownership will be dealt with by the trustees. Even if you lost your mental capacity the trustees could handle that paperwork for you.

Retention of a place to live

You can remain in the home so long as you wish unless circumstances change, and the property must be sold to buy another suitable property or because you no longer need a home to live in.

Retention of income and discretionary capital payments

If the home is sold, then you remain entitled to an income from it. This means that, if needed, funds will be available to supplement your income should you need to live elsewhere. You can also have payments of income made to you at the discretion of the trustees.

The trustees do not own the property in the trust fund outright

For as long as you live enjoying a life interest entitling you to occupation, the property is not theirs to deal with as they see fit and is not available to their creditors or other claimants against their finances.

Disadvantages of a Property Trust

Trustee ownership is not the same thing as owning a property yourself

The trustees have discretions. This can however be taken into account in the terms of the trust deed. We will need to discuss those terms with you very carefully before you sign the trust deed.

Equity Release & Loans

If you need the property to support a loan such as a ‘home income scheme’ or other equity release type scheme the trust will not be able to achieve this for you. But the same is also true of making outright gifts.

Administrative Matters with a Property Trust

The main administrative matters are as follows. We can assist with these and, as the family home will be likely to be the main trust asset whilst you need to live there, the tax issues are not likely to be relevant. Some of this information is technical and is subject to changes in the law.

Record keeping

It is wise for trustees to keep records of receipts and payments and other transactions relating to the trust. This can be important for tax and other practical purposes. Any important transactions should be carried out only after taking legal advice to avoid problems, but that is similar to the situation where you are considering doing something with your own money.

Buildings insurance

If the home is placed into a property trust, then the buildings insurance must be transferred into the names of the trustees. This is because the house is in their names. Insurance brokers do not usually charge for this. Contents cover should remain in your own name(s). The contents remain your own.

Tax matters

Do not be alarmed that tax will suddenly become a complex issue. Whilst you still live in the home held within the trust it should not have a great impact. Even after any sale it should be straightforward. All trusts must be registered with the tax office. We will do that for you. The yearly trust tax return looks complicated but usually there will be little, if anything, to include within it. Sometimes one will not even be required. Again, we can assist if there are any queries.

Inheritance tax

Provided that the value of your home is below the nil rate band, currently £325,000, inheritance tax is neither saved nor increased by transferring your home into a property trust. It is inheritance tax neutral. It is not a part of a tax planning scheme. There is no inheritance tax charge on founding a property trust for houses valued at under £325,000. If your home is valued close to or over that amount you will need to tell us, and we will explain to you the best way to proceed. There may well not be any inheritance tax to pay after all, but care is needed. Inheritance tax will not be payable upon your death, unless you have more than £325,000 (the ‘nil rate band’ for tax year 2017-18) in total assets including the home and certain gifts made within 7 years of death. If all your assets, including trust assets, pass to a surviving spouse then no tax is payable on that death, whatever value is involved. On the survivor’s death, if the £325,000 limit is exceeded, inheritance tax may fall due at 40% of the surplus above £325,000. However, there is the introduction of the “Residence Nil Rate Band” to consider. This is an additional nil-rate band of up to £175,000 when a residence is passed on death to a direct descendent.  This means that potentially the combined individual nil rate band limits could be up to £500,000 (£325,000 + £175,000).  Specific advice will be required at the time.

Capital gains tax

There should not be any capital gains tax payable upon the transfer of your home into the property trust. This is because the ‘principal private residence exemption’ to capital gains tax applies on entry into trust and subsequently. (It does not apply to property held after an outright gift to a person who does not live there.) But if you have not always lived in the property whilst you have owned it (perhaps it was built after you bought the plot) there can be a capital gains tax charge upon setting up a property trust. Also, if you cease to live there for a few years and then it is sold there can sometimes be capital gains tax to pay. This is all the same as if you owned the property in your own name. If there are other assets held in the trust, apart from cash (there is no capital gains tax on cash), then the current capital gains tax rate applicable to settlor interested trusts is up to 28% depending on your overall tax situation (2017-18 tax year). It is not likely that capital gains tax will have any significant impact unless there is no home involved as the main trust asset for a long period of time.

Income tax

There is no income tax charge upon founding a property trust. Whilst you live in the home within the trust you will not pay a rent for that residence. If, however it is let out, or the sale proceeds generate an income by way of interest, the tax liability is set at the lower rate or the basic rate depending upon the asset type. This is practically the same as for any income which you presently receive. If you are a higher rate taxpayer extra tax up to that rate may be due from you.

Stamp duty land tax

Unless there is ‘consideration’ (i.e. money paid for the transaction) there is no tax to pay on founding a property trust. There may be stamp duty land tax to pay if the property is sold and another is purchased for you to live in. The amount depends upon the cost of the new property. This is the same as if the property was in your own name. Note: if your home is subject to a mortgage then a transfer into a property trust may not be possible. Even if it were agreed with the lender, there might be a charge to stamp duty land tax because the liability to pay the mortgage would count as consideration that the trustees would be taking on. The tax due would depend on the value outstanding on the loan.

The pre-owned assets charge

In some situations, when property remains occupied by a person who has previously disposed of it, there is a special charge to income tax under the Finance Act 2004 Schedule 159. This does not apply where you have an interest under a family trust. It only applies in special circumstances, usually involving complex inheritance tax planning schemes. In the case of a property trust the exemptions within Schedule 15 paragraph 11 apply.

In short, the foundation of a property trust and its administration should not deter you from founding such a trust if you believe that it is right for you.

Summary

Seek advice from a solicitor that specialises in these matters such as ourselves and is able to properly help and advise on whether this might be a suitable option for you. Please call us for a free initial no obligation telephone chat on 0800 3 10 11 12.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Frequently Asked Questions

Deprivation of Assets

Question: What is a deprivation of assets?

Answer: A deprivation of Assets (in relation to residential care fees) is where you deprive yourself of an asset (such as giving away savings or your property) to prevent that asset, savings or property from being claimed by the Local Authority if you ever went into residential care in the future.  Unless you have a very good reason as to why you have given away or transferred away an asset, then the Local Authority are likely to regard that gift or transfer or disposal as a deliberate deprivation and will look for you to still pay for your care on the assumption that you still have that asset in your own name.  Some people think that if you give away an asset and a certain period of time passes, then it cannot be regarded as a deliberate deprivation.  They sometimes refer to the seven year rule (which actually relates to inheritance tax) or a six year rule (which relates usually to time limit for issuing proceedings in certain types of cases).  However, there is no time limit and in theory a local authority could regard a gift transfer disposal of an asset ten years, twenty years or even longer ago.

Transferring Property into a Trust

Question: Can I transfer a property into a Trust to avoid care fees?

Answer: It is possible to transfer a property into a Trust and not have to pay care fees if you subsequently have to go into residential care.  However, it is crucially important that you have a genuine reason or a number of reasons as to why you are transferring the property into the Trust into the first place.  Please refer to the section on this webpage relating to Property Trusts.  It is crucially important that you seek legal advice about this and that you go to a solicitor who knows what they are doing.

Gifting Property

Question: Can I gift a property to avoid care fees?

Answer: In short – no.  Any form of gift of an asset or property is likely to be regarded by the local authority as being a deliberate deprivation of an asset.  If you are looking at disposing of a property, then you really should be looking to transfer it into a Property Trust.  Please see our section on Property Trusts.  It is important that you seek legal advice from a specialist solicitor in connection with this if you are thinking of doing something like this.

Gifting Property to Children

Question – Can I gift my property to my children whilst I am alive?

Answer: Yes, you can gift your property to your children whilst you are alive.  However, any gift to your children is likely to be regarded by the local authority as a deliberate deprivation if you ever went into residential care in the future and they will therefore look for you to pay for your own care fees on the assumption that you still owned the property.  In addition, when gifting property to your children (or indeed to anybody else) you need to bear in mind certain important points such as the following:-

  • It is No Longer Your Property– You will no longer own the property so you will no longer have control over what happens to it and you will not be entitled to any of the sale proceeds when the property is sold.
  • Bankruptcy – If your children go bankrupt, then you could lose your home and the property.
  • Death – If any of your children die, then their spouse or family may well look to claim the property and you could again lose your home.
  • Divorce – If any of your children get divorced, then again their spouse could look to claim the property and you could lose your home.
  • Falling Out – If your children fall out with you, then you could again end up losing your property.
What does putting a house into Trust mean?

Question: What does putting a house into Trust mean?

Answer: Putting a house into trust can mean many different things.  However, what it usually  means is setting up an arrangement whereby the house is transferred into the names of say your children and they hold the property on trust subject to you having the right to reside in the property for the rest of your life, rent free.  You would have to pay the outgoings such as the utility bills and insurance as normal but your children would not be entitled to make any claim against the property until you have died, at which point the Trust would normally be brought to an end and the children could then sell the property.  However, property trust are quite complicated arrangements and it is essential that you seek specialist legal advice from a firm of solicitors such as ourselves.

Property Protection Trusts

Question: What is a Property Protection Trust?

Answer: A Property Protection Trust is a generic term that refers to a legal arrangement whereby a person’s home is placed into a Trust in the hope and expectation that the property will be protected and not claimed by the local authority in the event of you ever going into residential care.  Again, we strongly recommend you seek specialist legal advice.

Gifts to Avoid Care Home Fees

Question – Can I make gifts to avoid care home fees?

Answer: If you make a gift with the deliberate intention of that gift being treated to avoid care home fees, then the gift will probably be treated as a deliberate deprivation of asset and will be taken into account by the local authority if you ever went into residential care in the future.  If however you make a gift for another reason, such as because of part of an inheritance tax planning strategy or because you wanted to set up a Trust for your children, or because you wanted to transfer your property into a property trust, then often those gifts could have the effect of avoiding care home fees.

How to Avoid Selling Your House to Pay for Care

Question: How do I avoid selling my house to pay for care?

Answer: If you transfer your house into a Property Trust and in particular, an “interest in possession trust” and that you set that trust up for reasons that are unrelated to going into care, then that might result in you not having to sell your house in the event of you ever having to go into care.  However, this is a very specialist area and it is crucial that you seek legal advice.

Is Deprivation of Assets a Criminal Offence?

Question: Is deprivation of Assets a Criminal Offence?

Answer: In theory, it might be but we are not aware of the Police or Crown Prosecution Service taking any active interest in this area.  The way to avoid any criminal involvement is to make sure that any deprivation of assets complies with the law and to do that, you need to seek advice from a specialist solicitor in this area.

Property Trust Will

Question: What is a Property Trust Will?

Answer: A Property Trust Will is usually an arrangement whereby if a couple own their property in both their names, then they can set up a special Will (sometimes called a Will Trust) whereby it states that whoever dies first, that their half share doesn’t pass to the survivor but instead passes, say, to their children, subject to the survivor having the right to live in the property.  That means that if the survivor then subsequently went into residential care, that the deceased’s half share of the property would not be claimed by the local authority.  Making Will Trusts are excellent ways of protecting half of the property in the event of one person dying and the survivor subsequently going into residential care.  We always recommend that these types of Wills are made if you are worried about residential care fee risks.  Please call us for advice.

Putting a House in Trust

A Property Protection Trust is a generic term that refers to a legal arrangement whereby a person’s home is placed into a Trust in the hope and expectation that the property will be protected and not claimed by the local authority in the event of you ever going into residential care.  Again, we strongly recommend you seek specialist legal advice.

Summary of Matters

Please call us now on 0800 3 10 11 12 for a free, initial, no obligation 15 minute telephone chat or video conference call.  Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Important Disclaimer

Taking actions with the deliberate sole intention of avoiding paying residential care fees rarely works. For example, gifting assets or your home away or incurring substantial expenditure of capital will be treated by the local authority as a deliberate disposal or deprivation and will be successfully challenged and the assets reclaimed.

However, if you dispose of an asset for a genuine reason that is not related to avoiding paying residential care fees then there is a chance that it might not be challenged. Therefore, by taking actions for other reasons that are unrelated to residential care fee protection that can work. One good example of this is making “Will Trusts”. There are other potential actions you can take, details of which are contained in these web pages.

Basically, there are legally right and wrong ways of taking actions to reduce paying residential care fees, within the law, and of not falling foul of the deliberate disposal or deprivation rules. However, we can only advise and help on using the legal and legitimate ways of doing this. If we are uncomfortable with a potential action, then we will tell you if it’s not a good idea.

It may be legal to take certain actions to protect certain assets from being claimed to pay for residential care fees, but that doesn’t mean that those actions will be effective. The effectiveness of these actions will not be known with certainty for potentially years and possibly much longer. Anyone who believes that there are guaranteed ways of reducing the payment of residential care fees either don’t understand our legal system or is deliberately trying to deceive you. Rarely can anybody say for certain that any actions you might want to take will prove successful, without it being tested by a court. We inform you of the risks, the consequences. Ultimately though, it is important to form your own understanding of the risks and downsides.

Please Contact Us

Specialist legal advice is essential if you are planning on taking any action, because each situation is different and what works for one individual may not be the right solution for another.  We provide professional, friendly help and advice – and we want to see you get the help you need without compromising on your personal wishes and without taking away what you hoped to pass on to your family.  Please feel free to contact us for a free initial no obligation telephone chat to discuss further what your options are and how we can help you. Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face.   You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email.  Wherever you live in the UK, we can help.  Distance is not a problem.

Disclaimer – Important Warning – Please Read Carefully

Taking action to avoid paying care fees is difficult.  Some people are keen to take actions that help reduce paying residential care fees, using any legal means available.  They take the view that if it’s legal then it’s fair game, and that if there are loopholes that exist, and the government or local authority don’t close them, then they can be exploited.   However, there is a difference between the legal right to try to reduce paying residential care fees, within the law, and falling foul of the deliberate disposal or deprivation rules and the likely negative outcome of such efforts.  We offer no views on this, other than saying that we can only advise and help on using the legal and legitimate ways of doing this and that if we are uncomfortable with a potential action, then we will tell you if it’s not a good idea.

Deliberate Disposal/Deprivation of Assets

Taking actions with the deliberate sole intention of avoiding paying residential care fees rarely works.  For example, gifting assets or your home away or incurring substantial expenditure of capital will be treated by the Local Authority as a deliberate disposal or deprivation and will be successfully challenged and reclaimed.  There are legally right and wrong ways of gifting assets.

Disposal/Deprivation Unrelated to Residential Care Fees

However, if you dispose of an asset for a genuine reason that is not related to avoiding paying residential care fees then there is a chance that it might not be challenged.  Therefore, by taking actions for other reasons that are unrelated to residential care fee protection that can work.  One good example of this is making “Will Trusts”.  This is where a couple make Wills that state that when one person dies, their half share of the property passes into a trust.  The survivor would have the right to continue to reside in the property, but the deceased’s half share would be protected and would not be claimed by the local authority if the survivor went into residential care. There are various other options.

Risks of Challenge

It may be legal to take certain actions to protect certain assets from being claimed to pay for residential care fees, but that doesn’t mean that those actions will be effective.  The effectiveness of these actions will not be known with certainty for potentially years and possibly much longer.  Anyone who believes that there are guaranteed ways of reducing the payment of residential care fees either don’t understand our legal system or is deliberately trying to deceive you.  We can rarely say for certain that any actions you might want to take will prove successful, without it being tested by a court.

We inform you of the risks, the consequences, the costs and the downsides.  Ultimately though, it is important to form your own understanding of the risks and downsides.

Moral Arguments

We are all aware of the different beliefs, arguments and standards that apply when anyone references morals in the context of reducing the payment of residential care fees.  Some people believe that the current approach to care fees in the UK is arguably unfair, particularly to those who have worked hard through their lives and paid their taxes and mortgages and scrimped and saved to build up a nest egg and generally done the right thing are being penalised, while those who haven’t fully paid their way and generally wasted away their assets end up getting residential care for free.  There is an argument that this is simply not fair.  There are similar arguments in relation to tax avoidance.  For example, it’s wrong for big companies and for rich people, but fine for everyone else to find legal ways to pay less tax.  Whatever the arguments or your views are, all we can do is to try and provide you with unbiased information so that you can make the decision that is right for you.

General Information

The information, materials and opinions contained on this website are for general information purposes only, are not intended to constitute specific legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.  Seatons Solicitors does not accept any responsibility for any loss which may arise from reliance on information or materials published on this website.

Accuracy

All the information and documentation on this site deal only with matters of law in England and Wales.  Every reasonable effort is made to ensure that the information on this site is accurate and up to date.  However, we assume no responsibility or duty to update such information and we cannot guarantee that it will be fault free.  Versions as the documents and information can easily become out of date.  We reserve the right to amend add or alter any part of this site without giving prior notice.  You are advised and responsible for reading all of the information on this site.  We will do our best to correct errors and omissions as quickly as possible after being notified of them.  This disclaimer section applies only to the extent permitted by law.

Liability

We cannot and do not accept any liability for any losses or claims arising from any inability to access the site or from any interruption or failure to complete a transaction.   We cannot and do not accept any liability for any indirect or consequential loss of any kind in contract, tort, or otherwise arising out of use of the website or for any products or services purchased from the site.  We will only be liable for direct loss (save in the case of death or personal injury in respect of which there is no limit) up to a maximum total of any service purchased from this site in respect of any claim.

Finally

Well done for reading this far.  If you have any questions, then please call us for a free initial no obligation telephone chat on 0800 3 10 11 12. Please quote “website” for a 10% discount off our normal legal costs.

There is no need for us to meet up face to face. You can communicate with us over the phone or video conference call (Zoom/Whatsapp/Facetime/Skype) and by post and email. Wherever you live in the UK, we can help. Distance is not a problem.

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