Many people may require care at some point in their life. When determining the type of care and support you may receive, your local council will look at the assets that you own at the time to decide how much you’ll need to contribute towards your care.
Your assets may include income, savings, investments and property. The financial assessment carried out by your local council will evaluate your income (including your pensions and certain benefits), your capital (including savings and investments) and the value of any property that you own (sometimes including your own home).
Generally, the higher your income and capital, the more you will be expected to contribute towards care costs. Therefore, some people deliberately dispose of their assets to avoid paying care fees. Deliberate deprivation of assets is where you intentionally decrease your assets, in order to reduce how much you are required to contribute towards the services needed for your care and support.
This may include gifting large sums of money or property, extravagant spending (including gambling), putting assets into trust, transferring the title deed of your property to someone else, selling assets for less than their true value, paying off unsecured debts in large amounts, moving assets into investment products or buying investment bonds with life insurance, pension income, or savings.
Unlike with inheritance tax, there is no seven-year time limit for care home fees. Your local council can look back indefinitely to prove you disposed of assets with the intention of avoiding paying care fees. In this instance, the council may refuse to pay for your care or may expect you, or those who received the assets, to cover the costs as if the assets were still readily available. This only applies where you are asking the local council to assist you in paying for your care.
In determining whether you have deliberately deprived yourself of assets to avoid paying care fees, the local council looks at: (1) whether valuable assets were gifted or transferred; (2) whether this was done with the deliberate intention of avoiding paying care fees; and (3) whether you could have reasonably expected to need future care.
The council will need to consider the timing, amount and motivation of the above activities to determine whether there has been deliberate deprivation of assets. Where the council decides that you have deliberately disposed of assets to avoid care fees, you can challenge this decision using their formal complaints procedure, should you wish to do so.
Certain assets are exempt from care home fees. These include personal possessions (except those with a high monetary value and which are considered an investment), the surrender value of a life insurance policy or the capital value of occupational pension. The value of certain trusts may be exempt and the main home is disregarded for the first 12 weeks of permanent residential care.
Where a spouse, civil partner or other relative over 60, under 16, or incapacitated, resides at the home, the home will not be included as an asset for financial assessment purposes. Personal injury awards are also generally disregarded for the first 52 weeks after the first care payment or indefinitely if it is held in trust.
It is important to consider this information when looking to gift or transfer assets, as there could be severe financial implications, negative impacts on family members and delays in arranging care.
Should you wish to discuss the above in further detail or get advice on legally and ethically disposing of your assets, then do not hesitate to contact our experienced Private Client team. Contact Courtney Magnus on email: chm@cooperburnett.com or tel: 01892 515022.
This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.
