So whilst the money would be a lifeline for me, I don't feel I can accept? If your local council assesses you as needing social care, such as getting extra help at home or moving into a care home, they will do a financial assessment (known as a means test) to calculate how much you should pay towards the fees. © 2020 April King and April King Legal are trading names of April Legal Limited, a company registered in England and Wales with Company Number 12248940. Three weeks later he enters a care home and gives the car to his son. Your house is worth £100,000 at the time of the transfer. Income Support, Housing and Council Benefit, income-based Jobseeker's Allowance, income-based ⦠$33,000 + $2,000 â $23,000 = $12,000, which is less than the relevant limit of $30,000. As noted by the court in Yule v South Lanarkshire Council, the Local Authority can go back as far as they likewhen considering whether a gift transferred constitute⦠Your income and savings will be taken into account in the means test. Annex E of the guidance lists factors they should take into account: At this stage, the Local Authority have an obligation to provide care but they can seek recovery of the payment of care fees using debt recovery methods (see e.g Robertson v Fife [2002] UKHL 35). suddenly spending a lot of money in a way which is unusual for your normal spending. UK: Regular cash gifts did not prove deliberate deprivation of assets Monday, 05 February 2018 The woman, referred to as Mrs Y, suffered a stroke in 2007 and, aged 80, had to go into residential care. With this in mind, many people look for ways of reducing their assets prior to needing care. The couple should then revise their Will so that each leaves their share of the property on trust to the other for life. Your remaining assets may be used up entirely to pay for care (because you are deemed to still own the asset, even though you gave it away). She has a 50% interest in a property that is occupied by her husband, Mr Ellis. These companies claim that this is completely above board and will ensure your assets are protected from care fees. They can even move home with the permission of the trustees. This is known as a ‘gift with reservation of benefit’. Care fees and the myth of the 7 year rule. However, in the above scenario, this would be balanced against the fact that you were still living in the property (NB. Give money away to avoid care fees means test. cash) to purchase an insurance bond would be a common approach to deprivation. It can also mean you don’t get the level of care that you need. Deliberate deprivation happens when an individual gives away an asset for the main purpose of avoiding care home fees. This is, Mr and Mrs Arnold transfer their house to an ‘Asset Protection Trust’ to protect it from care fees. using savings to buy possessions, such as jewellery or a car, which would be excluded from the means test. Many people hold the believe that if you transfer your assets and then survive for 7 years, this is not deliberate deprivation of assets. 50%) which they can leave to whoever they like. Whether avoiding the care and support charge was a significant motivation; The timing of the disposal of the asset. Local Authorities have the power to recover contributions towards care charges, taking into account any property that has been deliberately given away. However, any gift can be set aside with no time limits (without bankruptcy) under the Insolvency Act if the Court believes that the transfer was made for the purpose of putting assets beyond the reach of a potential creditor or otherwise prejudicing the creditor’s interests. This may include: Later, Mr Arnold needs care. Should they need care, the deceased partner’s share will not be taken into account for means testing. Mr Andrew’s share is safe and will go to the children when Mrs Andrews passes away. Benefits Calculator â what are you entitled to? This article is for educational purposes only and is no longer available for CPD hours. Even a gift made 20 or 30 years ago could be considered. Did the person have a reasonable expectation of needing to contribute to the cost of their eligible care needs? This leaves you with assets of just £20,000. To date, few local authorities have used insolvency proceedings in this way – but with care funding stretched to the limit, we can expect an increasing number of cases going forward. The 7 year rule relates to inheritance tax. If there has been a deprivation In short, the local authority has three options if they conclude that a deprivation of assets has occurred: Notional capital: The local authority will act as though you still have the asset; this is a very effective way ⦠If so, the Local Authority. I think it would be viewed as deprivation of assets if he needed nursing home care. Local authorities will also look for other possible examples of deprivation of assets, such as: Asset protection trusts. This so called ‘7 year rule’ is a complete myth. D) if they were granted PIP, the same questions apply! They make Wills leaving their respective shares of the property to each other in trust for life, and then to their two children. If you transferred your home within two years (or within five years if you were insolvent at the time of the transaction – which is unlikely), the transaction can be set aside. Lines are open 8am-7pm, 365 days a year. The Local Authority, Mrs Smith gives her daughter a ring worth £5,000 the week before moving into residential care. Mrs Ellis has moved into a care home. We'll match you with one of our volunteers. The trust cannot be revoked. Once your assets reach the lower £14,250 limit, the Local Authority will take over funding your care fees. To be clear, the seven year inheritance tax ruleis not related to deprivation of assets. The Court’s powers allow it to restore the position to that which it would have been had the gift not been made. This may be before making a claim or during an existing claim. Company number 6825798. Later, Mrs Andrews requires residential care. When he sells the home Mrs Ellis’ share could be taken into account for means testing, but to ensure her husband can afford the new property, she makes these funds available to him. We suggest you find out more before you take any action and contact your local Age UK for face-to-face help. The Care Act 2014 gives Local Authorities power to recover care fees from whoever you transferred your assets to. If you die within 7 years of giving away all or part of your property, your home will be treated as a gift and the 7 year rule applies. There is also good evidence that families are put under a considerable amount of pressure to pay for care, even when a gift was genuinely innocent. This so-called â7 year ruleâ is a complete myth. R(IS)7/98 â relates to claimant having âshelteredâ her assets in an investment bond, with a future surrender value. deprivation. April King Legal Head office: Huntingdon House 278 - 290 Huntingdon Street Nottingham NG1 3LY. Mr Andrews passes away. The easiest way to understand the 7/14 year rule is to treat each transfer in chronological sequence and don't "add the chargeable transfers to the estate" that's a hangover from the CTT days (pre '86) when you kept a chronological record of lifetime transfers made and some examination textbooks decided to continue the practice. The person who received your gift may not be willing to contribute. Deliberate deprivation of assets is when the local authority deems that a person has deliberately disposed of assets to increase their eligibility for social care funding. Get a free weekly friendship call. This is called âdeliberate deprivationâ and there are very strict rules which enable the Local Authority to pursue assets given away and bring them back into account. There is a 7 year rule that relates to inheritance taxbut this is something different altogether. 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