I was referred to an article in a national newspaper recently about this very subject the opening lines being “councils are spying on parents who sign over their homes to their children to avoid care home fees.”
Care home fees are a valid concern to people as we are expected to live longer and, as a result, our physical and mental health may deteriorate to an extent that we would no longer be able to care for ourselves in our own homes. Gifting a home or transferring a home or other assets into trust to avoid the fees is a deprivation of capital under the funding rules only if the main reason of such a gift is to avoid these fees. This should be seen in light of the likelihood of this happening. Age UK publishes monthly updates on the statistics and in the results published yesterday there is only a 4% statistical likelihood of living in a care home for 75 – 84 year olds. Is succession planning really being driven by Care Fees, as the national media would have us believe?
There are many valid reasons for gifting an asset during lifetime, for example to reduce the Inheritance Tax which would be payable on death or simply to help out the next generation (we see many clients who want to see their children enjoy their gift rather than passing wealth on death). There are also valid reasons for placing a property into trust e.g again for tax planning purposes or to provide ongoing support for a disabled child
It is a concern that the article in questions stated that solicitors claim “on their websites that this tactic is a way to avoid care home fees”.
Trusts have been in existence since the time of the crusaders and have been used for various purposes. The effect of placing an asset into trust is that the owner i.e. the person who places the asset into trust no longer owns the asset and therefore if later goes into care does not own the asset in question so can not be used in the assessment of care home fees. This is a direct consequence of a gift. The same is true if the money had been spent on a holiday, or gifted outright to another person. The effect of a trust may therefore be that there is a lower amount of capital to be applied for care fees, but that is not usually a driving factor in setting up a trust. It is merely a vehicle to enable succession planning, and if the reason was to deprive capital for the aim of avoiding care fees then the Local Authorities are able to challenge this.
It is very important when placing an asset into trust or gifting an asset that the reason for this is fully considered and documented to avoid an assumption by organisations that the main reason was to avoid care fees – it can be one of the factors, but as the statistics referred to above show, a 4% risk is probably well down the list of concerns. We are aware that Trusts can be misunderstood, and are not appropriate for all, but they are very useful vehicles in the right circumstances. If you wish to discuss trusts and succession planning please contact Emma Fuller on 01509 216161 for a professional view.
Emma Fuller is head of the private client team at EHL; our solicitors in Loughborough are experts in their fields and dedicated to quality client care. If you would like to find out more about our solicitors in Loughborough please contact us.Talk to our legal team
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