Broadly, anyone that has capital assets over the amount of £23,250 will be expected to meet the costs of their own care (unless there is proven eligibility for NHS Continuing Care). Care costs will differ depending on the chosen care home and facilities but it is not uncommon to see costs of £750 to £1,000 per week for residential care.
Local Authorities have a statutory duty contained in the Care Act 2014 to charge a resident for the costs of their care home fees where the resident has the means to pay. Generally, this means that all of the resident’s income will be taken into account and, where the income is insufficient to meet the total care costs, capital will also be taken into account as above, until the minimum limit of £23,250 is reached. At that time, the ‘tariff income’ provision will become relevant, which states that for every £250 of capital a resident may have, they will need to contribute an extra £1 per week to the costs of their care, in addition to their income.
Once the minimum level of £14,250 in capital is reached, the resident will still continue to have all of their income taken into account, but capital will no longer be assessed.
It is common these days for people to be concerned about their assets and asset protection. Many have spent years working hard to provide for families and to secure a future and unfortunately, due in part to an ageing population and the state of the public purse, care, and particularly the cost of care, has become a big issue.
Contrast this in light of a generation where many people have paid off mortgages and have savings in the bank and it can be seen why so many are concerned that their life savings and property will be significantly eroded by the possible need for residential care.
We are often asked whether it is possible to give away assets (often property) and continue to have use of the asset, such as by living in the property.
Giving away assets as an attempt to avoid them being included in an assessment for care costs is known as ‘deliberate deprivation’ and it is a concept that LA’s are very familiar with.
In order to prove that deliberate deprivation has taken place the LA will need to show that avoiding the charge was a significant motivation. This can be illustrated by reference to the timing of the gift and whether the resident had, at that time, a reasonable expectation that they may require LA assistance to meet care costs in the future.
If the LA can prove that a resident has deliberately deprived themselves of an asset, avoiding care home fees, under such circumstances then they are able to take the following action:
And in extreme cases:
In the first case, the resident would be in a very difficult position. On the one hand, they would no longer have the asset to be able to realise to pay for care, and on the other hand, their costs would be based on the ability to realise the asset. In such cases the LA may refuse to assist with meeting the costs.
In the other cases, the costs of the Court expenses may be awarded against the resident leading to a bill for legal costs which may be quite high and ultimately the effort to remove the asset from the resident’s estate is pointless. There may also be criminal charges levied.
That is not to say that deliberate deprivation has occurred every time a gift is made. Every case must be judged on its own particular facts and an action that could be considered to be deliberate deprivation in one case may not be in another. All will depend on circumstances, intention and timing.
In an age of austerity it is common for LA’s to consider financial assessments in detail and investigate the value of a potential resident’s estate in detail.Our experts at Humphries Kirk can advise you on the question of making appropriate gifts in appropriate circumstances. We can also advise you if you have made a gift and are concerned about that you may have ‘deliberately deprived’ yourself of an asset. We can liaise with LA’s to rectify such issues and act on your behalf to ensure the best outcome.
A classic error. Contrary to popular belief there is no time scale beyond which time the LA cannot look at gifts made
This is difficult. Depending on the circumstances, not only may deliberate deprivation have taken place, but if the property is considered as an asset of your son’s marriage, your occupation may be threatened if relations with your soon to be ex daughter in law are not good.
No. Depending on why you have transferred the property to your daughter, the LA may allege deliberate deprivation has taken place. The payment of rent would be effective for inheritance tax purposes, but has no relevance here.
Possibly, if you are considering the need for residential care in the future.
Unfortunately, although a Deed of Variation is an excellent estate planning tool, it could be argued that varying an inheritance could also amount to deliberate deprivation.
For more information, contact one of our specialists.