Care fees – How we can help
Posted on 28 September 2018 by Catherine Murton
One of the perks of my job as a private client solicitor is that I get to visit lots of residential care homes. Contrary to the common view of many, residential care homes today are warm and friendly and offer five star services such as hairdressers, sweet shops and cafes. I have already selected my top three should my time ever come. It won’t surprise those of you that read this column regularly to know that the selection is based almost exclusively on the quality of cake served with afternoon tea! What they all offer is a safe environment, dignified personal care and an excellent social life.
Unfortunately, quality care comes at a price, which generally ranges from £650 to £1200 per week depending on the services provided in the home and the level of care required by the individual. Funding from the Local Authority can be provided if there is a medical requirement for the care but, in all other cases, an individual must pay for their care unless their total assets are below £23,250.
It is probably not surprising in light of the huge financial burden that care home fees can impose that one of the most common questions put to us (and indeed being asked in our free drop-in legal clinics) is what can be done to ensure that the family home remains intact to be passed on to children. There are many myths and everyone seems to know a friend of a friend who avoided care fees.
The most common of the avoidance tactics seems to be the idea that the family home should be transferred into the names of the children. If the property is then vacated by an ageing parent when they go into care, it can’t be sold to pay for care as it does not belong to the elderly parent. Of course the Local Authority and H.M. Revenue and Customs have seen most avoidance schemes many hundreds of times before and any possible loophole has been addressed.
There is a doctrine called ‘reservation of benefit’. This means that if you sign your home over to your children and you continue to live there without paying an open market rent to do so, H.M. Revenue and Customs will say that it was never gifted and still forms part of your estate when you die. This means the value of the house will still be taken into account in determining the amount of Inheritance Tax that is payable.
The same transfer will be regarded by the Local Authority as deliberate ‘deprivation of assets’ when considering whether care fees are payable and they will seek an Order from the Court to have the transfer set aside if it leaves you with insufficient funds to pay for your care. Of course there is the further risk that the child that you have transferred it to will be declared bankrupt or will divorce. Both events could lead to the requirement for the property to be sold, even if you are still living there! Most people also do not consider what the situation would be if their child dies before them.
Transferring property into the name of a child or children can leave you vulnerable to being homeless. Gifts once given cannot be taken back, unless set aside by the Court, and if the only intention is to avoid care fees or to reduce an Inheritance Tax liability, it rarely achieves the goal.
There are much better tax and care planning alternatives that can be considered so, if in doubt, give me a call on 01935 382689, email at email@example.com or call into one of our free legal clinics.
Posted in: Elderly & Vulnerable Client Affairs