The pandemic has resulted in our health being discussed more than ever over the last two years. Has this made you think more about the future? Are you currently forward thinking to the possibility of paying expensive residential care home fees?
If so, you may have heard of people transferring their property to family members in order to reduce their assets for the purpose of Local Authority means testing. You may be thinking that this is a good idea and something you wish to explore.
If you are, you will need to be aware of the Care Act 2014 (“the Act”). The Act deals with what is known as a “deliberate deprivation of assets” i.e. intentionally reducing assets so they will not be taken into account when the local authority carries out a financial assessment “means test”.
Deliberate deprivation of assets does not necessarily have to relate to property transfers it could also relate to:
- Gifting large sums of money;
- Spending large sums of money outside of your usual habits;
- Investing in expensive jewellery or other items which do not form part of the means test;
- Even reckless gambling could be caught by this definition!
If the local authority decides you have deliberately reduced your assets, they can means test you on the basis that you still have the full value of the disposed assets in your possession.
The local authority will consider many factors if they suspect a deliberate deprivation of assets, but two important aspects are:
The local authority will consider whether at the time you made the gift you could have reasonably known you would need to pay for care fees in the near future. For example, gifting your property away after having received a diagnosis which could lead to care being required may well be seen as a deliberate attempt to reduce assets. Conversely a fit and healthy person who could not imagine needing care and support at the time of the gift will be viewed differently.
The local authority will also look at the intention behind the gift. Was avoiding care fees the sole or significant reason for the gift, or are you trying to provide security to a partner or dependent adult who lives in the property with you? Would that dependent rely on the property for somewhere to live in the event of you being moved into residential care? The latter may be acceptable as there is a clear intention behind the gift, other than simply attempting to avoid care fees.
If you choose to proceed with a gift of your property you will also need to consider:
- How you are going to protect your occupancy if you intend to carry on residing there?
- That the property will form part of someone else’s asset ‘pot’ and will be taken into consideration should that person get divorced or become bankrupt.
- That there are Inheritance Tax considerations for up to 7 years after the date of the gift and there may well be capital gains tax implications too.
- That there are implications if you become insolvent within 5 years of making the gift.
In September 2021 the government set out its new plan for adult social care reform in England. Final guidance is expected to be published in Spring this year. The following changes are proposed to come into effect from October 2023:
- A cap will be set at £86,000. This means the maximum amount anyone will have to pay for personal care to meet their eligible care and support needs from October 2023 onwards will be £86,000. The cap will be implemented for adults of all ages, without exemption.
- The upper capital limit, being the point at which people become eligible to receive financial support, will rise to £100,000 from £23,250. Therefore, people with less than £100,000 of chargeable assets will never contribute more than 20% of these assets per year. The upper capital limit of £100,000 will apply universally, irrespective of the circumstances in which an individual receives care.
- The lower capital limit, the threshold below which people will not have to pay anything for their care from their assets will increase to £20,000 from £14,250.
Gifting of property is not as simple as you may think and should you be considering this please do ensure you seek full legal and tax advice before doing so.
If you would like to discuss this topic further, or gain advice on the gifting of property, please contact Sarah Ellis at [email protected] or 01284 717522. For more information on the services offered by Greene & Greene Solicitors please visit www.greene-greene.com and follow on Twitter @GreeneGreeneLaw