We are often asked by clients whether they can transfer their homes to a trust to avoid paying care fees in the future.
In a number of recent cases the clients in question had attended seminars held by companies promoting the use of “Asset Protection Trusts” or “Wealth Preservation Trusts” and were sceptical that the advice they had received sounded too good to be true. Unfortunately, their instincts were correct.
Long-term care - financial assetment
When an individual requires long term residential care the local authority will conduct a financial assessment and determine how much that individual should contribute towards the cost of their care. Whilst that assessment will consider the individuals income and capital the primary consideration will be whether they have capital assets (after taking in to account disregarded assets) of over £23,500. If they do the individual will be assessed as having to pay the full cost of the care they receive. This means that the majority of homeowners will be assessed as self-funding. With the cost of care potentially being £5,000 a month, depending on location and the level of nursing care required, it can be tempting to consider whether there are any steps that can be taken to protect the family home and place assets beyond the scope of assessment.
Making a gift - local authorities can intervene if they think the gift was to avoid paying long-term care home fees
It is recognised that people should be treated with dignity and respect and be able to spend the money they have saved as they wish. They should be able to make gifts as they feel appropriate. However, the relevant legislation gives local authorities the power to treat individuals as still owning assets they have gifted or money they have spent (“notional capital”) if they believe that the individual gifted the asset or spent the money and their sole or main intention was to avoid the payment of care fees. This is known as “Deliberate Deprivation of Assets” and no legal time limit has been set for the principle to apply. The test is purely on what the intention of the individual was when they made the gift.
If you transfer your property to a trust, you will have to pay up-front fees and the local authority can still investigate your intentions
If you transfer your property to trustees for them to hold on trust for you, and your intention was wholly or mainly to avoid the payment of care fees in the future, then you risk the local authority treating you as still owning that property when assessing your financial contribution to care costs in the future. With some companies charging £4,000 to £6,000 to set up a trust and transfer a property to the trustees this is rather expensive planning to undertake without any guaranteed prospects of actually achieving what you initially intended. Depending on the value of the property there could also be unintended tax consequences in undertaking this sort of planning.
The Private Client Team at Langleys has extensive knowledge and experience of estate planning for individuals and understand the legislation regarding the assessment of care home fees. We can help you plan for potential future care needs and ensure that your affairs are legitimately structured in the most effective way.
If you or a family member want to have a confidential discussion concerning your situation, please do contact us.