The spiralling cost of care has provided motive for many individuals to give away property, investments and savings, rather than see them spent on long term care fees.
Deliberate deprivation of assets – which is the disposing of assets to the extent that the individual’s care costs then must be met by the Local Authority – is an increasing problem for many Local Authorities; as is the issue of what to do when it occurs. If the authority believes an individual has deliberately reduced their estate to avoid paying care home fees themselves, they can refuse or stop paying for care, choosing instead to calculate their contribution on the assumed basis that the individual still owned the assets at the time a means test was conducted.
An individual’s home is usually their largest asset and something they want to pass down to the next generation. As such, it is of course the asset they want to avoid being lost to care costs and so may be tempted to give it away to family before they die. When the council is deciding whether a gift of this nature has been a deliberate deprivation of assets, they will consider the individual’s intentions to establish whether the primary motivation was to save on care costs, with a view to forcing the Local Authority to pick up the bill.
Aside from attempting to remove the home from the equation, other examples of deprivation of assets can include extravagant expenditure, investing in assets which are potentially sheltered or gifting money all with a view to leaving the local authority to pick up the care cost. However, it is far from clear cut, either way. Recently, North Yorkshire County Council appeared in the news when the Local Government and Social Care Ombudsman found the Council was ‘wrong’ to have stopped paying for a woman’s care fees because she had reduced her savings by giving away monetary gifts to her family.
The reason for the Ombudsman’s decision was that the woman had paid her own care cost for eight years previously without calling on the Council, and there was evidence that she was in the habit of giving gifts to family members for birthdays and Christmas. The Ombudsman said that just because someone was in care didn’t mean “they should not be able to spend their money on things other than their care, and this includes continuing to give gifts to friends and family”.
The basic rule of thumb is that taking any action, with the main purpose being avoiding care home fees, and passing the financial burden to the taxpayer is unacceptable and people do get caught. However, where an action can be proven to have had an alternative purpose the Local Authority may struggle to make a claim. Obviously, if assets are given away when someone was fit and healthy and could not have expected needing care and support should be out of reach,
As more and more people are living longer there is a greater chance of the need for long term care. Planning ahead, through opportunities such as trusts and insurance bonds, can help ensure some family wealth is passed on whilst also meeting obligations to pay for necessary care and support.
Whatever method is used to try to protect or reduce capital prior to needing care, it is important to make informed decisions and never forget, if it is your care we’re talking about and it’s for the rest of your life, you might want to think about putting yourself first and getting the best possible.
The Financial Conduct Authority does not regulate Trusts.