Giving Gifts While in a Care Home

uftoncourt

Hi,

I'm hoping someone can help me to understand if my mother in law can give gifts while in a care home.

She moved into a home in May and we have had to sell her house to fund her care. Her house sold for just over £150k which is in a bank account paying her care home fees. I'm aware that once this reduces to "23k (or something similar) the government will then contribute. However, I wondered if she is allowed to give 'gifts' out of her money?

My thought is she could give gifts to her son & daughter of up to £3k per year (so as to avoid inheritance tax should she pass away) and they could keep it in a joint bank account so neither of them can touch it without the others permission. The only added complication is that power of attorney has been granted to both her son & daughter as she has alzheimers.

Does anyone know if this is allowed?

Cheers,
Vicky

dunstonh

However, I wondered if she is allowed to give 'gifts' out of her money?

No. That would be fraud and is known as deprivation of assets.

My thought is she could give gifts to her son & daughter of up to £3k per year (so as to avoid inheritance tax should she pass away)

as you say, thats in relation to inheritance tax. It is not in relation to benefits means testing.

Torry_Quine

She can give gifts which are the same type as previously. Also with that amount of money it will be a few years before the local authoruty are interested in her financial arrangements.

EdInvestor

Have you looked into buying an 'immediate needs annuity' to pay the cost of some of her care?

This might enable you to save some of the money from the house.

The income is tax free.

http://www.hmrc.gov.uk/manuals/iptm/IPTM6205.htm

kennyboy66_2

The power of attorney complicates things but if she was still able to make decisions this kind of action may be counted as "deprivation of assets". It is not fraud however.

The local council could potentially recover any gifts from you.

margaretclare

Does she actually want to give these gifts, or are there family members who would like to receive them?

She's way way below Inheritance Tax levels, so no need to worry about that.

If I wanted to give someone a gift I would give it and ask no one's permission or opinion. But I wouldn't like the suggestion to come from one of the possible recipients.

m_13

This is the advice given by the Law Society to their members on the matter:

In most cases, the intention behind making gifts of assets is the most important factor. If a local authority believes that an asset has been given away with the intention of creating or increasing entitlement to means tested benefits, it may decide that the donor has notional capital of equivalent value to that of the asset given away.

Your client will be particularly vulnerable if they are deemed to have notional capital since, although the local authority is obliged to provide care, this does not have to be in a residential home. Moreover, your client may not be entitled to financial assistance towards the fees. The local authority may still be obliged to provide care, but the local authority could seek payment using debt recovery methods, as in the case of Robertson v Fife [2002] UKHL 35.

A local authority financial assessment must follow the needs assessment. There is a question mark regarding whether Robertson v Fife would stand up in England because of the slightly different wording of the legislation, such that the local authority would refuse to provide the care because the notional capital makes it otherwise unavailable (see 'Community Care and the Law' from paragraph 8.91), and as such are arguably under no obligation to provide residential accommodation under s.21 National Assistance Act 1948. However, the person might qualify as a vulnerable adult, regardless of notional capital, where they are in need of such accommodation because they cannot arrange their care or no longer has any resources to fund their care.

If the local authority believed that a significant part of the intention to transfer an asset was to increase entitlement to financial assistance, they could impose a charge on the asset after it had been gifted, or even recover the asset. For a local authority to pursue a claim they would have to show what the donor's intention was at the time of disposal. It may be difficult for the donor or donee to give evidence as to the donor's intentions and if another purpose of the gift cannot be established or indicated, the judge may conclude that it must have been to avoid means testing.

One way to establish the intention is the foreseeability or immediacy of the need for care. Any decision to reject or accept the evidence requires an overall assessment of that evidence by the local authority - see Beeson v Dorset County Council [2002] HRHR 15. If, for example, your client was fit and healthy and could not have foreseen the need for residential care, it would be unreasonable for the local authority to treat the transfer of assets as deliberate deprivation. However, Yule v South Lanarkshire Council [1999] 1 CCLR 546, states that there was no time limit on local authorities when deciding whether a person had deprived themselves of assets for the purposes of avoiding residential care fees.
If a local authority were to pursue a claim for care funding, your client could challenge that decision but would bear the burden of proof that the authority's decision was Wednesbury unreasonable - Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB233). This process could be protracted, involving local authority complaints and ombudsman procedures, and this could be very stressful for your client and expensive if it involves court proceedings.

So, if your mother in law gives gifts with the outcome that her capital reduces and she becomes eligible for care funding then you the gift recipients may find themselves having to give it back or your mother in law being treated as though she still had it.