Are investment bonds used to hide capital from councils?

buel

Hello,
A brief question- are investment bonds used by some older people to shield/hide capital from councils who try to claim care home fees?

jamesd

Yes. It's vital that such a purchase is made before there is any sign that there is a personal need for care and that this is not given as the reason for the purchase. Inheritance tax is a common acceptable alternative reason.

Once there is any personal diagnosis that care will be needed it's too late to do any planning because the deprivation of assets rules will apply and negate it.

Do remember that using this approach is effectively planning to use the lowest cost provider that the council can find. This is unlikely to be the most desirable place to live.

dunstonh

A brief question- are investment bonds used by some older people to shield/hide capital from councils who try to claim care home fees?

Difficult to answer that directly due to the way you word it.

You cannot take out an investment bond with the purpose of avoiding means tests. If it shown that this was your reason then they can include it in the means test.

However, if you have justifiable other reasons why you should take out an investment bond (i.e tax efficiency) then it is not included in the means test. You also need to take it out before the means test in question is known to be required or foreseeable. (its not just the care means test but pension credit as well and most other means tests).

If the investment bond is used to provide an income, then it gets included.

xylophone

http://www.ecadviser.com/xq/asp/txtSearch.Personal+Injury/exactphrase.1/sid.0/articleid.3A501061-8E12-4027-A3EF-8135F15CE977/qx/display.htm
http://www.dwp.gov.uk/publications/specialist-guides/technical-guidance/rr2-a-guide-to-housing-benefit/working-it-out/income-and-capital/
might be of interest.

buel

Thanks for the answers and links.

Please could i ask a hypothetical question-
An 88 year old man has £100,000 from the sale of his house. He invests it all in an investment bond for 5 years due to inheritance tax.

After 2 years he needs to go in to a home, the council pay for it being as he has no assets. He is in the home when his investment bond matures/ends.

Does he then have to start paying fees?

Meeper

If it is decided that he has done the bond for avoidance of care fees, then yes. If his case is strong that he has done it for other, legitimate, reasons, then no.

jamesd

If he has received no individual diagnosis of any condition that would cause a future need for care then he should get and keep proof of that fact. If he has received such a diagnosis it's already too late.

He's unlikely to be around when an investment bond matures. Their normal term is twenty years, although money can be taken out sooner, particularly on death. If he takes an income from the investment bond that will be counted as part of his income.

xylophone

http://www.shrewdcookie.com/investments/investment-bonds/investment-bonds-an-introduction

buel

Hi,
it's been a while, i just thought id ask two questions if i may?
1, regarding the hypothetical question i asked about the 88 year old: Can investment bonds be 'made out'/payable to someone other than the person who made the investment?
2, what other 'vehicles' do people use to escape paying potential care home fees?

System

It's not clear from the tone of your question whether you are outraged by the practice or are thinking of doing some evasion yourself.

If the latter, you need much better personalised advice than you are going to get on a public forum.

buel

Neither outraged nor thinking of evasion really. Id say more intrigued.
However, do i have to choose one in order to get the answers/opinions on my two questions? ;o)

For the record, the scenario is hypothetical. Unfortunately im not in that position.