Help re future care costs

elliq

My mother is 82 and has recently moved into a local authority sheltered housing development and is in the process of selling her home which will complete in the next few weeks.

As the house sale is imminent she is now trying to decide what to do with the money. She will need to use some of her capital to pay her rent on the flat but is concerned that she will need to keep it 'sitting there' as it was incase in the future she has to go into a care home.

Her house is worth about 70k and apart from an investment trust for my children worth about 17K and a few thousand in savings she has no other assets. She doesn't have a massive income either just a old age pension and a small pension from my late father plus attendance allowance (hence the need to use capital to pay her rent so she can still live comfortably). Because of this small amount she is well under the inheritance tax threshold.

She has suggested giving me some of the profit from the house (around 20K) which we would use to do some work on our house but is worried that this would cause problems should she need to pay home care fees in the future. She has also discussed her gifting some money to the kids every year to invest in for their future (they are 3 and 8 at the moment).

I have looked online and while there is clear advice for inheritance tax there is very little about care costs and it seems that it is related to the council wanting to investigate your finances and potentially take you to court if you are seen to be reducing your capital which sounds horrendous. I have already said that if the case arose that we needed to 'pay the money back' my husband and I could increase our mortgage and do this.

We want to know how best to advise her as we don't want to get it wrong and cause stress in the future but also know she would like to do something with her money now rather that sit on it for a 'what if' that may not happen.

We are in Scotland where I know the rules on paying for care are slightly different.

If anyone has experience or can point me towards any helpful resources about this I would be very grateful.

converted

does not matter if you are in England or Scotland, the LA can check back a number of years and if you are seen to have been depriving yourself of capital to avoid paying the cost of your care they can take that money into account - whether you have it or not- that you have gifted or awarded to your family. Check out Deprivation of Capital.

margaretclare

I think if I was your Mum, I would work out how much her rent and other expenses are going to be per year, set against her income from pensions and AA. Balance her books, in other words.

I wouldn't be too quick to give money away, apart from small amounts. I'd keep some of it accessible e.g. in a current account which pays interest. The rest, proceeds from the house sale, I'd look to invest so that it grows. An ISA for instance.

PS: I do NOT believe that money should be allowed to 'simply sit there'. Money must be put to work.

bjbyorkshire

Just out of pure interest really but how do the Local Authorities get to know that you have given money away, ie deprivation of assets. Would your numerous banks give them details of your savings accounts going back X number of years if they asked for that information? I always thought your bank accounts were private, except from the Inland Revenue that is.

Mojisola

bjbyorkshire wrote: »

Just out of pure interest really but how do the Local Authorities get to know that you have given money away, ie deprivation of assets. Would your numerous banks give them details of your savings accounts going back X number of years if they asked for that information? I always thought your bank accounts were private, except from the Inland Revenue that is.

If you don't give the evidence to prove that you are entitled to means tested help, you won't get it.

If you hide money or lie about how much you have or give it away and hope it won't be noticed and then receive benefits, that's fraud.

Farway

bjbyorkshire wrote: »

Just out of pure interest really but how do the Local Authorities get to know that you have given money away, ie deprivation of assets..

I guess the first question they would ask is where is the money you got for your house?

bjbyorkshire

Yes, I think you're right on all counts. I just wondered if there was any way that an L/A would have access to your accounts and especially to know that you had given away a sum of money say 5 years previously, probably before you knew what your future care needs might be.

It's not a position I'm in but I have wondered about this.

scotsbob

bjbyorkshire wrote: »

Just out of pure interest really but how do the Local Authorities get to know that you have given money away, ie deprivation of assets. Would your numerous banks give them details of your savings accounts going back X number of years if they asked for that information? I always thought your bank accounts were private, except from the Inland Revenue that is.

You remember all those laws that were passed under the guise of "preventing terrorism?" Well those are the laws that give your local council the right to trawl through the financial institutions.


They use the same data base as the Revenue and Customs and only need to enter name, dob, etc and hey presto every bank and building society account pops up.


Data protection legislation prevents me from accessing your bank details but doesn't prevent the government from accessing them.

Browntoa

the large sum could be classed as deprivation of capital but the small gifts to grandchildren would pass scrutiny especially if they are held in a childrens account so you have a paper trail for the money

bjbyorkshire

We've just sold our deceased daughters house and I have given our son a sum of money £12,000 in line with what Hubby and I can give in each year backdated for one year. I will give him £6,000 after 5 April for next year. After that it seems that I must wait another year to gift more to him.

It seems very wrong that you can't give whatever amounts you want to who ever you want if the tax has been paid on it but it would make life very difficult for the recipient if in 4 years time, for example, I needed care and they asked/demanded that money back.

Many folks make no attempt to save when they are working but they get looked after anyway.

I'm really not wanting to start an argument here and I'm sorry if I've hijacked to O/p's thread but I was backing her mums idea of gifting a bit of her hard earned/saved money to a caring daughter before she actually needs to pay care home fees, if indeed she ever does.

Mojisola

bjbyorkshire wrote: »

We've just sold our deceased daughters house and I have given our son a sum of money £12,000 in line with what Hubby and I can give in each year backdated for one year. I will give him £6,000 after 5 April for next year. After that it seems that I must wait another year to gift more to him.

You can give as much as you like - no-one is stopping you.

If you want to give away and avoid paying inheritance tax, the amounts are restricted - although you may end up paying IHT anyway. Sometimes it's better to give a larger sum immediately and gamble on living for more than seven years.