Care Home Fees and Deliberate Deprivation

Barrybloke

My mother-in-law is wondering about giving some money to her grandchildren when they leave university next year, but is worried that a local authority might claw the money back from the grandchildren if she has to go into a care home in a few years' time. Does anyone have experience of application of the care home 'deliberate deprivation' rules to such circumstances?

EdInvestor

If she gives away gifts to the level allowed under the IHT rules (3k a year plus various smaller amounts) she should be OK.

dunstonh

If the gifts are deliberate to reduce her assets to get local authority care then IHT rules dont apply. They are two different things. If the gifts are not deliberate deprivation then the local authority are unlikely to include them.

In reality, small gifts are not going to raise any eyebrows. Large gifts would.

margaretclare

Is she planning to go into a care home? If she is, this might be where the 'deliberate deprivation' would come in, that she planned to divert assets.

It's only a minority of people who end their days in a care home, and isn't giving money to grandchildren - assuming you've got some to give - what grandparents do? Better let them have it when it's most useful to them, why not.

Margaret

EdInvestor

dunstonh wrote: »

If the gifts are deliberate to reduce her assets to get local authority care then IHT rules dont apply. They are two different things.

Yes I'm aware of that, but.....

If the gifts are not deliberate deprivation then the local authority are unlikely to include them.

....one way of showing that they aren't is to observe the IHT limits so that the intention of the gifts can be clearly shown not to have anything to do with care fees.

In reality, small gifts are not going to raise any eyebrows. Large gifts would.

Indeed so.Signing ownership of the home over to children for instance, is one of the most obvious things not to do: not only will it act like a red rag to a bull down at the council office, it also brings additional tax penalties as well.:(

Barrybloke

Okay - thanks for thoughts so far. This has confirmed my view that the IHT limits offer a safe benchmark. I was trying to see how far people have been able to reasonably push this. I guess it depends on the particular circumstances and the council concerned. Age Concern Factsheet 40 gives a good summary of current case law, but obviously only goes so far.

Both my parents were in care homes. I acted on very good advice at just the right time on legal affairs and immediate care policies that protected inheritances from being potentially gobbled up by care home fees. You never know how long someone will live in a care home at around £25,000 per year. With this sort of potential expense, advice can be well worth it.

Finally on a general point, I find that people often confuse the IHT and deliberate deprivation rules. The latter can be far-reaching; with the potential sums at stake - you can see why!

oceanblue_3

It's always a good idea to have a look at the Charging For Residential Accommodation Guide (CRAG), which is usually upadated each April by the Department of Health - it gives guidance to local authorities in England and Wales with regard to financial assessments prior to entering residential accommodation.
Broadly speaking, any gift made for the purpose of mitigating a potential IHT liability will be disregarded. Clearly, this would apply now only to couples, for example, whose assets exceed £700,000.00.
In many circumstances, where there is no demonstrable potential liability to IHT, the local authority simply has to ask "Why did you give that away?" Unless there is a logical and compelling reason, the local authority can claim deliberate deprivation. Furthermore, there is no time limit, after which deliberate deprivation becomes acceptable.
Nevertheless, the greater the period between the gift and the assessment, the less likely there is to be a challenge, especially if medical records indicate that, at the time, there had been no talk of impending residential accommodation.
It is interesting to note that CRAG specifically instructs local authorities to disregard investment bonds from the financial assessment.

EdInvestor

oceanblue wrote: »

It is interesting to note that CRAG specifically instructs local authorities to disregard investment bonds from the financial assessment.

I understand that any withdrawals are however considered when assessing the income side of the contriution.

oceanblue_3

You're right. If, however, those withdrawals are suspended, the investment bond has to be disregarded.

dunstonh

It is interesting to note that CRAG specifically instructs local authorities to disregard investment bonds from the financial assessment.

And with true Govt contridictions, advisers are not allowed to recommend investments bonds on the basis of them not being included in the local authority means test. Yet they want advisers to take into account pension credit when making pension recommendations.

Both are benefits but one you can recommend, one you cannot.

Liz_the_Whizz

oceanblue wrote: »

It is interesting to note that CRAG specifically instructs local authorities to disregard investment bonds from the financial assessment.

So why are investment bonds treated as a special case in these circumstances?

edit: think I just found the answer to my own question - an investment bond is disregarded as it is classed as a life insurance policy - is this correct?