Gifting money

Spendless

Though think about the area where you live. One of my Grandmothers is in a nursing home with dementia. She's been there for the past 5 1/2 years.  She is self funding or rather was, her money for the sale of her home ran out in July. My mum looked around several different homes before settling on this one being the best suited to needs and made the decision based on that. Here's the thing they charge exactly the same price as our council pays, so ultimately it would have made no difference. We do live in a cheap part of England though, this wouldn't be the case if we lived in a more affluent area

Mickey666

Comms69 said:

Literally give anyone any amount of cash or assets at any point. 

If they die with-in 7 years of said gift, it can attract IHT

If they need care with-in 7 years of the gift, council can count it as deprivation of assets. 

Is that 7 years a formal thing?
I know someone whose 70-year old parents sold their home, gifted a lot of the proceeds and moved into the annexe of their daughter’s house.  They are now in their mid-80s, so the cash gift PET has long expired but what would be the situation regarding deprivation of assets if a care home was needed in the future?  They are still relatively healthy and living quite independently so could rightly argue that at the time they sold their house and gifted money there was no expectation of needing care, something that has been borne out by the last 15 or so years.
So, could the council regard this arrangement as DoA?  Is this ‘7-year rule’ a legal thing or just a guideline that councils could ignore?

zagfles

Mickey666 said:

Comms69 said:

Literally give anyone any amount of cash or assets at any point. 

If they die with-in 7 years of said gift, it can attract IHT

If they need care with-in 7 years of the gift, council can count it as deprivation of assets. 

Is that 7 years a formal thing?
I know someone whose 70-year old parents sold their home, gifted a lot of the proceeds and moved into the annexe of their daughter’s house.  They are now in their mid-80s, so the cash gift PET has long expired but what would be the situation regarding deprivation of assets if a care home was needed in the future?  They are still relatively healthy and living quite independently so could rightly argue that at the time they sold their house and gifted money there was no expectation of needing care, something that has been borne out by the last 15 or so years.
So, could the council regard this arrangement as DoA?  Is this ‘7-year rule’ a legal thing or just a guideline that councils could ignore?

Never heard of any 7 year rule for care home fees, I suspect it's rubbish unless anyone can produce a reliable link. As I understand it the usual rule is whether needing care could be forseen, eg if someone was fit and healthly vs if they were getting frial, had a degenerative condition etc. As per link above and also Age UK here: https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets/

However in the case of the above, selling the house and moving into a "annex" paid for by a "gift", they need to understand the "pre-owned assets tax". Good explaination here https://www.fladgate.com/2015/06/pre-owned-assets-tax-the-forgotten-tax/

Mickey666

The test of ‘whether needing care could be foreseen’ seems fraught with difficulty to me, if only on the basis that it ‘could be foreseen’ that EVERYONE might need care as they get older.   In the case I mentioned, a 70 year-old might be ‘foreseen’ by a council as likely to need care in the future, except that in this specific case the person concerned could counter-argue that they are now 85-ish and still don’t need care, so in their specific case they were correct in not foreseeing a need for care when they sold their home.  Although what happens if they live another 15 years and then need care?  It all seems a bit ‘woolly’ and open to Interpretation, which is far from ideal when dealing with tax rules.

As for the POAT thing, that was an interesting link so thanks for that.   Seems a bit unfair though when a family creates a multi-generational home in order to better care for elderly parents, thus taking much of the burden of old age care away from the state.  Still, who was it said the only two guarantees in life are death and taxes?  

zagfles

Mickey666 said:

The test of ‘whether needing care could be foreseen’ seems fraught with difficulty to me, if only on the basis that it ‘could be foreseen’ that EVERYONE might need care as they get older.   In the case I mentioned, a 70 year-old might be ‘foreseen’ by a council as likely to need care in the future, except that in this specific case the person concerned could counter-argue that they are now 85-ish and still don’t need care, so in their specific case they were correct in not foreseeing a need for care when they sold their home.  Although what happens if they live another 15 years and then need care?  It all seems a bit ‘woolly’ and open to Interpretation, which is far from ideal when dealing with tax rules.

As for the POAT thing, that was an interesting link so thanks for that.   Seems a bit unfair though when a family creates a multi-generational home in order to better care for elderly parents, thus taking much of the burden of old age care away from the state.  Still, who was it said the only two guarantees in life are death and taxes?  

It's the same as arguing "anyone could become unemployed" etc and then saying people deliberately deprived themselves of capital if they went on an expensive holiday and then lost their job. If you take it to the logical extreme you'd never be allowed to spend any savings on anything if there's any possibility of you needing to claim any means tested benefits at any point in the future.

Re POAT - AIUI it doesn't apply if the ownership of the multi-generational house fairly reflects the contribution made by the occupants, so if the parents and offspring club together and put £200k each into buying a £400k house and they own the property jointly, not a problem. It only applies where there's an obvious dodge like the parents gifting money to their offspring which they then use eg to build a granny annex/buy a bigger house, with the whole property owned by the offspring.

Mickey666

zagfles said:

Mickey666 said:

The test of ‘whether needing care could be foreseen’ seems fraught with difficulty to me, if only on the basis that it ‘could be foreseen’ that EVERYONE might need care as they get older.   In the case I mentioned, a 70 year-old might be ‘foreseen’ by a council as likely to need care in the future, except that in this specific case the person concerned could counter-argue that they are now 85-ish and still don’t need care, so in their specific case they were correct in not foreseeing a need for care when they sold their home.  Although what happens if they live another 15 years and then need care?  It all seems a bit ‘woolly’ and open to Interpretation, which is far from ideal when dealing with tax rules.

As for the POAT thing, that was an interesting link so thanks for that.   Seems a bit unfair though when a family creates a multi-generational home in order to better care for elderly parents, thus taking much of the burden of old age care away from the state.  Still, who was it said the only two guarantees in life are death and taxes?  

It's the same as arguing "anyone could become unemployed" etc and then saying people deliberately deprived themselves of capital if they went on an expensive holiday and then lost their job. If you take it to the logical extreme you'd never be allowed to spend any savings on anything if there's any possibility of you needing to claim any means tested benefits at any point in the future.

Re POAT - AIUI it doesn't apply if the ownership of the multi-generational house fairly reflects the contribution made by the occupants, so if the parents and offspring club together and put £200k each into buying a £400k house and they own the property jointly, not a problem. It only applies where there's an obvious dodge like the parents gifting money to their offspring which they then use eg to build a granny annex/buy a bigger house, with the whole property owned by the offspring.

1.  Yes, agreed.  Almost anything 'could' happen, which is why it seems like a pointless policy.  Well, not pointless for council's I suppose, because they can save money as a result, but definitely not equitable.  There may not be a '7 year rule' for DoA but it seems like things would be a lot fairer if there was.

2. I suppose a way around it would be to make the parental money a loan instead of a gift, so that on the death of a surviving parent the loan would effectively be repaid from the offsprings inheritance.  Although, I guess that is effectively what POAT does anyway, so maybe it all comes out in the wash anyway - and if the parents estate is not liable for IHT territory anyway (even with the POAT) then it makes no difference anyway - if I'm understanding it correctly.

Keep_pedalling

Mickey666 said:

zagfles said:

Mickey666 said:

The test of ‘whether needing care could be foreseen’ seems fraught with difficulty to me, if only on the basis that it ‘could be foreseen’ that EVERYONE might need care as they get older.   In the case I mentioned, a 70 year-old might be ‘foreseen’ by a council as likely to need care in the future, except that in this specific case the person concerned could counter-argue that they are now 85-ish and still don’t need care, so in their specific case they were correct in not foreseeing a need for care when they sold their home.  Although what happens if they live another 15 years and then need care?  It all seems a bit ‘woolly’ and open to Interpretation, which is far from ideal when dealing with tax rules.

As for the POAT thing, that was an interesting link so thanks for that.   Seems a bit unfair though when a family creates a multi-generational home in order to better care for elderly parents, thus taking much of the burden of old age care away from the state.  Still, who was it said the only two guarantees in life are death and taxes?  

It's the same as arguing "anyone could become unemployed" etc and then saying people deliberately deprived themselves of capital if they went on an expensive holiday and then lost their job. If you take it to the logical extreme you'd never be allowed to spend any savings on anything if there's any possibility of you needing to claim any means tested benefits at any point in the future.

Re POAT - AIUI it doesn't apply if the ownership of the multi-generational house fairly reflects the contribution made by the occupants, so if the parents and offspring club together and put £200k each into buying a £400k house and they own the property jointly, not a problem. It only applies where there's an obvious dodge like the parents gifting money to their offspring which they then use eg to build a granny annex/buy a bigger house, with the whole property owned by the offspring.

1.  Yes, agreed.  Almost anything 'could' happen, which is why it seems like a pointless policy.  Well, not pointless for council's I suppose, because they can save money as a result, but definitely not equitable.  There may not be a '7 year rule' for DoA but it seems like things would be a lot fairer if there was.

2. I suppose a way around it would be to make the parental money a loan instead of a gift, so that on the death of a surviving parent the loan would effectively be repaid from the offsprings inheritance.  Although, I guess that is effectively what POAT does anyway, so maybe it all comes out in the wash anyway - and if the parents estate is not liable for IHT territory anyway (even with the POAT) then it makes no difference anyway - if I'm understanding it correctly.

The 7 year rule is too crude to work for DDoA, the position as it stands is that every case is ( or should be) treated on its merits. If for example I give a large gift to a child, to prevent their house being repossessed, then 3 years later I need care, it can be shown that there was a sound reason other than avoiding care costs the gift was made. On the other hand giving my house away 12 years before needing care is highly likely to be treated as DDoA as there is no sound reason for doing that other than avoiding care costs.

kayleighali

This story is from experience but bear with me as it may be long (and possibly boring) but might help.

When the 'right to buy' scheme came in my gran used savings/life insurance payout to buy both her house and my great-grandparents - the house was in their name but the agreement was that my gran would inherit the house when the time came. Fast forward 20 years or so, my great-grandmother had a fall and broke her shoulder. It was agreed that she would move in with my grandmother (her daughter) until she recovered. After a while, it was decided in her best interests that she wouldn't be safe living herself as she was at high risk of falls so the house got sold and she officially moved in with my grandmother. All was well.

Fast forward 3 years, dementia sets in (which was not foreseen) and it's no longer possible for my grandmother to provide the ongoing care on her own. Carers start to come in to assist with my great-grandmother and all continues quite happily. My grandmother then trips taking the bin out and fractures her spine. The carers recommended that my great-grandmother go in to a nursing home full time as this is what is best for all parties concerned.

Long story short (but I wanted to ensure I explained the background), the council pursued my grandmother for the money from the house sale to pay for care. Even though the need for a nursing home was not foreseen (backed up by doctors letters) my grandmother was still pursued for the money from the sale of the house to pay for care as it was seen as deprivation of assets.

Mickey666

Yes, I accept keep_pedalling’s point but the problem, I’d say, is that the need to assess every situation on its merits opens the door to situation like that described by kayleighali.   Of course, councils are going to pursue anyone they can if it means saving money.  That’s not really assessing a situation on its merits, it’s simply chasing the possibility of saving money with no consideration of the personal circumstances.
It’s a perversion of a well-meaning system to avoid deliberate ‘fraud’ that ends up causing much grief and suffering.

Keep_pedalling

Mickey666 said:

Yes, I accept keep_pedalling’s point but the problem, I’d say, is that the need to assess every situation on its merits opens the door to situation like that described by kayleighali.   Of course, councils are going to pursue anyone they can if it means saving money.  That’s not really assessing a situation on its merits, it’s simply chasing the possibility of saving money with no consideration of the personal circumstances.
It’s a perversion of a well-meaning system to avoid deliberate ‘fraud’ that ends up causing much grief and suffering.

It’s not a case of saving money, it a case of allocating limited funds to where its most needed. Unfortunately the reality is that anyone who can’t self fund will struggle to get LA funding when needed.
Not only will the choice of care homes be limited, but you will also have a long wait to reach a level of decrepitude that is deemed sufficient to you gets past the panel that allocates places.

I experienced this with my mother, fortunately we are far better off than she was and fully self funded care costs has been built into our long term financial  planning