Care home fees - can we legitimately dispose of some savings?

badmemory

Exactly.  & the DWP do look at wills - well actually probate or they wouldn't come chasing for overpayments of benefits when it is actually a property which wouldn't have been included in the assessment.  They are now employing more to chase fraud than ever before (if they are to be believed) as are HMRC.  It is far easier to track & trace the little man's money than the billionaire's, so to quote some actor do you feel lucky?  I certainly wouldn't.

74jax

nanapop1977 said:

My husband and I are in our 60s and quite comfortable in that we own our home, both have good pensions and have a bit in the bank. We are about to inherit a sizeable sum from MIL's estate and whilst we plan to enjoy some of it, we also will give our two children and grandchildren decent amounts to help them along. Hopefully we will not need paid-for care for a good few years, and can only hope if and when the time comes, this help to our family will not be seen as DOA. But none of us knows what the future holds and we can only do what seems reasonable and fair at the time. I believe it's our moral responsibility to pay for any care needs if we have the resources to do so, but equally think we all should be able to help our kids out if we choose. So the moral is "do the right thing" - which I believe in this case is find your parent the best care home you can. You might not not get as much inheritance ultimately , but at least you'll know that the money has been well spent.
And I agree with badmemory - less expensive care homes are not necessarily less good!

Is there a reason you aren't doing a deed of variation in this instance? 

nanapop1977

There are personal factors within the family that we have to consider and seek further advice on. We might yet do a DOV but need to discuss with both our children first 

Mickey666

Keep_pedalling said:

Mickey666 said:

Interesting.  I wonder how long it will be before the taxman cottons on to this ‘deprivation of assets’ thing.  Why does it seem to be generally acceptable to avoid IHT by making various financial arrangements (ie basically giving away money and assets as PETs) but it’s generally frowned upon to make similar arrangements to avoid care home fees?   Perhaps councils should be limited to searching back only seven years for deliberately ‘deprived assets’, making it similar to the PET thing.

In practice gifts from that far back are totally untraceable so you would get away with it, but who in their right mind gives away their entire savings risking their long term security?

Doing silly things like giving your home away will always fall foul to both IHT avoidance and DOA as it is both a gift with reservation (so does not fall out of the estate after 7 years) and unlike bank accounts is held on public record.

Could the gift with reservation thing be easily avoided by using equity release instead?  Unless it is wished to pass on the physical property, this could be a way to release the value held in the property, which could then be gifted away as desired, while retaining the right to live in the property until death - the objective being to die with as small an estate as feasible. 

Yes, it would mean a chunk of value being taken by the equity release lender but how would that compare with the the chunk taken by the taxman if IHT is payable?  I'm mainly thinking of large properties here, ones that would definitely incur IHT for the owner's estate, even with the possible £1m allowances.

naedanger

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Interesting.  I wonder how long it will be before the taxman cottons on to this ‘deprivation of assets’ thing.  Why does it seem to be generally acceptable to avoid IHT by making various financial arrangements (ie basically giving away money and assets as PETs) but it’s generally frowned upon to make similar arrangements to avoid care home fees?   Perhaps councils should be limited to searching back only seven years for deliberately ‘deprived assets’, making it similar to the PET thing.

In practice gifts from that far back are totally untraceable so you would get away with it, but who in their right mind gives away their entire savings risking their long term security?

Doing silly things like giving your home away will always fall foul to both IHT avoidance and DOA as it is both a gift with reservation (so does not fall out of the estate after 7 years) and unlike bank accounts is held on public record.

Could the gift with reservation thing be easily avoided by using equity release instead?  Unless it is wished to pass on the physical property, this could be a way to release the value held in the property, which could then be gifted away as desired, while retaining the right to live in the property until death - the objective being to die with as small an estate as feasible. 

Yes, it would mean a chunk of value being taken by the equity release lender but how would that compare with the the chunk taken by the taxman if IHT is payable?  I'm mainly thinking of large properties here, ones that would definitely incur IHT for the owner's estate, even with the possible £1m allowances.

I think those who are wealthy aren't that worried about care home fees they can pay them out of income/pensions etc. 

IHT on the other hand is something they worry about, and there is no doubt a huge highly paid industry avoiding it. What was the last Duke of Westminster's net work and how much IHT did his estate pay? And a large part of the value of his estate was (ultimately) held in UK property that can't be physically moved. Nevertheless with the clever use of probably offshore investment companies, trust funds etc the value of the estate for IHT purposes is far less than the true economic value of the estate enjoyed by the family.

Mickey666

naedanger said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Interesting.  I wonder how long it will be before the taxman cottons on to this ‘deprivation of assets’ thing.  Why does it seem to be generally acceptable to avoid IHT by making various financial arrangements (ie basically giving away money and assets as PETs) but it’s generally frowned upon to make similar arrangements to avoid care home fees?   Perhaps councils should be limited to searching back only seven years for deliberately ‘deprived assets’, making it similar to the PET thing.

In practice gifts from that far back are totally untraceable so you would get away with it, but who in their right mind gives away their entire savings risking their long term security?

Doing silly things like giving your home away will always fall foul to both IHT avoidance and DOA as it is both a gift with reservation (so does not fall out of the estate after 7 years) and unlike bank accounts is held on public record.

Could the gift with reservation thing be easily avoided by using equity release instead?  Unless it is wished to pass on the physical property, this could be a way to release the value held in the property, which could then be gifted away as desired, while retaining the right to live in the property until death - the objective being to die with as small an estate as feasible. 

Yes, it would mean a chunk of value being taken by the equity release lender but how would that compare with the the chunk taken by the taxman if IHT is payable?  I'm mainly thinking of large properties here, ones that would definitely incur IHT for the owner's estate, even with the possible £1m allowances.

I think those who are wealthy aren't that worried about care home fees they can pay them out of income/pensions etc. 

IHT on the other hand is something they worry about, and there is no doubt a huge highly paid industry avoiding it. What was the last Duke of Westminster's net work and how much IHT did his estate pay? And a large part of the value of his estate was (ultimately) held in UK property that can't be physically moved. Nevertheless with the clever use of probably offshore investment companies, trust funds etc the value of the estate for IHT purposes is far less than the true economic value of the estate enjoyed by the family.

Hmm - one extreme to the other!  I wasn't really thinking about billionaire's offshore property arrangements, more the sort of person with a large but now empty family home and having retired with only a modest pension income.  The asset-rich, cash poor sort of person.  Large houses do not automatically infer being wealthy in a practial sense, though it's a commonly made mistake.

Aranyani

Mickey666 said:

naedanger said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Interesting.  I wonder how long it will be before the taxman cottons on to this ‘deprivation of assets’ thing.  Why does it seem to be generally acceptable to avoid IHT by making various financial arrangements (ie basically giving away money and assets as PETs) but it’s generally frowned upon to make similar arrangements to avoid care home fees?   Perhaps councils should be limited to searching back only seven years for deliberately ‘deprived assets’, making it similar to the PET thing.

In practice gifts from that far back are totally untraceable so you would get away with it, but who in their right mind gives away their entire savings risking their long term security?

Doing silly things like giving your home away will always fall foul to both IHT avoidance and DOA as it is both a gift with reservation (so does not fall out of the estate after 7 years) and unlike bank accounts is held on public record.

Could the gift with reservation thing be easily avoided by using equity release instead?  Unless it is wished to pass on the physical property, this could be a way to release the value held in the property, which could then be gifted away as desired, while retaining the right to live in the property until death - the objective being to die with as small an estate as feasible. 

Yes, it would mean a chunk of value being taken by the equity release lender but how would that compare with the the chunk taken by the taxman if IHT is payable?  I'm mainly thinking of large properties here, ones that would definitely incur IHT for the owner's estate, even with the possible £1m allowances.

I think those who are wealthy aren't that worried about care home fees they can pay them out of income/pensions etc. 

IHT on the other hand is something they worry about, and there is no doubt a huge highly paid industry avoiding it. What was the last Duke of Westminster's net work and how much IHT did his estate pay? And a large part of the value of his estate was (ultimately) held in UK property that can't be physically moved. Nevertheless with the clever use of probably offshore investment companies, trust funds etc the value of the estate for IHT purposes is far less than the true economic value of the estate enjoyed by the family.

Hmm - one extreme to the other!  I wasn't really thinking about billionaire's offshore property arrangements, more the sort of person with a large but now empty family home and having retired with only a modest pension income.  The asset-rich, cash poor sort of person.  Large houses do not automatically infer being wealthy in a practial sense, though it's a commonly made mistake.

Surely the best thing for that person to do is to downsize? 

naedanger

Mickey666 said:

naedanger said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Interesting.  I wonder how long it will be before the taxman cottons on to this ‘deprivation of assets’ thing.  Why does it seem to be generally acceptable to avoid IHT by making various financial arrangements (ie basically giving away money and assets as PETs) but it’s generally frowned upon to make similar arrangements to avoid care home fees?   Perhaps councils should be limited to searching back only seven years for deliberately ‘deprived assets’, making it similar to the PET thing.

In practice gifts from that far back are totally untraceable so you would get away with it, but who in their right mind gives away their entire savings risking their long term security?

Doing silly things like giving your home away will always fall foul to both IHT avoidance and DOA as it is both a gift with reservation (so does not fall out of the estate after 7 years) and unlike bank accounts is held on public record.

Could the gift with reservation thing be easily avoided by using equity release instead?  Unless it is wished to pass on the physical property, this could be a way to release the value held in the property, which could then be gifted away as desired, while retaining the right to live in the property until death - the objective being to die with as small an estate as feasible. 

Yes, it would mean a chunk of value being taken by the equity release lender but how would that compare with the the chunk taken by the taxman if IHT is payable?  I'm mainly thinking of large properties here, ones that would definitely incur IHT for the owner's estate, even with the possible £1m allowances.

I think those who are wealthy aren't that worried about care home fees they can pay them out of income/pensions etc. 

IHT on the other hand is something they worry about, and there is no doubt a huge highly paid industry avoiding it. What was the last Duke of Westminster's net work and how much IHT did his estate pay? And a large part of the value of his estate was (ultimately) held in UK property that can't be physically moved. Nevertheless with the clever use of probably offshore investment companies, trust funds etc the value of the estate for IHT purposes is far less than the true economic value of the estate enjoyed by the family.

Hmm - one extreme to the other!  I wasn't really thinking about billionaire's offshore property arrangements, more the sort of person with a large but now empty family home and having retired with only a modest pension income.  The asset-rich, cash poor sort of person.  Large houses do not automatically infer being wealthy in a practial sense, though it's a commonly made mistake.

If the house was worth over £1million, or even an amount signficantly less say £500k, then I don't think the owner should be too worried about care home costs. In all probability even two or three years in a good quality home is likely to leave a significant inheritance. (And in some cases the house could be let out to bring in an income that may partly offset the care costs.)

If the house was worth a bit less, or both owners were likely to need care, then there would be a possibility most might go in care home costs. If the owner was willing to accept the lowest cost care then they could consider asset deprivation. I am sure you could come up with strategies that they might get away with. (Personally I would put my own care ahead of any inheritance, but I realise everyone's circumstances are different.) 

Mickey666

Aranyani said:

Mickey666 said:

naedanger said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Interesting.  I wonder how long it will be before the taxman cottons on to this ‘deprivation of assets’ thing.  Why does it seem to be generally acceptable to avoid IHT by making various financial arrangements (ie basically giving away money and assets as PETs) but it’s generally frowned upon to make similar arrangements to avoid care home fees?   Perhaps councils should be limited to searching back only seven years for deliberately ‘deprived assets’, making it similar to the PET thing.

In practice gifts from that far back are totally untraceable so you would get away with it, but who in their right mind gives away their entire savings risking their long term security?

Doing silly things like giving your home away will always fall foul to both IHT avoidance and DOA as it is both a gift with reservation (so does not fall out of the estate after 7 years) and unlike bank accounts is held on public record.

Could the gift with reservation thing be easily avoided by using equity release instead?  Unless it is wished to pass on the physical property, this could be a way to release the value held in the property, which could then be gifted away as desired, while retaining the right to live in the property until death - the objective being to die with as small an estate as feasible. 

Yes, it would mean a chunk of value being taken by the equity release lender but how would that compare with the the chunk taken by the taxman if IHT is payable?  I'm mainly thinking of large properties here, ones that would definitely incur IHT for the owner's estate, even with the possible £1m allowances.

I think those who are wealthy aren't that worried about care home fees they can pay them out of income/pensions etc. 

IHT on the other hand is something they worry about, and there is no doubt a huge highly paid industry avoiding it. What was the last Duke of Westminster's net work and how much IHT did his estate pay? And a large part of the value of his estate was (ultimately) held in UK property that can't be physically moved. Nevertheless with the clever use of probably offshore investment companies, trust funds etc the value of the estate for IHT purposes is far less than the true economic value of the estate enjoyed by the family.

Hmm - one extreme to the other!  I wasn't really thinking about billionaire's offshore property arrangements, more the sort of person with a large but now empty family home and having retired with only a modest pension income.  The asset-rich, cash poor sort of person.  Large houses do not automatically infer being wealthy in a practial sense, though it's a commonly made mistake.

Surely the best thing for that person to do is to downsize? 

Why?  Why should someone be expected to move out of their family home (with all the associated expense and upheaval) with all its comforts and memories just because someone else thinks it is too large for them?  Who decides when a house is 'too large' anyway?  The UK is being flooded with pokey little new build identikit houses with postage-stamp 'gardens' with the developers giving little or no consideration to the quality of life such houses will support.  We've all seen the disastrous, failed social engineering that accompanied high-rise estates and 'community spaces' back in the 60/70s and I predict there will be similar future issues arising out of the current frenzy to cram more and more poor quality 'breeding boxes' into every square inch of available building land.  Still, with the likes of Persimmon CEO leading the way forward with his outrageous £75m annual bonus, what can we expect?

https://www.theguardian.com/business/2018/nov/07/persimmon-boss-asked-to-leave-amid-ongoing-outrage-over-bonus

OK, rant over

Keep_pedalling

Mickey666 said:ŷ

Keep_pedalling said:

Mickey666 said:

Interesting.  I wonder how long it will be before the taxman cottons on to this ‘deprivation of assets’ thing.  Why does it seem to be generally acceptable to avoid IHT by making various financial arrangements (ie basically giving away money and assets as PETs) but it’s generally frowned upon to make similar arrangements to avoid care home fees?   Perhaps councils should be limited to searching back only seven years for deliberately ‘deprived assets’, making it similar to the PET thing.

In practice gifts from that far back are totally untraceable so you would get away with it, but who in their right mind gives away their entire savings risking their long term security?

Doing silly things like giving your home away will always fall foul to both IHT avoidance and DOA as it is both a gift with reservation (so does not fall out of the estate after 7 years) and unlike bank accounts is held on public record.

Could the gift with reservation thing be easily avoided by using equity release instead?  Unless it is wished to pass on the physical property, this could be a way to release the value held in the property, which could then be gifted away as desired, while retaining the right to live in the property until death - the objective being to die with as small an estate as feasible. 

Yes, it would mean a chunk of value being taken by the equity release lender but how would that compare with the the chunk taken by the taxman if IHT is payable?  I'm mainly thinking of large properties here, ones that would definitely incur IHT for the owner's estate, even with the possible £1m allowances.

No, and it could actually mean they have to contribute more. If for example a couple had £50k each in ISAs and one needed residential care then they would be assessed on that amount alone. If they then took out £100k of EQ and immediately gave it away the amount in the Essex net would double.