How to Protect Parents Assets and avoid 'Deprivation of Assets'?

theoretica

The government doesn't have the resources to interfere in the finances of every elderly/ill person.  If he appoints you as LPA and he (or you) has enough assets to pay for his own care then they government and local council will not step in and will leave you to arrange and pay for his care - which I think is what you want? The council would rather do nothing, and so long as he is cared for that is basically what they will do!

JakeHyde said:

Before anyone asks, we have an extremely close relationship, all we have are each other, I’m not trying to take his money, I have money of my own, I just want to intelligently and legally insulate it from the government absorbing it, if he should require care down the line. He hopes to keep his own independence, and I want him to live near me so I can look after him, or pay for care when the time comes.

tetrarch

RAS said:

Meantime, he's unlikely to get an ISA appointment this financial year, but there'll be plenty the week after, and he'll get more benefit from the year long interest. Don't tie money up for over a year at this stage, as he needs flexibility.

You don't need an "ISA Appointment".

In order to make use of this year's £20,000 ISA allowance apply online for an instant access Cash ISA - it doesn't really matter where. This 2022/23 ISA "wrapper" is completely transferable into another account/investment at a later date.

Regards

Tet

p00hsticks

Gers said:

There's a very clear article about this in the Guardian today.  Well worth reading it.

It's good in as far as it goes, but it only really addresses the 'deprivation of assets' question and doesn't touch at all on the other downsides that often come up on this board when the topic is raised - for example,

• if the child is not actually living with the parent, then unless the parent pays the child a market rent after giving away their home whist continuing to live in it is a 'gift with reservation of benefit' and will still form part of the parents estate for IHT purposes. 

• If the child gets into debt and is made bankrupt,  or if they divorce, then the property will be included in their assets and so may end up having to be sold, leaving the parent potentially homeless. 

• If the child is not living with the parent, then they will potentially be liable to Capital Gains Tax when the property is eventually sold. 

• If the child does not yet own their own home, then when they come to buy not only will they will no longer qualify for any First Time Buyer benefits such as Stamp Duty Relief, they will also need to pay the additional SDLT surcharge for a second home (assuming England & Wales) 

MEM62

JakeHyde said:

My dear mum passed away before Christmas, it’s left me devastated 

Sorry for your loss.  

JakeHyde said:

We are both worried that if later in life (he's 78), if he becomes ill, and the government takes his life savings, and the family home.

The Government do not take your assets because you become ill.  What may happen is that your father might need to pay for care should he need it towards the end of his days.  Now surely your would want him to be in a position to do this so that his last days are as comfortable as possible.  And after all, if he is in that position, what else would he need the money for?            

Sarahspangles

It might help you to reframe your question as ‘how can I support dad to remain healthy and independent for as long as possible’.  The chances of someone needing a care home increase from something like 1 in 50 in their mid-60s to 1 in 8 by mid-80s.  Sometimes people end up in care homes because it’s not possible to support them in their own home - a right-sized bungalow near family, or a granny flat are more practical for longer.  There are plenty of people in care homes because they had a fall, went into hospital and it wasn’t possible to discharge them to a home with stairs and no downstairs toilet/shower.  Or the onset of dementia means someone can’t adjust to a new home that would be easier to manage, without distress.  It’s better to consider these scenarios while someone is still well, not when they urgently need a bed.

The Guardian article is negative in relation to a family pooling capital and living together, but I think this is because the journalist feels the writer is more interested in their relative’s money than their well-being.  Looked at from a financial point of view cohabiting so that support can be provided reduces the likelihood of the state having to step in.  And if they do then maybe you end up with a charge on the property, but you still know you’ve done the right think by your relative.

Brie

Having carers (self financed or not) in one's own home is one way to ensure that the house is not sold.  Once the savings have dwindled then the council has to step in whether they like it or not.  Problem is that the care provided can be very hit or miss.  

But do, as already suggested, get all the POAs sorted, also ensure there is a will and, I strongly suggest, a letter of intent (or living will) that outlines exactly what Dad wants to happen in the future.  None of these have to be expensive or require a lawyer if he situation is straight forward.  In my mom's letter she states she doesn't want be resuscitate un-necessarily, that she wants X, Y & Z for her funeral - basically anything that she was able to think about a few years back when she still had the brain power.  

Because things like POAs can take time it would also be a good idea for you to get third party authority on any bank accounts.  This will allow you, legally, to deal with his finances even before a POA is in place or has been activated.  So you'd have a debit card and can take money out at an ATM if he can't get to one, pay for his shopping if he has trouble handling the card itself or remembering his pin.  You can also keep an eye on account online to ensure there's nothing scary happening - like large withdrawals due to him being scammed.  The alternative is for you becoming joint on the accounts - from a deprivation aspect this is a good thing as in most cases each individual on a joint account is considered to "own" half of the balance, no matter how the account is funded.  That was certainly the case with my MiL and OH so the council disregarded half her account he was joint on when calculating her total assets and ability to pay for the home she ended up in.

CalJo99

Do take a look at Carers UK, where this issue is covered. The forum there is also good.

Bottom line though: Those of us who have the assets to pay for our own own must (and indeed, should!) do so. Only when those assets are 'burnt through' down to around the £20k mark (a post above gave the range), will the local authority step in. 

The only way to 'avoid' this is to spend the money before we need care and 'impoverish' ourselves down to the LA threshold. Then we'll have to accept whatever council-funded care  is on offer.

Do bear in mind that, like it or not, in care homes that take both privately funded and council funded residents (and not all do), because councils do not pay (cannot afford to pay without hoiking council tax - unpopular!) the actual cost of the residential care provided, it is the privately paying residents who cross-subsidise the council-funded residents. 

If you do need to go down the residential care route at some point, it's sensible to choose a home if possible that also takes council-funded residents, so moving out is not necessary if and as one lives so long one runs out of cash to be privately funded, and hits the LA funding threshold.

CalJo99

The issue of deprivation of assets is contentious.

It would indeed be simpler and clearer if there were a seven year rule, as there is for IHT.  ie, If a property, or other assets, or cash, were gifted to children 7 years before care is needed, then there is no DoA.

Or any clear term of years (ten, 15, whatever).  At the moment, LA's have to prove the person deliberately away assets for the precise purpose of not having to spend that on care costs, but to become eligible for LA funded care. 

Mojisola

Brie said:

Having carers (self financed or not) in one's own home is one way to ensure that the house is not sold. 

This is what my FIL chose - he had the income and savings to pay for good care at home.  It cost more per week than going into a good care home would have done but it was his money and his choice and, as you say, it meant the property was still there to be inherited by his beneficiaries.

My Dad had to go into a care home and, by selling his house, we were able to choose where he lived for his last years and he was happier there than he had been at home.

I visited the few care homes locally that accepted clients at council rates and I couldn't have left him in any of them.  I don't know what we would have done if he hadn't had the capital from his home to cover the care home fees. 

I certainly couldn't have enjoyed any 'inheritance' from him if we'd been able to transfer money to us in advance and he ended up in one of the poorly-funded homes paid for by taxpayers.

Marcon

JakeHyde said:

Hi everyone,

I’ve been putting off this post for a few months, 

My dear mum passed away before Christmas, it’s left me devastated, and I’ve been finding it hard to deal with the Will, and other only child / executor / family duties.

Over the next few weeks, I’ll be asking a few questions on here, especially about ugly topic of probate! 

My mind is so cloudy with everything going on, so I am struggling to write this in a clear and concise manner, so please bear with me. Also I didn't know where to post this question, so I hope here is okay.

QUESTION: 

My dad has a significant amount of savings of his own. Right now they are sitting in a bank earning nothing, so I am looking at high interest accounts, and an ISA to at least provide a little 'protection' from inflation.

We are both worried that if later in life (he's 78), if he becomes ill, and the government takes his life savings, and the family home. Is there any way to protect his savings, by either putting it in some kind of trust, assigning me as Power of Attorney, or him gifting the money to me, but somehow he retains some kind of access to it? He doesn't mind allowing me to take care of the family money, he trusts me infinitely , he just doesn't want to feel totally powerless, and rightly so.

Before anyone asks, we have an extremely close relationship, all we have are each other, I’m not trying to take his money, I have money of my own, I just want to intelligently and legally insulate it from the government absorbing it, if he should require care down the line. He hopes to keep his own independence, and I want him to live near me so I can look after him, or pay for care when the time comes.

He is healthy at the moment, but we don’t want him to be accused of intentionally depriving himself of assets.

Do you know what sort of time frame we have to take positive action? I know inheritance tax is 7 years, but is that the same in this situation?  Time is running out for me to help him with an ISA this year.  A fixed term ISA might be the wrong choice, if we later realise we need to reallocate the assets.  So maybe an easy access might be the smarter thing to do in the interim. 

Any and all advice welcome, thank you.

Condolences. Bereavement never made anyone feel great/think clearly...

This article is from 2019, but still a helpful and useful read: https://www.saga.co.uk/magazine/money/personal-finance/care/paul-lewis-paying-for-care

If he hasn't invested in an ISA for this year, as someone else has already suggested, just get one open before Wednesday this week and transfer it elsewhere when you have time to think about whether another ISA provider might be more suitable. See https://www.moneysavingexpert.com/savings/best-cash-isa/ for some practical thoughts.