Inheritance Tax/Care Home Fees/Depravation Assets

SpideressUK · 3 July 2018 at 8:22PM

Possibly not the exact correct forum but was the nearest that seemed relevant. My mum is still alive (age 74) but wants to sell her house and live with a family member (initially my brother and his family) as she needs help with cooking, dressing etc. Can anyone tell me if she is allowed to gift a large chunk of the house sale (£100K between two children) to her children (keeping £20K or so for herself) and have the children "safe" from a potential future care home point of view?

I have read that inheritance tax starts at £325K and mum has no where near that so presumably there is no inheritance tax. Her intent is to live with a family member (and that is our intent for her) until her death. Our concern is what if her health needs become too great a year or two from now whereby she needs hoists etc and night-time assistance etc so has to go into a care home. Would the care home be saying that she has "depravation" of her assets from gifting the £100k bulk of the sale from the house to her children?

In order for it to be feasible for one of the children and their family to have her with them they need that £50K to be able to clear debts (costing £500 pm in min interest payment) so that they can then rent/buy a much larger living facility which will allow them their "space" and mum her own "space" within the building.

Yorkshireman99 · 3 July 2018 at 9:22PM

SpideressUK wrote: »

Possibly not the exact correct forum but was the nearest that seemed relevant. My mum is still alive (age 74) but wants to sell her house and live with a family member (initially my brother and his family) as she needs help with cooking, dressing etc. Can anyone tell me if she is allowed to gift a large chunk of the house sale (£100K between two children) to her children (keeping £20K or so for herself) and have the children "safe" from a potential future care home point of view?

I have read that inheritance tax starts at £325K and mum has no where near that so presumably there is no inheritance tax. Her intent is to live with a family member (and that is our intent for her) until her death. Our concern is what if her health needs become too great a year or two from now whereby she needs hoists etc and night-time assistance etc so has to go into a care home. Would the care home be saying that she has "depravation" of her assets from gifting the £100k bulk of the sale from the house to her children?

In order for it to be feasible for one of the children and their family to have her with them they need that £50K to be able to clear debts (costing £500 pm in min interest payment) so that they can then rent/buy a much larger living facility which will allow them their "space" and mum her own "space" within the building.

This would be seen as deprivation (not deprvation) of assets so would not avoid care home fees. Note that the fees are paid by the person receiving care not their family.

SpideressUK · 3 July 2018 at 10:06PM

Yorkshireman99 wrote: »

This would be seen as deprivation (not deprvation) of assets so would not avoid care home fees. Note that the fees are paid by the person receiving care not their family.

Thank you. What recourse would the LA have towards the family to reclaim their £100K they feel my mum did for the deprivation? My mum would be able to pay a short time for her own care from what remained of her savings but then would have no facility to pay anything else. How do the LA make a claim to the people mum gifted her money to? Could they force us to sell our assets to pay it so for eg force me to sell my house? Would they make us pay their £100K in installments at a high interest rate etc?

Dox · 3 July 2018 at 11:32PM

It is far from clear that this would be seen as deprivation of assets, since the main objective does not appear to be to increase your mum's eligibility for local authority funding - and that's the acid test. There's a good, clear (and accurate!) article at https://www.which.co.uk/elderly-care/financing-care/gifting-assets-and-property/343063-what-are-the-rules-for-gifting-assets

Where there could be an issue is if your mum gives £50K to each of her children but then moves in and lives with one of them. If the money is genuinely needed by the 'hosting' child to provide larger accommodation, then that gift many well be fine - but probably the other £50K would need to be left to in her will to even up the balance. If in the meantime it is needed for care home fees, then it will be up to her offspring to sort things out in terms of any 'inheritance' after she's gone.

Marcon · 3 July 2018 at 11:48PM

SpideressUK wrote: »

Thank you. What recourse would the LA have towards the family to reclaim their £100K they feel my mum did for the deprivation? My mum would be able to pay a short time for her own care from what remained of her savings but then would have no facility to pay anything else. How do the LA make a claim to the people mum gifted her money to? Could they force us to sell our assets to pay it so for eg force me to sell my house? Would they make us pay their £100K in installments at a high interest rate etc?

Doesn't work like that. The LA will carry out a financial assessment and if they believe your mum deliberately disposed of assets so she could qualify for help from the LA, they will simply refuse to pay.

But it doesn't sound as if this is the main motivation for what she proposes. Provided she only disposes of capital which is reasonably required to adapt/expand the accommodation of the family member with whom she will live (but not any other family members), and she is in reasonable health with no imminent need for residential care, there is a strong case that, if she needs care at a later date and can't fund it herself, then the LA can be required to help.

elsien · 3 July 2018 at 11:57PM

Given that mum already has care needs and the OP specifically mentions any money being "safe" from future care costs, that's exactly what it sounds like. Particularly if she's talking (as per OP) of gifting money to the child she won't be living with.

Tealblue · 4 July 2018 at 12:01AM

SpideressUK wrote: »

My mum is still alive (age 74) but wants to sell her house and live with a family member (initially my brother and his family) as she needs help with cooking, dressing etc. Can anyone tell me if she is allowed to gift a large chunk of the house sale (£100K between two children) to her children (keeping £20K or so for herself) and have the children "safe" from a potential future care home point of view?

Your mother is doubtless trying to be fair to both her children. Gifting money to the child she will live with is one thing; gifting cash to the other one is much riskier in terms of how the LA might view it, particularly if her health takes a sharp turn for the worse in the next couple of years.

Keep_pedalling · 4 July 2018 at 12:11AM

It would be extreamly foolish for your mother to give away her one major asset. This is almost certainly going to be classed as DDA, and the LA can claw the money back from the recipients, through the courts if nessasary. The fact that she is already in need of help makes it even more likely.

Apart from the money she is also giving away security, you need to think what would happen to her is her children pre deceased her or ran in to financial trouble through losing their job or getting involved in a messy divorce. She will also have no fall back if the proposed arrangement does not work out. Having an elderly parent move in can put a huge strain on families, and I certainly will neve4 look to do this with either of my children.

Keep_pedalling · 4 July 2018 at 12:15AM

SpideressUK wrote: »

Thank you. What recourse would the LA have towards the family to reclaim their £100K they feel my mum did for the deprivation? My mum would be able to pay a short time for her own care from what remained of her savings but then would have no facility to pay anything else. How do the LA make a claim to the people mum gifted her money to? Could they force us to sell our assets to pay it so for eg force me to sell my house? Would they make us pay their £100K in installments at a high interest rate etc?

Unless she gets partial ownership of the new property for her £50k then it may still very well be classed as DOA. There is no valid reason why the money needs to be gifted rather than make a joint purchase.

SpideressUK · 4 July 2018 at 12:18AM

Tealblue wrote: »

Your mother is doubtless trying to be fair to both her children. Gifting money to the child she will live with is one thing; gifting cash to the other one is much riskier in terms of how the LA might view it, particularly if her health takes a sharp turn for the worse in the next couple of years.

Yes, I think this is the case and also the likely outcome of how an LA might view it. I think the child mum will be living with should be "safe" (as in not going to have it claimed back by the LA via Deprivation of Assets) so long as the amount "gifted" is the actual amount to clear the debts and by doing so increasing that child's disposable income by the £500+ saved off min interest payments but not necessarily any extra over and above that which is needed to clear those debts UNLESS more is needed to either buy or rent a suitable larger property.

The other child may be subject to a Deprivation of Assets claim should mum need full time nursing home care as the only "reason" for that child to receive the same level of "gift" would be to allow that child a better chance of being able to visit mum. The same level of "gift" to the other child clears the mortgage saving £200 a month and thereby producing that extra amount of disposable income with which to visit mum (her children live a 5+ hour drive apart so it needs an overnight stay in a hotel and a lot of petrol costs for each visit).

troubleinparadise · 4 July 2018 at 12:39AM

The situation if the LA views this gifting of your Mum’s assets as deliberate deprivation will be less one of “clawing back” the gifted funds but refusing to fund the care costs for your mother in a care home. The LA is not obliged to pay for your mother’s care if she has given her money away. In that case you/your sibling would either need to fund residential care, or give her the care she needs.

Your mother may never need residential care, and you or your sibling can continue to meet her care needs for her wherever she ends up living. That way she (or you) would not need to worry about having given her money away.

Inheritance Tax/Care Home Fees/Depravation Assets

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