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  • FIRST POST
    • Hutch100uk
    • By Hutch100uk 8th Jan 18, 10:20 AM
    • 360Posts
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    Hutch100uk
    Deprivation of assets
    • #1
    • 8th Jan 18, 10:20 AM
    Deprivation of assets 8th Jan 18 at 10:20 AM
    Apologies if this is the wrong section for this.

    My parents would like to put their house in my name (and my siblings) in order to protect their assets from being used should they go into a care home.

    They have taken legal advice but I'm not convinced its the right advice.

    I keep reading about 'deprivation of assets' and would be interested to know how likely this is. In some articles I read that the local authority would be likely to seize the asset anyway if they thought it had been done deliberately. Other articles say that if its done while they are still in perfect health with no immediate need for care, it should be fine.

    I'm not 100% sure they should go ahead as I understand there will be tax implications if I was to purchase another home (I rent at the moment). This all seems like a minefield.

    Any advice?
Page 3
    • TrickyDicky101
    • By TrickyDicky101 9th Jan 18, 12:15 PM
    • 3,038 Posts
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    TrickyDicky101
    Council can still challenge a trust if it's believed to have been done to avoid care home fees

    http://www.bbc.co.uk/news/business-39589083
    Originally posted by Browntoa
    I believe in the instance raised by pensionpawn it is the case that the trust is created on death - there is no deprivation (as the individual is dead and thus can no longer benefit from a care home or assistance). It is merely a tax-efficient structure to pass on the wealth. It does not deprive the still-living spouse as it wasn't theirs in the first place.
    • zagfles
    • By zagfles 9th Jan 18, 4:12 PM
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    zagfles
    I believe in the instance raised by pensionpawn it is the case that the trust is created on death - there is no deprivation (as the individual is dead and thus can no longer benefit from a care home or assistance). It is merely a tax-efficient structure to pass on the wealth. It does not deprive the still-living spouse as it wasn't theirs in the first place.
    Originally posted by TrickyDicky101
    If it specifically allows the still-living spouse to remain in the house, then why couldn't it be viewed as deprivation? The surviving spouse gets the benefit of the deceased spouse's half of the house, rent free, for the rest of their life. So they have been left a benefit from the deceased's share of the house.

    Also what if the survivor wanted to move house?

    How would CGT work? AIUI trusts usually have to pay CGT, and only get one allowance. Had the house stayed owned by the surviving spouse, no CGT would be payable because of PPR. Also had the house been owned directly by the children, they'd each be able to use their own CGT allowance. So couldn't it be worse from a CGT point of view?
    • pensionpawn
    • By pensionpawn 9th Jan 18, 8:12 PM
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    pensionpawn
    If it specifically allows the still-living spouse to remain in the house, then why couldn't it be viewed as deprivation? The surviving spouse gets the benefit of the deceased spouse's half of the house, rent free, for the rest of their life. So they have been left a benefit from the deceased's share of the house.

    Also what if the survivor wanted to move house?

    How would CGT work? AIUI trusts usually have to pay CGT, and only get one allowance. Had the house stayed owned by the surviving spouse, no CGT would be payable because of PPR. Also had the house been owned directly by the children, they'd each be able to use their own CGT allowance. So couldn't it be worse from a CGT point of view?
    Originally posted by zagfles
    Are you saying that if the surviving spouse needed to move into a care home that the assets of their deceased spouse, who explicitly stated in their Will is to pass to their children, should now become available to fund said care? Half of the house belongs to the surviving spouse so why should they be forced to sell / vacate the house when care home fees are only gathered from the estate of the 'cared for' person after they are deceased?

    If the surviving spouse wishes to move house then any new property is acquired in the same ratio with the children as in the previous situation and if downsizing any equity split between the surviving spouse and their children.

    I believe there is no CGT issues to worry about.
    • Clifford_Pope
    • By Clifford_Pope 10th Jan 18, 7:09 AM
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    Clifford_Pope
    I believe there is no CGT issues to worry about.
    Originally posted by pensionpawn

    That is my understanding. A trust beneficiary having a right to live in a property owned by the trust can claim principal private residence CGT relief.
    • zagfles
    • By zagfles 10th Jan 18, 7:39 AM
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    zagfles
    That is my understanding. A trust beneficiary having a right to live in a property owned by the trust can claim principal private residence CGT relief.
    Originally posted by Clifford_Pope
    Well I have to admit I don't understand trusts, but this doesn't sound right at all - the whole point of the trust is that the surviving spouse doesn't own the trust's half of the house, so how can they claim PPR CGT relief on capital that they don't own?

    Not saying you're wrong, just that it sounds wrong!
    • Hutch100uk
    • By Hutch100uk 11th Jan 18, 11:52 AM
    • 360 Posts
    • 89 Thanks
    Hutch100uk
    Saw a solicitor this morning but, of course, as I am living in England and my parents and sibling are in Scotland, he advised using a Scottish Solicitor.

    I will ask my sibling to do this. At least then hopefully he can put a case to our parents that this wouldn't work.

    It would be interesting to hear more about the Trust option. I guess even if this is shown as deprivation of assets, the asset is still there and can be used.
    • le loup
    • By le loup 11th Jan 18, 1:05 PM
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    le loup
    I guess even if this is shown as deprivation of assets, the asset is still there and can be used.
    Originally posted by Hutch100uk
    As would the house left in it's current ownership!
    • TrickyDicky101
    • By TrickyDicky101 11th Jan 18, 2:09 PM
    • 3,038 Posts
    • 1,961 Thanks
    TrickyDicky101
    If it specifically allows the still-living spouse to remain in the house, then why couldn't it be viewed as deprivation? The surviving spouse gets the benefit of the deceased spouse's half of the house, rent free, for the rest of their life. So they have been left a benefit from the deceased's share of the house.

    Also what if the survivor wanted to move house?

    How would CGT work? AIUI trusts usually have to pay CGT, and only get one allowance. Had the house stayed owned by the surviving spouse, no CGT would be payable because of PPR. Also had the house been owned directly by the children, they'd each be able to use their own CGT allowance. So couldn't it be worse from a CGT point of view?
    Originally posted by zagfles
    Apologies, only just seen this reply.

    You are conflating a Gift With Reservation (for Inheritance Tax purposes) with a Deprivation of Assets test/rule. They don't go together. It doesn't matter that the surviving spouse continues to enjoy the benefit (as they did when other spouse was alive) as there is no GWR (spouse has died - and it is dead spouse's estate that GWR would apply to). Deprivation would only apply if the surviving spouse gifted their half of the house eg to the trust/children.

    CGT could be an issue - but it is one for the future and only if the asset has increased in value from whatever value it had on death.
    • Clifford_Pope
    • By Clifford_Pope 11th Jan 18, 5:57 PM
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    Clifford_Pope
    Well I have to admit I don't understand trusts, but this doesn't sound right at all - the whole point of the trust is that the surviving spouse doesn't own the trust's half of the house, so how can they claim PPR CGT relief on capital that they don't own?
    Originally posted by zagfles
    The trust claims the relief from CGT, with the result that the beneficiary is not liable. CGT is normally assessed on beneficial ownership not legal ownership, but PPR relief is available in this case. If the beneficial owner did not live in the property then the relief would not apply. But living in the property has to be specifically permitted under the trust deed.
    Last edited by Clifford_Pope; 11-01-2018 at 6:00 PM.
    • zagfles
    • By zagfles 11th Jan 18, 6:31 PM
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    zagfles
    Apologies, only just seen this reply.

    You are conflating a Gift With Reservation (for Inheritance Tax purposes) with a Deprivation of Assets test/rule. They don't go together. It doesn't matter that the surviving spouse continues to enjoy the benefit (as they did when other spouse was alive) as there is no GWR (spouse has died - and it is dead spouse's estate that GWR would apply to). Deprivation would only apply if the surviving spouse gifted their half of the house eg to the trust/children.
    Originally posted by TrickyDicky101
    I don't doubt that you're right technically legally, but a GWR is exactly what it is! The deceased spouse has gifted (willed) their half of their house to their kids with the reservation that the surviving spouse can continue to live in it for the rest of their life. That's clearly a gift with a reservation!
    • DairyQueen
    • By DairyQueen 12th Jan 18, 6:15 PM
    • 293 Posts
    • 459 Thanks
    DairyQueen
    Well, killing thread 2 to in favour of this thread seems to have killed the discussion on thread 2 stone-dead. Well dead mod.
    • DairyQueen
    • By DairyQueen 12th Jan 18, 7:12 PM
    • 293 Posts
    • 459 Thanks
    DairyQueen
    I do realise this topic would raise some 'moral issues' and indignation with many but, just to re-iterate, I'm not looking for people's personal opinions on that side of it. Although I'm sure some can't help but give them regardless.
    Originally posted by Hutch100uk
    Those are the opinions of the people that your parents expect to fund their care so I think that such opinions are highly relevant. I can see why you would wish to marginalise these opinions but s/he that pays the piper has a right to express their opinion as loudly as they choose. I can't see any reason why I should pay for your parents' care whilst my (not wealthy) parents pay their own way. Moral bankruptcy is no defence for what your parents are attempting and I (for one) hope that they get stung. That would be no more than they deserve.
    Last edited by DairyQueen; 12-01-2018 at 7:14 PM. Reason: typo
    • westiod
    • By westiod 25th Apr 18, 2:02 PM
    • 2 Posts
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    westiod
    I've recently been through all this with my father first, he had Alzheimers and constant falls left him disabled, and now my mother has had a pacemaker implanted, it stopped working and 3 weeks in hospital has left her unable to look after herself. When Dad went into a nursing home, their home was not included in the financial assessment as Mum was still living there. But 50% of his pension was taken by the LA to pay for his care. He died at 90, nearly 2 years ago and now Mum is also 90 and her house has to be sold so she can self-fund her care costs.

    There is a 12-week disregard of the property value so that helps but we need to apply for a deferred payment loan from the LA to cover costs until the sale goes through. Luckily I have LPA both for her Health & Welfare and Finance & Property but even so this is not a trivial task. The LA (West Sussex) requires a huge number of documents, most of which have been already supplied during the first financial assessment. But now I have to give them sight of my passport plus original utility bills and bank statements as they don't recognise online documents if I print them out for them. Two different departments in the same LA won't share information and demand different forms of ID. I don't have a photocard driving licence as I took my test over 50 years ago and this has caused huge problems. You need to be prepared to do a lot of work and be very firm with Social Services as they will suggest all sorts of ghastly places if it takes time to find the right home for your parent.

    I'm not complaining about doing this for Mum but I do feel that the LA makes these applications for financial assistance as difficult as possible to discourage people from applying. But it is much better to be honest and not look for ways to avoid payment. You need to supply 6 months of bank statements and every transaction is examined. Anything unrecognised will be queried and if you don't have a legitimate explanation the application will be rejected.
    Last edited by westiod; 25-04-2018 at 2:11 PM. Reason: Additional information about funding
    • Mojisola
    • By Mojisola 25th Apr 18, 2:41 PM
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    Mojisola
    I'm not complaining about doing this for Mum but I do feel that the LA makes these applications for financial assistance as difficult as possible to discourage people from applying.
    Originally posted by westiod
    I agree that it seems overly complicated and departments don't share information - I lost track of the number of people who had to be told the same information again and again - very inefficient! - but I got the feeling it was lack of competence rather than deliberate.

    I also found that some staff were lacking in knowledge - again, very frustrating having to explain things to the people who were paid to know them!
    • atush
    • By atush 26th Apr 18, 11:54 PM
    • 16,814 Posts
    • 10,493 Thanks
    atush
    Just on this point, my parents have a house they are looking to leave in their will. If left to the children would CGT still be due? Currently they have a large amount of CGT in the property which is why they are holding on to it.

    Is it the same if they left it to grandchildren?
    Originally posted by adam81
    The value at the date of probate is the value not the value now. So there isnt CGT to pay on inheritance if the property is sold soon after.
    • humptydumptybits
    • By humptydumptybits 27th Apr 18, 12:03 PM
    • 554 Posts
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    humptydumptybits
    My parents know all about the care home system. My grandmother was in one for a short time so they are well aware of all this.
    My grandmother ended up in state funded one locally and was perfectly fine.

    I'm sure my solicitor will come up with more practical reasons to convince them this isn't a good idea.
    Originally posted by Hutch100uk
    Social care is deteriorating, councils don't have the money to meet the need, it is less money and more need. If your grandfather was in a care home even 2 or 3 years ago the situation was very different. Care homes are closing, councils aren't increasing what they will pay in line with inflation. They really would be foolish to do this.
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