In our previous issue we discussed making gifts and taper relief and we now move on to explore the way in which lifetime gifts can be challenged if there is a possibility that funds may be required to pay for long term care or nursing home fees.
Most people are aware that they may need to pay for their residential care, if they cannot continue to live in their own homes. If they have reasonable funds at their disposal, then they would have a wide choice of living accommodation available to them. However many people are understandably concerned about the escalating costs of care and wish, if at all possible, to make sure that there are some assets left at the time of their death to pass on to family members.
There are complicated rules in place, called CRAG (Charging for Residential Accommodation Guide). These cover among other matters, the ‘deprivation of assets’, which is the term used for deliberately reducing one’s assets, which would otherwise be available to fund the cost of long term care. This can be done by transferring them either by way of gift or investment, out of one’s name and into the name of someone else, often a family member. Local authorities have guidance which they must follow but they can, when determining a person’s eligibility for assistance with the cost of long term care, look for instances where funds have been purposely transferred out of the name of the person needing care and into the name of another.
A local authority is allowed to review transfers going back many years and therefore an arrangement entered into some time ago is still perfectly liable to be questioned. The rules allow a local authority to look at one off lump sum payments, transfers of property and trust arrangements. The timing of such arrangements is relevant, as a local authority is allowed to look at whether the person making the gift or transfer could have foreseen the need for long term residential care and made the gift or transfer with that need in mind.
It is often necessary for us to alert clients who wish to make gifts or transfers, to the implications of doing so in light of the rules regarding deprivation of assets and to ensure that they are aware of the range of options for gifts or transfers where appropriate.