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deprivation of assets 7 year rule

Mrgreen.com
16 augusti, 2015

deprivation of assets 7 year rule

What if I gave my money or home away a long time ago? Because Mr Ellis still occupies the family home, the value of the property is disregarded for means testing. If a Local Authority decided to pursue a claim for care funding, you would have to challenge the decision – and would have the burden of proving that the Local Authority’s reasoning or decision was ‘so unreasonable or irrational that no reasonable person acting reasonably could have made it’ (known as ‘Wednesbury unreasonable’ – Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB233). If your assets are worth between £14,250 and £23,250, you will be expected to make a contribution to your care. This so called ‘7 year rule’ is a complete myth. Let’s say you transfer the title to your house to your only son, and carry on living in it. The person who receives your gift may die or run into financial difficulties. This is because they do not own the share outright – they only have a life interest. Your remaining assets may be used up entirely to pay for care (because you are deemed to still own the asset, even though you gave it away). © Age UK Group and/or its National Partners (Age NI, Age Scotland and Age Cymru) 2020. People might considering gifting their assets for a number of reasons. A decision to accept or reject such evidence requires an overall assessment of that evidence by the Local Authority (see Beeson v Dorset County Council [2002] HRHR 15). About the Age UK Advice Line The 7 year survivorship requirement applies to Inheritance Tax PETs (Potentially Exempt Transfers), and not to notional capital. The Local Authority may choose to provide only a basic level of care, leaving you to fund the rest. Later, Mrs Andrews requires residential care. If you transferred your home within two years (or within five years if you were insolvent at the time of the transaction – which is unlikely), the transaction can be set aside. George, for example, has savings of £12,000 and his home is valued at £175,000. Who can make ‘Do Not Resuscitate’ decisions for me? C) if it would count as deprivation of assets, is that just tough shit on that person? Again, the deprivation of capital rule could apply if your sister-in-law moved in for the purpose of your mother-in-law avoiding paying residential care home charges. When your council is deciding whether getting rid of property and money has been a deliberate deprivation of assets, they will consider two things: It’s not just giving away your money that could be seen as a deliberate deprivation of assets. The risk here is that these actions may be regarded as deliberate or intentional ‘deprivation of assets’. We also explain how you can legally and legitimately protect your share of the family assets from care fees. The issue that is most often in dispute in this context is whether a person has a property interest in a government benefit. Tax year rule (disposals on or after 1 July 2002) VEA ? Centrelink gifting and deprivation rules have been designed to prevent people from giving away assets or income over a certain level in order to increase pension and allowance entitlements. If someone intentionally reduces their assets - such as money, property or income - so these won’t be included in the financial assessment for care home fees, this is known as ‘deprivation of assets’. In fact, companies exist that will recommend transferring your property into an irrevocable ‘Lifetime Trust’ (also dubbed ‘Asset Protection Trusts‘ or ‘Lifetime Asset Trusts’) to avoid care fees. Mr Andrew’s share is safe and will go to the children when Mrs Andrews passes away. However, your son would not be liable to pay anything which exceeds the benefit they have received from the transfer. $33,000 + $2,000 – $23,000 = $12,000, which is less than the relevant limit of $30,000. It could be very stressful and very expensive. They make Wills leaving their respective shares of the property to each other in trust for life, and then to their two children. Telephone friendship. When a local authority carries out a financial assessment for care it will ask about previously-owned assets, not just those that are owned currently. However, from what you have said, the Council may have failed to apply the correct legal test about deliberate deprivation. Annex E of the guidance lists factors they should take into account: © 2020 April King and April King Legal are trading names of April Legal Limited, a company registered in England and Wales with Company Number 12248940. Couples who act now can protect their own share of assets from care home fees in a way that is completely legitimate and acceptable to the Local Authority. Home » Blog » Deprivation of assets – a guide. It is usually quite difficult to provide evidence of your intention and in absence of adequate evidence, the judge may reach the conclusion that the transfer was to avoid means testing. their main residence or a holiday home, The transfer of assets into trust which cannot be revoked, Making a saving on inheritance tax or other costs on death, Avoiding the need to sell their assets to pay for care fees (note that under the Care Act, it is now possible to set up a, Making themselves eligible for means tested benefits (or getting a higher level of benefits by reducing their assets), Reducing the burden of the asset (for example, a company, or a holiday let), Reducing the administrative burden on death. Deprivation of income may include the gifting or selling of income bearing assets. While UK bankruptcy law concerns the rules for natural persons, the term insolvency is generally used for companies formed under the Companies Act 2006. Inheritance tax (IHT) is big news right now. With this in mind, many people look for ways of reducing their assets prior to needing care. As noted by the court in Yule v South Lanarkshire Council, the Local Authority can go back as far as they like when considering whether a gift transferred constitutes deliberate deprivation. The council will look at when you reduced your assets and see if, at the time, you could reasonably expect that you would need care and support. At the point the capital was disposed of could the person have a reasonable expectation of the need for care and support? Our service is flexible to suit the different needs of everyone who takes part. Your house is worth £100,000 at the time of the transfer. Many people hold the believe that if you transfer your assets and then survive for 7 years, this is not deliberate deprivation of assets. The question here is whether Mr Jones knew he would be moving into residential care. Once your remaining assets are used up, the Local Authority can take enforcement action in respect of ongoing care fees. He sells the home to fund this. Even a gift made 20 or 30 years ago could be considered. Get a free weekly friendship call. The person you gift the property to may lose their entitlement to benefits or services based on means testing. In other words, if you transferred your home to your son, your son is liable to pay the Local Authority the difference between what it would have charged, had the transfer not been made. There is also good evidence that families are put under a considerable amount of pressure to pay for care, even when a gift was genuinely innocent. Age UK factsheet: Deprivation of assets (PDF, 384 KB), Age UK factsheet:Property and paying for residential care (PDF, 2 MB), How we're helping older people as lockdown lifts, Switched Off: Save free TV for older people, You must have known at the time you got rid of your property or money that you needed or may need care and support. Get a free weekly friendship call. It can also mean you don’t get the level of care that you need. How your donations could help older people this Christmas. Care fees planning and deprivation of assets. For the Local Authority to take action, they would need to show that your intention at the time of disposal was to exclude the property from means testing to avoid care fees. The guidance points out that using assets (i.e. If you have assets above £23,250, you will be expected to pay for the full cost of your care. She holds a Masters in Law with Distinction and was Highly Commended by CILEX in 2018 for her private client expertise. Unfortunately, there is no “7-year rule” when it comes to paying for care and the Council can go back as far as they wish when investigating deprivation of assets. “The ‘Deprivation of Capital’ rule means that if you simply spend your retirement fund, give it away or lose all of your money and end up needing to rely on the State for support, you will only be allowed to do so if the Government agrees with your financial decisions. Deliberate deprivation happens when an individual gives away an asset for the main purpose of avoiding care home fees. If you or your partner need care in later life and you are not entitled to NHS Continuing Healthcare funding, the Local Authority will usually conduct a means test to see if you can fund the cost of care yourself. Policy reference: SS Guide 4.6.2.10 General provisions for exempt assets, 4.1.10 The Rolling Five Financial Year Deprivation Provisions & Other Deprivation Changes Effective from 1 July 2002 Disposal of an asset to a special disability trust With the new changes being phased in from April 2017 whereby the Government has introduced “the family home allowance” which is worth up to an additional £175,000 per person, the gradual change amounts to £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20 and £175,000 in 2020-21. … VAT No: 335753881. How do my home and savings affect what I pay for social care? She has a 50% interest in a property that is occupied by her husband, Mr Ellis. Three weeks later he enters a care home and gives the car to his son. This is called “deliberate deprivation” and there are very strict rules which enable the Local Authority to pursue assets given away and bring them back into account. Gifts made in excess of certain amounts are treated as an asset […] For disposal of assets on or after 1 July 2002, section 52JA (for an individual) and 52JC (for members of a couple) provides a tax year rule that replaces the pension year rule. Benefits Calculator – what are you entitled to? If your local council concludes you have deliberately reduced your assets to avoid paying care home fees, they may still calculate your fees as if you still owned the assets. suddenly spending a lot of money in a way which is unusual for your normal spending. Additionally we look at the ‘7 year deprivation rule’ myth. This article is for educational purposes only and is no longer available for CPD hours. Once again, this is not the same as making a Will that leaves your share of the family wealth to your partner for life, and then to your children. The natural reaction of many people, when considering the future cost of care, is to divest themselves of the assets that would be taken into account – see Paying for Care Home Fees – the Basic Rules.. How to get help with urgent or one-off expenses, Transport concessions for disabled people, What standards you should expect from NHS services, Getting active when you find exercise difficult, Getting active but not sure where to start, What to do when the weather's particularly bad, Financial and legal tips before remarrying, Homecare: How to find the care you need at home, Help for carers looking after a loved one, What to do when your caring role changes or ends, How to complain about care to your local council, EU citizens and settled status after Brexit, Making and amending your will to include a gift to Age UK, The difference a gift in your will could make, Charity triathlon events and obstacle courses. If you need to move into residential care, your property could be taken into account. If the couple owns the property as Joint Tenants, it is possible to sever the tenancy so that it is instead held as Tenants in Common. Many people hold the belief that if you transfer your assets and then survive for 7 years, this is not deliberate deprivation of assets. To date, few local authorities have used insolvency proceedings in this way – but with care funding stretched to the limit, we can expect an increasing number of cases going forward. When he sells the home Mrs Ellis’ share could be taken into account for means testing, but to ensure her husband can afford the new property, she makes these funds available to him. This so called ‘7 year rule’ is a complete myth. £150,000 – even though you no longer technically own the property. After the first person dies, the surviving spouse or civil partner will have full use of the property for life. The Local Authority will therefore treat you as if your total capital is the current value of the house plus your remaining assets – i.e. April King Legal Head office: Huntingdon House 278 - 290 Huntingdon Street Nottingham NG1 3LY. Company number 6825798. There is no time limit on Deprivation of Assets - purely judged on whether you could have foreseen a need for financing care … Paul King discusses Covid-19 challenges with Leaders Council, Paul King welcomed to the Leader’s Council, Newly registered LPAs easier to use with new service from Office of the Public Guardian, CEO Paul King interviewed by the Leaders Council of GB and NI. Your income and savings will be taken into account in the means test. Jen is a Solicitor and Chartered Legal Executive. A further key point of the above solution is that it is extremely affordable. They will certainly ask where the proceeds of the house sale have gone I would imagine no matter how many years pass, especially as your MIL is already needing care in the home and could consider it a deliberate deprivation of assets Some time afterwards, you need care and the Local Authority performs a means test. Deprivation of assets in social care Page 7 of 18 Local authority investigations The local authority may conduct its own investigations into whether deprivation of assets has occurred, rather than relying solely on information you provide. This is known as a ‘gift with reservation of benefit’. This may be before making a claim or during an existing claim. Note that Yule v South Lanarkshire Council [1999] 1 CCLR 546 establishes there is no time limit on how far back Local Authorities can look when deciding whether a person has deliberately deprived themselves of assets to avoid residential care. If your capital has reduced significantly you may be asked for evidence that you no longer have it. They decide that there is no reasonable explanation for you making this transfer, except for avoiding having to pay for care yourself. The 7 year rule has nothing at all to do with deprivation of assets - it’s to do with what counts for Inheritance Tax purposes. R(IS)7/98 — relates to claimant having “sheltered” her assets in an investment bond, with a future surrender value. They note that you have transferred your house to your son, and that its current value is £130,000. We'll match you with one of our volunteers. Deprivation of capital is when you knowingly reduce or transfer elsewhere your savings or other capital to get, or increase your award of Universal Credit. At this stage, the Local Authority have an obligation to provide care but they can seek recovery of the payment of care fees using debt recovery methods (see e.g Robertson v Fife [2002] UKHL 35). Different methods of reducing your money or property could count too, including: If the local council thinks that you have deliberately reduced your assets to avoid care fees, they may still include the value of the assets you no longer have when they do the means test. Whether avoiding the care and support charge was a significant motivation; The timing of the disposal of the asset. there would also be inheritance tax implications to this). The value of the assets you transferred may be still taken into account when performing a means test (“Notional capital” – see above). This may include: Local authorities will also look for other possible examples of deprivation of assets, such as: Asset protection trusts. They continue to live in the property. 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