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Legal & money

Deprivation of assets

(69 Posts)
pensionpat Mon 14-Sep-20 08:37:58

I have a background in benefits for older people and my understanding, with that of my colleagues, was that there is no legal way to “protect “ property from being required to be sold to pay for care.

Next week we are updating our wills. A close friend who did this last year said that their solicitor had sold them a product, a kind of trust, which meant that whatever happens in the future, they are guaranteed to be able to leave their property to their family. I did not share my concerns. They had already done it.

But it does concern me that a) this company is giving wrong info. and making money out of clients and b) my understanding is wrong and we should at least consider it.

Have the rules changed? Any experiences among GNetters.

Missfoodlove Mon 14-Sep-20 09:19:56

The rules haven’t changed, it sounds like “ sharp practice “.
This link explains everything clearly. www.carehome.co.uk/news/amp/article/id/1591631/should-care-fees-home-trust

Doodledog Mon 14-Sep-20 09:52:53

It is likely to be a will that leaves the estate to the next generation but gives the spouse a legal right to live there for life. I can’t remember the name of it, but you first become joint tenants rather than tenants in common, so each person owns half of the estate outright rather than both sharing ownership of all of it.

Then both parties can leave their share to beneficiaries independent of the other, and the state has no claim on the partner’s share.

The downside is tha if one party needs to access their share (eg to pay for care costs) they only own half, so could end up having to go somewhere less pleasant than if they could draw on all the money. It would also throw them onto state benefits in half the time, as care costs are so high. Councils are wise to this, and are less inclined to keep people in more expensive homes for continuity, so the chances are that they would only get funding for the cheapest option available.

It’s perfectly legal, and means that those who have saved for old age are not forced into poverty by having to pay for care that those who have spent get for free. The risk of being plunged into poverty remains, however, as half the money will run out twice as quickly as all of it.

It is time that social care was sorted out once and for all, but older people have been at the bottom of the heap for decades now.

suziewoozie Mon 14-Sep-20 10:14:09

Doodle you’ve used some quite emotive language here and and problem is fraught with more problems than you mention. It also depends on whether most of an estate is tied up in the family home or if there’s also other assets. Basically at its heart it’s about safeguarding the inheritance of the next generation at a potential cost to taxpayers.But as Doodle says it’s also about relinquishing control and choice over your futures. There are a raft of moral, ethical, legal and practical issues to consider. The only real solution of course is a fundamental reform of social care - hummmm

Liz46 Mon 14-Sep-20 10:23:19

My aunt and uncle had a trust and my cousin had a dreadful time unravelling it and lost a lot of money.

Doodledog Mon 14-Sep-20 10:23:24

I do feel that social care needs to be sorted out.

I’m not sure about ethical and moral issues in this case - it is, as you say, about protecting the next generation. You could look at it as a cost to the taxpayer, but equally, you could see people ‘depriving themselves of their assets’ by spending on expensive holidays or whatever whilst others chose to save instead. I firmly believe in taxing income (much more highly than at present) and then letting people spend the remaining money however they see fit.

Means testing is iniquitous, as it means that less well-off families are kept ‘in their place’ whilst the rich can leave money to their families and the poor are (rightly) provided for.

quizqueen Mon 14-Sep-20 10:33:39

If people have been cautious in life, worked hard and saved to buy property then they should be able to leave it to their family as an inheritance. It is ridiculously unfair that those who have not done this for whatever reason or those who haven't paid into the system at all just get state aid for free, otherwise what is the point of trying to better yourself in life. Surely, even the most hardened leftie must see this is not right.

Doodledog Mon 14-Sep-20 10:52:49

I don’t think it is about left and right. Politics is not as simple as that.

I think it is regressive to allow inheritance only to those who either are lucky enough not to need to pay for care or who can afford to pay for it with money left over, but not to those who are cleaned out by these costs.

The fact that those without the means to pay are given care free complicates things, as of course it is right that they should, but (IMO) it is unfair that those who have saved instead of spent are assumed to be rich when very often they have earned no more than spenders and have already paid income tax. It is, to me, more about state control of people’s earnings than about the political spectrum (and both left and right can be authoritarian in that regard).

suziewoozie Mon 14-Sep-20 10:57:06

For a lot of families, most of an inheritance is from the increased value of the family home. That’s very much a lottery as to what that is worth. The biggest lottery of all of course is whether you end up needing residential care - if you don’t, then your heirs benefit more than if you do. That’s nothing to do with working hard and saving

pensionpat Mon 14-Sep-20 11:11:33

Miss food love. Thank you for the link. And other comments. I think sharp practice too.

kittylester Mon 14-Sep-20 11:20:14

Tenants in Common is when both parties own an agreed amount of the mutual assets - it doesn't have to be 50/50.

The care costs argument works both ways. The council can take a charge on the bit of house owned by the person requiring care . But, that leaves the other 'bit' of the house available for the second person's care should they need it.

Joint bank accounts are another minefield.

Doodledog Mon 14-Sep-20 11:20:57

suziewoozie

For a lot of families, most of an inheritance is from the increased value of the family home. That’s very much a lottery as to what that is worth. The biggest lottery of all of course is whether you end up needing residential care - if you don’t, then your heirs benefit more than if you do. That’s nothing to do with working hard and saving

All of that is true, but a separate issue, I think. By all means tax profit on housing - I am in favour of taxation, but not of control of how people spend their own money.

My objection is to having someone else decide how we spend our earnings. I feel the same about those who blithely say that someone else ‘can afford’ to pay a TV licence or put the heating on, so should not get them provided. That person has every right to save every penny of their taxed earnings to spend on a collection of stamps, an igloo in Greenland or their pet camel, IMO. As soon as we start making value judgements about how people spend their own money we are on dangerous ground.

Means testing is most unfair on the so-called ‘squeezed middle’, who already get a rough deal.

Floradora9 Mon 14-Sep-20 22:00:12

Someone tried to sell us the same and I asked the financial advisor how had the people fared he had sold this to . His reply was that nobody had died yet so he could not tell me . I am sure that this will not stand up in law. I do know that the person selling it gets a very good commission on the sale . The same FA tried to sell us a funeral plan despite me having told him already we would not be having one .

Doodledog Mon 14-Sep-20 22:07:35

Our solicitor mentioned that sort of will when she was drafting ours. We did think about it, but decided to get a more usual one so that the surviving spouse would have more control over what’s left of our money if it hasn’t been used to pay for care.

She wasn’t selling us anything - just drafting a will, so didn’t stand to profit from our decision one way or the other. It was a will, not a policy, so I’m not sure that what someone tried to sell you was the same thing, Floradora.

LadyStardust Mon 14-Sep-20 22:15:56

What if you 'gift' the property to your children, but continue to live in it? Sign over the property so they actually own it and you don't. I know there are horror stories about children kicking parents out but could it work? What about the partners of the children? Would they be entitled to anything if there was a divorce? An absolute minefield isn't it?

Doodledog Mon 14-Sep-20 23:02:20

I'm absolutely not an expert, but I think that so long as you live for seven years or more after gifting the property to your children there would be no comeback. Even if you died, the only penalty would be that if your estate was worth more than about £800,000 your children would be liable for inheritance tax (that figure may be wrong, but it is roughly right, as each parent has a figure that is added together for the purposes of inheritance tax).

If, however, you needed social care, as opposed to clinical care, the council might decide that you have deliberately deprived yourselves of the means to pay for it, and apply (not sure to whom) to recover the money from your children. I don't know if it matters how far ahead of your death you gave away the house, though.

As for the possibility of the property going to an in-law after divorce, I think that this could happen, and probably would. It seems to be a risky strategy, and it would make more sense to have a will such as I described above, and become a bit like Lady Crawley in Downton Abbey - the dowager whose fortune has passed to her son, but has a right to live off the proceeds of her late husband's fortune until her death grin.

The difference between Lady C's situation and most people's, however, is that she has enough money from the residual estate to be very comfortable, whereas the rest of us would possibly struggle to pay for a decent care home if the need arose.

Esspee Tue 15-Sep-20 03:42:25

Some of the answers on here are quite wrong. I do so wish that members would refrain from writing about matters they know little about.
Professional advice may seem expensive but could save you and your family from even more expensive mistakes.

kittylester Tue 15-Sep-20 06:38:51

I dont think the 7 year rule applies any more. I believe that the authorities just 'take a view' and can go back as far as they like.

If you make the house over to the children I think you should pay rent.

Davidhs Tue 15-Sep-20 08:28:56

I’m not sure about the 7 yr rule but the parent living in the house must be paying a market rent. You can give away whatever you want and if you live 7 yrs it’s tax free, so if a rent is being paid the council is going to find it difficult to claim the house. It’s no different to those who rent and spend the spare cash from month to month, plenty choose to holiday abroad every year rather than invest in a house.

What many families do is persuade the old folks to move onto a “granny annex” with the intention of caring for them as long a possible. Father in Law is 97 he has the family doing night shifts and 3 carers on rotation for days and it’s still much cheaper than a care home.

Brahumbug Tue 15-Sep-20 09:22:57

09:52Doodledog
but you first become joint tenants rather than tenants in common, so each person owns half of the estate outright rather than both sharing ownership of all of it.

You have got that the wrong way round. Joint tenants jointly own all of the property.

Brahumbug Tue 15-Sep-20 09:34:18

of spent are assumed to be rich when very often they have earned no more than spenders and have already paid income tax

But the majority of assets taken into account for care costs are not the result of saving. They are the result of unearned asset inflation in the majority of cases. Why shouldn't that be taxed? Taxing income before capital gains is iniquitious.

suziewoozie Tue 15-Sep-20 10:10:13

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. Deprivation of assets is all to do with intention so ( unlikely example) you gave away a chunk of your estate 10 years ago but had put in writing you were doing it so you didn’t have to pay your own care home fees, that would be deprivation of assets .However, it wouldn’t necessarily count towards IHT unless you were still benefitting from it ( which is why for IHT purposes you have to pay a market rent if you continue to live in a house you’ve given away)

suziewoozie Tue 15-Sep-20 10:12:31

Bra exactly - income is taxed incredibly unfairly compared with Capital Gains and Inheritance

Doodledog Tue 15-Sep-20 10:57:10

Brahumbug

of spent are assumed to be rich when very often they have earned no more than spenders and have already paid income tax

But the majority of assets taken into account for care costs are not the result of saving. They are the result of unearned asset inflation in the majority of cases. Why shouldn't that be taxed? Taxing income before capital gains is iniquitious.

As you have quoted me, I’ll respond smile.

I said a few posts down that I am not disagreeing with that, and that taxation of profit in property seems fair to me. It is the right to spend after-tax earnings as we see fit that I feel strongly about, and means-testing removes that right.

I would be happy for a radical redistribution of wealth, tax and income, but that is a different discussion.

Doodledog Tue 15-Sep-20 10:58:20

I meant z as few posts after the one you quoted - I wish we were trusted to edit Our posts on here!