Property trusts; a cautionary tale of asset deprivation and care home fees
Did someone say financial assessment?
The introduction of means testing for care home fees has meant that many people in the UK are attempting to ‘off-load’ their assets into property trusts, in order to exclude them from any financial investigations. Naughty.
But, with the average cost of residential care homes in the UK at around £37,500 a year (with nursing) and the means testing threshold at a, some may say measly, £23,250 (UK) which INCLUDES the value of your property it’s easy to see how this haemorrhaging of assets could be tempting. However, there are serious implications to ‘gifting assets’, for both the person giving away the assets and the person receiving them.
As a property is usually your most valuable asset it’s not surprising that home owners are looking for ways to protect the capital tied up in their home. Be that by selling it for a nominal amount, literally giving it away, be warned, there are complex rules surrounding the gifting of property, OR putting then into property trusts. But, as the means test now includes previously owned assets, seriously, whatever you do there is NO guarantee your property will be excluded from the financial assessment for long-term care…
I wrote recently about Protective Property Trusts being an excellent way of protecting your share of a jointly owned asset from Third Party intervention. However, there has been a growing trend of people putting their property, in its ENTIRETY, into a ‘Property Protection Trust’ or ‘Asset Protection Trust’. The way it works is this; your home is gifted to the trust, allowing you to carry on living in it even though technically you no longer need it. Therefore it can’t be included in the means test. Sneaky, right? Perhaps not. As with everything that seems too good to be true, it normally is. And, as they can come at considerable cost, these trusts could well end up being an expensive waste of time.
Do you, or have you ever owned a property?
As I mentioned earlier, during the financial assessment, you will be asked about PREVIOUSLY owned assets. Don’t forget, it’s pretty (VERY) easy for authorities to follow the trail of ownership of a property and if it’s considered that you deliberately disposed of assets to increase eligibility for local authority funding – this is called, funnily enough, Deliberate Deprivation of Assets, they will over rule the trust, gift or sale and STILL take the capital from your home to meet your care needs. So, if you no longer own the property the person that now does may have to stump up the cash.
The key factors your local authority will consider are…
When the assets were disposed of was the main reason to avoid care charges? Say you fell ill or were diagnosed with a long term degenerative illness and THEN a few weeks later transferred your home into a protective property trust, you’ve got to admit this does look a bit dodgy. Your local authority will be on this the first whiff they get. Which means if you’re in care and you’ve ‘gifted’ your property to your children who are living it, they could very well be made to pay the fees as they are benefiting from that asset.
Although there is no set time limit it’s unlikely that your local authority will go back too far. They are really looking at the time between when you realised you need care and when the asset was ‘disposed of’.
It needs to be a SIGNIFICANT amount to appear on your local authority’s radar. Giving away your £500,000 property, for example, would definitely pique their interest whereas gifting a less valuable item, such as a piece of jewellery to your granddaughter is unlikely to prompt further investigation. So as long as you stay within the gifting rules you’ll be fine.
Are Protective property trusts the next PPI scandal?
Who knows…. but, I can’t imagine that they will hold much water when your local authority starts poking around in your finances. The UK’s population is ageing. It’s predicted that by 2050 there will be 8 million over 80’s living in the UK and with them will come a HUGE care bill. So, it’s little wonder local authorities are looking a ways to reduce the pressure. They will be clawing money in to meet the rocketing costs faster than you can say ‘deprivation of assets’.
But, it all boils down to timing. If you’ve suddenly ditched your biggest asset and then applied for funding of course your local authority are going to get a tiny bit suspicious. Our advice, don’t do ANYTHING without seeking legal guidance it’s not worth the risk.