Protecting your property when care home costs loom

We received an abundance of calls, emails and texts following the recent pension changes. We also received queries about whether it was possible to put a main residence into a trust to avoid paying care home fees.

It sounds tempting. Some of you might be interested in giving this approach a try, not least because getting to grips with how we’re going to pay for the care we may need later in life is a really difficult one. There are, however, very clear rules about what you can and cannot do.

Understanding a ‘Deprivation of Assets’

When we talk about paying for the cost of care, it brings the idea of a ‘Deprivation of Assets’ sharply into focus. A Deprivation of Assets is when you intentionally reduce your overall assets by giving away or selling any property, possessions, capital, or income you may have. It can be completely legal and valid why you might want to reduce your assets at any time in your life, such as making lump-sum payments to family members as a gift or transferring the ownership of your property to manage exposure to Inheritance Tax.

A ‘Deliberate Deprivation of Assets’ however, is when you knowingly – and sometimes quickly – reduce your assets and finances to avoid paying for something like residential care or care and support at home when you know you will need it. Now, that is a criminal offence.

Assessing your assets

Deciding on who will pay for your care will invariably involve an assessment by the relevant local council. This assessment will not only look at your current financial situation, it will look at your finances over time. If the assessment notes see a sharp reduction, the council will look into how this was done. Disposing of your money could be seen as a deliberate deprivation of assets, but an assessment will also look into any other methods used to reduce your finances. These can include:

• ‘Gifting’ or making large lump-sum payments of money to family members.
• Unexpected, unnecessary, or extravagant spending or gambling.
• Transferring ownership deeds of your house or other properties to someone else.
• Putting your assets into trusts that can’t be reversed or cancelled.
• Selling any of your assets for less than their market value.
• ‘Hiding’ your wealth by not declaring all your assets.

The council will also look at the length of time since the gift or transfer was made, the needs of the person the gift or transfer was made to, the intentions behind making the gift or transfer and whether there was an extended pattern of gifting.

Is it worth the risk?

If they conclude that any capital, finances, property, or other assets have been deliberately given away or discarded, they will include their value in their assessment, even though you no longer have them. As a result, even if you need long-term residential or home care, the council can declare you ineligible and refuse to pay for any care costs now and in the future, while also taking action to recover the assets. The question you have to ask then is, is it worth it? And in our view, the answer is no, it is not.