The local authority can claw back money provided for your care fees if it believes you have given assets away specifically to avoid paying the full cost yourself.
If you end up having to go into a residential home, the local authority will carry out an assessment to decide how much you should pay towards your care. If you have wealth over a certain amount, and you do not qualify for nursing care support, you will usually have to pay the care fees in full.
It’s therefore not surprising that people in failing health can sometimes be tempted to offload assets – money, property or income. But if you or somebody you know is thinking about doing this, be warned. Councils have the power to claw back money provided for care fees if they believe you should have paid, even if you no longer have the money.
So how does a council decide whether the gifting of an asset was done deliberately to avoid paying for care fees?
Timing is important. The local authority will look at when you gave away assets and see if, at the time, you could reasonably have expected to need care and support. It must decide whether you intentionally reduced your assets to avoid paying care costs based on all the case facts and clear reasons; if it deems that you did, then it may decide to challenge you.
If you were fit and healthy, and could not have anticipated needing care and support, then giving away your money may not count as deprivation of assets. However, the Local Government and Social Care Ombudsman has recently accused several local authorities of not following the correct assessment process; making unsubstantiated assumptions about the motives behind gifts; and having no logical explanation or providing no evidence that families had deliberately tried to avoid fees.
In one case, a 91-year-old man was assumed to have deliberately deprived himself of assets by handing £9,000 in cash gifts to his family. He gave £3,000 to his grandson who was getting married and buying a house, and £2,000 to his son-in-law in Australia for cancer treatment. His son-in-law later died, and a further £4,000 was gifted to allow his daughter to come home for a visit, and for his other daughter to travel to Australia to see her grieving sister. A month later, he suffered a fall and had to move into a care home.
The local authority decided the gifts had been made with the intention of reducing his assets. The ombudsman’s report concluded that the local authority had not provided a logical explanation or basis for its decision and there had been no reason for the individual to believe he would need to move to permanent residential care before the fall, when the gifts had been made.
“Giving grandchildren gifts, paying for weddings or cancer treatment is a natural part of family life,” said Baroness Altmann, former pensions minister. “For councils to suggest this is somehow not allowed is outrageous.”
While the ombudsman does not have the legal power to enforce actions on local authorities, it can and will make recommendations on how improvements can be made to processes and what actions to take to put right the effects of a poor decision (which can involve a compensation payment) – it is very rare for a council to refuse.
“While I appreciate councils need to make difficult, nuanced decisions about whether people have deliberately reduced their assets, the guidance does state that people with care needs are free to spend their money as they see fit,” said a spokesman for the ombudsman. “Just because someone might be living in a care home, it does not mean they should not be able to spend their money on things other than their care, and this includes continuing to give gifts to friends and family.”
As in this and many other cases, local authorities can sometimes get it wrong, but those mistakes merely underline that this can be a complex area. Early advice as part of a wider legacy planning exercise is important to help ensure any gifts fall outside the lottery of paying for care.
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I am a Shropshire based financial adviser who helps my clients manage their finances as effectively as possible. I specialise in investments, retirement planning and Inheritance Tax Planning.