Can I gift assets to avoid paying care home fees?

At a glance

  • Finding the money to pay for care home fees can be one of the biggest financial worries facing us in later life.
  • Your local authority may help fund your social care – but they can claw back money if they believe you’ve given assets away deliberately to avoid paying the cost of care fees.
  • There are complex rules on giving away assets – a financial adviser can help you understand these before transferring ownership of assets to someone else.

Arranging social care in later life can burn through money. The cost of residential care now stands at just over £46,000 per year1 – and that’s without nursing costs. In cities such as London and Brighton, the annual figure is over £50,000.1

Anyone who has assets above a certain level and doesn’t qualify for NHS support will usually have to pay for some or all of the care themselves. Different thresholds apply for funding care at home.

If you do end up needing social care, the local authority will carry out a free ‘needs assessment’ – a means test – to decide how much you should pay towards your care.

Is there a way to avoid paying care home fees?

Many people are under the impression that, if you can reduce the amount of your assets by giving away money, property or income, the state will step in and pick up more of the bill. Gifting money to reduce your overall estate is a common part of legacy planning – and in theory it could help you qualify for state-funded care in later life.

But – be aware! There are very strict guidelines on giving away property and assets. A financial adviser can help you understand what these are, and help make sure that you don’t fall foul of the ‘Deprivation of Assets’ rule.

What is the ‘Deprivation of Assets’ rule?

The Deprivation of Assets rule says that if you reduce your assets so these won’t be included in your needs assessment, you may be intentionally trying to avoid self-funding your social care.

The key word is ‘intentionally’. If your local council decides you have deliberately reduced your assets to avoid paying care home fees, they may calculate your fees as if you still owned the assets. It will be as if you had never given them away. This can be emotionally distressing for individuals and their families. Moving into a care home can be very unsettling and the last thing you want is to be worried about money, or whether that money will last as long as you need it to.

What counts as deprivation of assets?

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, your local authority will look at the timing of your gifts, to see if you could reasonably have expected to need care and support.

And it will want to know why you were making the gift. Your financial adviser can help you make it clear that you made the gift in good faith, to help family or friends with school fees, house purchases or medical care for example – not to avoid care home fees.

What criteria will they use?

When your council is deciding whether getting rid of property and money has been a deliberate deprivation of assets, they will consider three things:

• Did you know at the time you got rid of your property or money that you needed or may need care and support?

• Why were you giving the money or assets away?

• Did you give assets away to deliberately avoid paying for care?

It’s not just about giving away a lump sum of money. Would you think of these as deprivation of assets? A council might well think otherwise:

• Transferring the title deeds of your property to someone else

• Reckless or unusual spending patterns

• Gambling the money away

• Using savings to buy possessions, such as jewellery or a car, which would be excluded from the means test.

How far back will the council look?

The local authority can in fact look as far back as they like when deciding whether you have deliberately deprived yourself of assets. Whether you gave away an asset last week or ten years ago, it could still be subject to Deprivation of Assets rules.

It all depends on your health at the time of the gift and your intentions in giving the asset away.

So what happens if I’ve tried to avoid care fees by reducing my assets?

If your local council thinks you have deliberately reduced your assets to avoid care fees, it can affect the funding you receive. Not only could you end up having to pay for your care in full, but you might also no longer have sufficient assets to fund those costs.

The value of financial advice

Arranging social care, whether for yourself or your parents, can be confusing and stressful. In particular, the ‘Deprivation of Assets’ regulations can make you feel like you’re treading on eggshells. Early advice from a financial adviser is crucial before transferring ownership of assets to someone else. Just to help make sure your best intentions don’t backfire.

The Deprivation of Assets rule should never make you feel as though you can’t gift money and assets to those you love, even if you’re actually in care.  If you discuss and record gifts and assets with your adviser, it’s easier to show that the gift was always part of your personal, long-term financial planning.

Having a long-term financial adviser who knows your family and your own personal life goals can lend emotional as well as practical support in these decisions.

Feeling secure and in control of your money is at the heart of financial wellbeing – and we all deserve that. Do get in touch if you’d like to talk through your options with one of our advisers.1

Source

1UK Care Guide – The data is based on a survey of care homes between December 2022 and February 2023. Each care home had a minimum of 25 beds. The costs provided are for those residents privately funding all their care.

SJP Approved 17/07/2023

Sovereign Wealth Hong Kong is a Partner Practice of St. James’s Place (Hong Kong) Limited

The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

Members of the St. James’s Place Partnership in Hong Kong represent St. James’s Place (Hong Kong) Limited, which is an insurance broker company licensed with the Insurance Authority (Licence No. FB1075), a licensed corporation with the Securities and Futures Commission (CE No. AAV439) and registered as an MPF Intermediary (Registration No. IC000852).