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This is where a couple make Wills that state that when one person dies, their half share of the property passes into a trust. The survivor would have the right to continue to reside in the property, but the deceased’s half share would be protected and would not be claimed by the local authority if the survivor went into residential care. The woman, referred to as Mrs Y, suffered a stroke in 2007 and, aged 80, had to go into residential care. At the time her assets, including her home, were valued at £250,000 so she was not eligible for local authority financial assistance.
Those companies promote the idea that doing so avoids the need for probate and they state that this is a legitimate excuse for the transaction. In reality, probate is almost always needed so the excuse will rarely be valid. Further, many of the companies and so-called ‘lawyers’ offering such services are not regulated by the Solicitors’ Regulation Authority. We understand that as an employer, ensuring you have a comprehensive legal framework in-place is crucial to the success of your business and the well-being of your employees.
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These type of trusts are marketed as a guaranteed way of avoiding care charges. However this is simply not the case and these kind of arrangements are, in fact, fundamentally flawed. The going rate for preparing these types of trusts is usually at least a few thousand pounds. In transferring your house into a Family Protection Trust you are disposing of an asset for no consideration.
Mrs Y’s daughter sold her mother’s house and used the proceeds to pay her care home fees until the money ran out in July 2015. Mrs Y’s assets had now fallen below the £23,250 threshold for local authority assistance in England. Her daughter duly applied to North Yorkshire County Council for financial help which was granted pending completion of a full financial assessment and North Yorks began paying the care home fees from January 2015. John transfers his property to his son Michael (the 'transferee') for zero consideration although the property is worth £500,000 .
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However, this is a myth; the local authority can go as far back as they like when considering whether or not a gift is a Deliberate Deprivation of Assets. This type of arrangement is completely legitimate because neither party is depriving themselves of assets. They are just ensuring that they do not end up paying for care that they never received. You can apply for financial assistance for care home costs if your capital is below a certain amount. If you own your home, the value of the part you own will usually be counted as part of your capital. However, if your partner or a disabled relative still need to live in your home after you move into residential care, the value of your house will not be counted when the local authority assesses your capital.
John transfers his property to his son Michael and daughter Claudine (the 'transferees') for zero consideration although the property is worth £500,000 . Michael owns 40% of the beneficial interest and Claudine owns the remaining 60% and this is drafted within a deed of trust. The local authority view the transfer as a deliberate deprivation of assets and calculates that John owes £30,000 in care home fees. John is unable to pay the costs so the local authority request the payment from Michael and Claudine.
Paying for care: a free guide from Which?
We can remove any survivorship from your titles and draw up Wills to specify that your respective half shares in the property are instead left to your children subject to a right of liferent only in favour of your spouse. Your spouse does not actually need to own the entire house but rather have the right to live in the house for the rest of their days. If the surviving spouse owns the entire house then the risk is that the local authority could force a sale if they ever need to pay care charges. By making these liferent arrangements in your Wills we can be confident this is guaranteed to at least protect a one half share of the value of your property for your children.
The difference to the previous options is you are not transferring any interest in the property for no consideration but rather this arrangement is in implementation of a Will. Therefore the local authority will be unable to challenge this and it will be difficult for them to force a sale of only a half share of a property. This might include giving away assets, as well as other courses of action, such as selling an asset for less than its true value. For example, there have been cases of people 'selling' their house to a relative for a nominal fee such as £10, just so they can transfer the legal ownership of the property. If avoiding care costs is considered to be a significant reason for the disposal, then it may be considered a deliberate deprivation of assets.
That 'One rupee' coin in gift/shagun envelopes
If eligible, you may not have to pay some or all of your care costs – regardless of your income or assets. Consider whether you have a reasonable expectation of needing/contributing towards care at the time of the disposal. For example, if a client transfers their property into the names of their children the day before they enter a care home, the Local Authority is likely to treat that person as if they still own that asset.
If you pass the money onto your son or daughter, for example, and they then go bankrupt or get divorced, your assets could be lost completely. There is also the potential for financial abuse, with older people being at risk of being pressurised by younger family members to pass on their inheritance to avoid costly care home fees. It can be a shock to discover just how much you will have to pay to stay in a care home. Many people understandably feel apprehensive about spending their life savings on care.
Through appropriately structured Wills at least part of a couple’s estate may be protected if one spouse were to die. We would therefore recommend that spouses review their Wills and ownership of the family home. It is possible for couples to make sure that they each own a distinct share in the property. This means that, if the husband or wife passes away, the surviving spouse can use and enjoy the whole property but ultimately the deceased spouse’s share of the property passes down to their chosen beneficiaries. If you transfer your assets or savings when you are likely to soon need care, it is very likely that the local council will find out when they carry out their searches.
Once they have proved that you deprived yourself purposely in an attempt to avoid care home fees, they will refuse your application for funding. It is then up to you to fight your corner if you feel their decision was wrong. This is likely to be a very stressful experience at what is already an emotional time. Local councils will fund care for people who are eligible for financial help. This involves a means test, which will examine your income as well as your savings and assets.
It'll be traumatic and at very short notice, without you choosing anything about "where" you're put. In short, the first bed that's available in one of the homes that has a Council Account on their books. Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. The ombudsman has now ordered the council to apologise, reassess Mrs Y’s situation properly, and repay her any fees to which she is entitled. Most of us never seem to have enough, but some fortunate people find they have wealth to spare, putting them in the happy position of being able to give part of it away.
If your local council concludes you have deliberately reduced your assets to avoid paying care home fees, they may still calculate your fees as if you still owned the assets. Local Authorities are severely underfunded, particularly following the Covid-19 outbreak; and they are actively pursuing those who have deprived themselves of assets to avoid care. Should you transfer the house to your children but remain living there rent free this will be considered to be a gift with reservation of benefit. A gift with reservation of benefit would be looked on as a deliberate deprivation of capital by the local authority.
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