Advice....personal gifting of money to family

[Yankydoodledandy]

Family member is applying for care package after becoming ill.

Previous 18 months when they were healthy no problems at all, they gifted £5,000 as follows:

£3,000 to Nephew who went to study abroad. £2,000 to sister just as a gift.

Finance dept is querying this. Surely you are allowed to gift????

Anyone???

It can be seen as deprivation of assets.

If they have millions in savings it would be inconsequential but say they had £20k in savings and gave 5 away that's quite a dent.

If they were healthy when gifts given i would be very strong with the finance dept. Can't be seen as deprivation if not in contemplation of likely care needs. Age isn't enough as plenty live to old age with no care. I'm guessing though that if you are applying for LA funding they don't have much in the way of savings so the LA will do what they can to claw it back. Not legitimate in my view though.

What do you mean they are querying it? What is their query?

UK. Not too sure on the context. All I know is any condition, if you gift money to family and you die within 7 years of doing so, inheritance tax must be deducted.

www.gov.uk/inheritance-tax/gifts

Check this out if its relevant to this situation, as I don't know all the ins and outs.

If the person had no health issues at all at that point, there should be no issues at all. Is there a clear date when s/he became ill?

As pp's have said they will be considering if this was deprivation of assets.

Basically deliberately reducing your capital so it can't be used to fund your care.

The problem firstly is what percentage of their capital this gift represented and how near to the threshold were they at the time they gave the money away.

Giving away a significant proportion of your savings when you are elderly, even if healthy at the time shows a lack of foresight into the eventuality that you are likely (as most people are) to need support in the future.

Age is also an issue. If you give the money away aged 60 and in good health then it's reasonable to argue that this was a gift and no reasonable person could have anticipated a massive decline in only 18 months.

If the person was 85, that argument doesn't really hold water.

Essentially we all have a responsibility to plan for our future care needs and to prioritise them above giving "gifts" that represent a large part of our capital asserts.

The fact that they are being assessed suggests they have fallen below capital limits at £23,250 and in that context giving away £5k when they had savings of presumably less than £30k is absolutely going to be questioned (and I'd guess likely to be considered as DOA).

If the gifts were a couple of hundred pounds then that would considered reasonable.

As per BreadInCaptivity the 2 questions are "how old were they?" and "what proportion of their savings does the 5K represent"

There are very straightforward rules about gifts and inheritance tax, but the rules on deprivation of capital for care costs and benefits purposes are much more judgemental.

This factsheet is very useful OP.

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs40deprivationnofassetssinsociallcarefcs.pdf

It's not an issue of inheritance.

It's about people deliberately depleting their assets to avoid paying for care and thus expecting the local authority to fund it.

Ultimately you can give away what money you want.

The problem is having done so, is expecting the state to fund your care instead.

The good news is that the onus is on the LA to prove DOA and this can be more difficult that it sounds.

The factsheet I linked to above is a great resource to explain it.

Not if it’s under £3000.
under HMRC you are allowed to give £3000 In total, outside of IHT even if you drop dead tomorrow.
you can give anything outside of IHT if you live longer than 7 years
There are also additional non IHT gift allowances for things like children wedding etc. list is longish
plus any single gift under £250 is conserved inconsequential

You can carry forward 7nused gift allowance form one year to next..but not longer than that

i think authorities will struggle to say its deprivation of assets if she gave away £6k in total over 2 years to these people.

It it does sound like they could argue she gave away £1000 more than that , based on IHT rules, and therefore she did it deliberately to deprive assets. Seems pretty flimsy really - especially given it’s just £1000- not sure how many days that’d buy in a care home.

dontnthink they have a leg to stand on going after her, for something the government considers reasonable in terms of tax

You need to separate the rules around inheritance tax from deprivation of assets.

They are very different things.

I think authorities will struggle to say its deprivation of assets if she gave away £6k in total over 2 years to these people.

The issue isn't the amount given away.

It's the proportion of capital especially if you didn't have much to start with.

In addition the LA can dig back into finances for an undetermined period, so when you gave the gifts also doesn't matter in a DOA case.

If a person aged 75 gave away £5k 36 months ago but had £200K at the time and was in good health DOA would likely be very hard to prove. By the time they had fallen below capital limits they would have already paid over £170k for their care.

A person also in good health at the time of gifting at 75 and gave away 5k 18 months ago with savings of less than £28k which then put them under capital limits immediately and thus will expect not to contribute anything to their care is very likely to spark a DOA investigation.

Can anyone point me to a case where a healthy 80 year old (for example) has given away money and 18 months down the line it was declared forseeable that they would need care and therefore a deliberate deprivation of assets.

I'm sure local authroities have run the argument but is there case law to support such a position?

@cantba

It's complex because individual circumstances are so unique.

This case is quite interesting:

deanscourt.co.uk/articles/care-fees-update-a-lifetime-gift-does-not-necessarily-constitute-a-deprivation-of-assets

The money gifted was substantial £140k and the gifter was also in ill health at the time.

The ombudsman found the LA had not proven it's case.

It's an interesting read as it highlights the complexities involved and references case law and the way in which the LA had failed to demonstrate DOA.

www.wrigleys.co.uk/news/community-care/care-act-deprivation-of-capital-is-the-local-government-ombudsman-getting-it-right-on-deprivation-decisions/

This is also good.