Is this Deprevation of Assets

[NotyourMummynotyourmilk]

My Father is in a care home and at the moment paying his own fees in full. He has about 4 years worth of money left and then he will have to get the LA to help him pay. He wants to give a lump sum of 5k to each of his 5 grandchildren this Christmas. I wondered if when he has a financial assessment in a few years time this will be deemed as a ploy to get rid of some of his money.

I think it will unless he, has always given them that sum every year in which case it might be judged to be a regular gift.

Gifts would need to be out of income and woukd not affect his lifestyle (not out of savings) so he would need an income of 25k plus an income that paid fully for the care home fees plus a bit more. So let's say £100k annual income. If those conditions are fulfilled then there is a chance he will get away with it.

As you say his money will run out in 4 years, then the advice scenario seems unlikely.

Should say 'the above ' scenario.

It would. Also look in to the 7 year rule regarding money gifts. I think anything over 3k is liable for tax regarding this rule

The 7 year rule relates to inheritance tax. There is no time limit on Deprivation of Assets - purely judged on whether you could have foreseen a need for financing care in the future, which clearly your DF can OP.

Sorry!

Yes it would im afraid. My DGM is in a care home and my Ddad has POA. My Ddad continued what my DGM had always done and gave me and my brother and my two DCs £100 each birthday and Christmas out of her account. This was questioned when the proceeds of her house sale ran out and they had to show bank statements going back years to prove this is what she had always done. I dont think he will get away with giving away £5000.

Thanks for that info. Say he does still give it to them what will the consequences be though if it does come to the point where he needs a Care Needs Financial Assessment they surely can’t arrest him fir giving away his own money so what will they do, just refuse to pay for his care until they claw back the 25k of his own money he spent years earlier.

There is quute a lot of guidance on both deprivation of assets and on inheritance tax. His gifts are well above IHT limits, so when he died recipients would have sudden tax bills.

I dont know whether claw back arrangements apply on Deprivation of Assets. I assume so.

They will try and get the money back from the recipients. I looked in to it in quite a lot of detail re. MIL. There was one experience where a family had used their sick mother's money to get a DC home from Australia for a final visit, the DM recovered but needed longterm care, and the LA were recovering the money for the airfare from the DC who had flown back to the UK.

Not to be upsetting but how well is your father? There is strong evidence that 80% of care home residents are in the last year of life.

So all these gifts are likely to be subject to inheritance tax under the 7 year rule.

anna he is not ill as such just unable to care for himself properly so a care home was the best option. I don't think he is in his last year of life, he still looks like he has a few years in him.

Wont he be liable for tax on this gift, I always thought the maximum you can gift is £3,000 in total for any one tax year.

so when he died recipients would have sudden tax bills.

That's not quite correct - his estate would be liable for IHT on these gifts.

There is strong evidence that 80% of care home residents are in the last year of life.

The average length of stay in a care home is thirty months according to research published last year. Can I ask where you have got your statistic from please?

The average length of stay in a care home is thirty months Is that median or mean, do you know?

The council will assess him as if the money he has gifted is still in his bank account. So whatever he actually has left in there plus the £25k he has gifted.

So he would still be liable to pay the fees as if he still had that money, and it would be up to him/the family to pay them in full still until he properly dropped below the charging threshold. If he didn't pay them then the care home would give him notice to leave - usually around 4 weeks.

This does actually happen, and it's sad when it does, but councils have no funds and will stick to the rules, private care homes are business and don't let people stay there for free.

So what do the authorities actually do? They won't put him out on the streets. If the family claim to not have enough money to pay, they can't force the family to pay the man's debts or fees. What will they do?

What will they do if they can't get the money back from the resident or the family, maybe take it out of his estate when he dies or get the taxpayer to foot the bill.

Yes it is Deprivation of Assets and they’ll still include it in his total capital when they means test. He will then have to try to get the money together himself to pay the care fees or risk being given notice on.

It’s never a good idea to give thousands away when you aren’t fit and healthy anymore.

sollyfromsurrey the Local Authority applies to the county court to recover the debt. In particular circumstances the court can award a third party debt order (i.e make the family pay the money back)

Most of the time it doesn't get that far and family return the money to pay for fees long before it goes to court.

But sometimes it does get that far.

Thanks for all the advice. I just need a bit of clarification as you are all mentioning IHT but his total assets are nowhere near the level required to pay IHT. He is insisting on gifting his grandchildren there are 4 not 5 (fat finger syndrome) we were under the impression that when he has reached the stage to need help his savings will be down to 23,250 and he can use 20k of that to continue to pay his own care as if he never gifted the money in the first place. Am I getting it wrong?

Hi, from working in adult SW the LA will on financial assessment assess as though he has the £25,00 as money has been given away when there are clear care needs. It would be viewed as a deprivation as the money will come down sooner than it should of. Also don’t forget ( at present anyway) there is a lower threshold charge between £14,250 - £23,250 on top of any assessed client contribution from income such as state pension and any private pension. The lower threshold charge is £1 for every £250 of the lower threshold amount a person has. It would be best OP to see advice from Age Uk, CAB or independent legal advice.

No, as Domino says, he will still have to pay a contribution to his care even after he drops below the £23k threshold, he just won't have to pay the full amount anymore.

Once he drops below the £14k threshold that's when he is no longer expected to contribute, but that £14k is left in place to allow him weekly living costs for things like toiletries, haircuts, newspapers etc and to ensure there are funds in place to pay funeral and legal costs when the time comes.