MIL transferring money to DH against future care home costs

[DisgruntledofTunbridge]

Just wanted to run this past people who might have been in a similar situation.

Sadly, DH's dad has been diagnosed with dementia. He's still at a stage where he's basically ok (ish) but occasionally making mistakes with things and was going online and making big purchases that he then forgot about completely. (MIL took away his ability to do this by closing his/their eBay account. Not sure he's noticed yet TBH.) He doesn't drive any more. MIL already transferred a fairly lumpy lump sum to DH for 'funeral expenses' (they are quite traditional) basically to safeguard it from being drained by FIL (should he decide to revert to online shopping again) and that's now in an ISA for them, that DH set up.

Today, MIL did this again - she'd been talking to friends or relatives who had found themselves having to pay for a care home for one of them, because their savings were over the threshold. MIL promptly sent another few grand to DH to 'safeguard' in case care home expenses were needed her end. I gather she did the same with SIL.

I mean, obviously this is all really sad. There's no plan, nothing has been discussed with DH or SIL, they just keep on being given sums of money to safeguard for eventualities.

With my less-involved hat on, I just wondered if there's a disadvantage for DH/us? Is it taxable? As far as I know, on paper it's a 'gift' (except one he's looking after for them). We know about duties payable on gifts of money if both DH's parents pass away in the next 7 years, but are there any other considerations?

Oh, and DH/SIL don't have POA. It was suggested by my mother-in-law a year or two ago and they got a certain way down that track, but then FIL got a bit windy about it and decided he didn't want to proceed because he'd lose control of his money...

(I mean, I say there's no plan, but it feels well thought through compared with the head-in-sand from my own parents who are comparable age and probably into the dementia zone (dad) as well... But just for once I'm concerned about DH's parents, rather than mine!)

It is intentional deprivation of assets. I do think we need another system though.

I'm not clear :
Is she giving it away to prevent it being used for care fees (in which case it can be clawed back)
Or giving it away to keep it safe and available to stop FIL spending it?

IHT may also be liable on gifts for up to 7 years, though there are allowances.

It's the deliberate deprivation of assets that's the problem. She is giving away money to avoid paying care home fees and this is not allowed and it doesn't even have the seven year rule attached. Any gifts given with that intent or that just look like it might be the case can be reclaimed however long afterwards.

I would get some professional financial advice. DH dad used to give him £1k a year, for about 13 years before he died, and it was not an issue.

Ok. This transfer today (it was £3000) was I believe specifically to prevent it being used for care home fees. The amount transferred last year to DH which is now in an ISA was for 'funeral expenses' and to stop FIL spending it!

In addition to that, they did give us a relatively small amount to help with recent building repair work which was a gift, and very nice of them.

Basically none of us know what we're doing, but a little voice was niggling away at me, saying 'if it were that easy to avoid paying care home fees then everyone would do that' ...

What RitaSue said about deliberate deprivation of assets was what the niggling voice was on about, I think. Makes sense. So if a LA was asked to find a care home space for someone and asked to pay, presumably the LA would legally be able to look at that applicant's bank statement for recent withdrawals and transfers? I can't see why they wouldn't, or wouldn't be entitled to that information.

(I want to add the disclaimer here that I'm not condoning trying to game the system! This isn't my parents, I just want to make sure DH's parents don't get into hot water, and DH too for that matter.)

£1k per year is within the £3k annual gift allowance (depending of course whether other £1k gifts were given).
It is gifts in the 10s or 100s of k that could be more of an issue.

You can gift 3k PA with no tax issues.

Here is a link to the official guidelines https://www.gov.uk/inheritance-tax/gifts

They are actually deliberately trying to avoid care home fees if they become needed by deprivation of assets. That is a problem. I’m not at that stage of life yet but will if I need care have to pay. It’s a PITA but I do not see why some seem to think the taxpayer should pick up the bill. Doing this sort of stuff is a sort of benefit fraud.

If they need care and they want assistance with funding the local authority will request bank statements and will query large withdrawals of cash. If they suspect that money has been given away to avoid care fees it will be deprivation of assets.

www.ageuk.org.uk/siteassets/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf

That would have been covered by the small gifts annual allowance

Also, funding yourself gives you much more say over the care you get.
When mum had NHS care after discharge from hospital the timings were all over the place. With her private care visits the times are far more consistent (and known in advance).

Whose name was on the bank account the transfer came from? If FIL would be likely treated as deprivation of assets as he has been diagnosed with dementia already so would reasonably expect to need care in the imminent future. If MIL depends on her age and health and if care needs seem imminent. Only funds held in the name of the person needing care can be considered. Money in MIL’s name cannot be required to pay for FIL’s care.

What assets do they have?
The house will be totally disregarded whilst MiL resides there.

If she is reliant on any pension of his, other than State pension - 50% is disregarded, same with savings/investments.

Thanks everyone. I'm putting this to DH and he's being a bit shirty, at least in part because it's not something most of us want to think about. But there we are. I've told him, he knows, and he needs to have a chat with MIL about it.

There is the small gifts allowance but it is also ok to gift any amount of money, the same amount on a regular basis which doesn’t diminish the giver’s lifestyle.

Has to be 'excess income' I believe.
(I'm currently looking at how to create some visible excess income so I can give it to my DC.)

Yeah they’ll be all over this if the need arose to look to the state for paid care and it came from FIL. Done too late. Should have given it or drip fed it to you many years ago if they wanted you to have it. We’re mid 50’s and will be starting to do this very soon when the DC need it most too.

Money held in joint accounts will be included - say there’s 10K in a joint account it will be deemed each person owns 5K.

Yes, it has to 'not impact your own standard of living' - but that is subjective. So if you can cover your basic living costs, you could gift the rest but it would need to be regular i.e. paying school fees or contributing to a savings plan for a grandchild.

I think this is not well known or understood by most people.

I'm not sure all LAs are 'all over it'. A good friend of mine helped her mum sell her house and move in with her (to a much bigger home they bought using the mum's money alongside their own) - a year later she moved into a care home and they never paid a penny.

£3k? Not being funny but that’s about two weeks in a care home, barely touches the sides. On is own, as a one off is not going to raise too many flags, unless it’s to deliberately take them below the limit at which the LA starts to contribute to care costs.

But deprivation of assets like transferring property to children’s names or major draining of savings will raise big red flags at the LA.

Sounds like a Conversation Needs To Be Had with your in-laws. Good luck, my mum handwaved it away with a “I’ll manage somehow”. AKA I can rely on you Funnel to sort things out for me.

Your husband and your mil could both be in trouble since your father in law is unwell, and likely to need a care home in the near future. Please get financial advice asap.

£10k per month for a desirable care home round here. Our council simply would not spend the resources on looking into £3k that had been given away from time to time. Deliberate deprivation is not taken seriously for such small amounts.

Have you thought about how your parents in law will fund their care if they give their money away?

FIL wanted to use our unused ISA allowances (effectively to hide money) and was most indignant when we said no despite us explaining if anything happened and we needed to claim benefits in the future through loss of job/illness etc it would be seen as "our" money to use first and take us over claim threshold. He confirmed he would be expecting us to pay him back "his" money if we had to use it including interest. Be wary.