Protecting Inheritance from care home ...help me!!!

[lincolnpaul1]

Hi there,
Thanks for reading this first of all....
Summary:
My mother is ill and now in care (home) with Alzheimers. She is self-funding her care home fees but the money owed is being run up on her property (about 14K currently). I have Power of Attorney over her finances and she is not in the position to make any decisions now, so I make all these. She has her house which I am currently selling for her (120K). Some of the proceeds will go to pay off the debt. We will be left with about 100K capital in mum's account. Mum will continue to self fund her care (about 700£ per week) until her saving are down to about 20K. Mum wanted to protect her savings (as much as the 100K) and obviously didn't want it all to go to her care. Does anybody know how I can/what I can do to protect this to ensure it is passed onto family?

I am setting our home up as a business if we live to a ripe old age.
The business will be managed until we are both dead and then they will close business and inherit the money.
There are lots of ways round it if you do it early enough.

Babyroobs it depends on the person and an assessment of their needs/best interests when the money runs out. You may be able to stay if they offer NHS rooms too, or you could move to a shared bedroom. Or you could stay but the rest of the fees not covered by the government would need to be paid by family members etc. It all depends on circumstances and the person (and care home) I'm afraid.

Thanks for explaining Sparkly.

basset I'm hope I'm like your mum when I'm older. I get sad thinking that I won't even live till my retirement age!

Grays it is ironic isn't it ? and for you .

Much appreciated basset!

This may rub people the wrong way but why shouldn't your DM's assets be used to fund her care? If she was living at home she would need to self fund (beyond any pension entitlements).

I don't see why the public should fund living expenses (which essentially this amounts to) while there are significant assets available.

Indeed. What the people who disagree with you are basically saying is that because someone owns a house, they should be entitled to what may be many years of free accommodation when they can no longer live in it, while someone who has a similar estate in eg shares or cash shouldn't. Fuck that for a game of soldiers.

WRT the renting suggestion, it would have to be a pretty expensive property for the rent (after any costs for maintenance etc) to cover the costs of a nursing home. If it's worth 120k, I can't see the rental value being high enough. If I were OP I'd tread very carefully.

Where we are, all nursing homes are private. If you are taxpayer funded, you pay less than if you are self funded. For example, around £500 vs £950 a week for a bed in the same nursing home. There are a few nursing homes that are more expensive - £1300 a week upwards - that only take private patients.

My mum died last year, so I don't know the current situation, but the cheapest way then was to get a deferred loan set against the value of her home. We then rented out her home. The main benefit of this was not the rental income (which was only modest) but that the local authority pays on your behalf, and so you pay £500 a week rather than the £950, and this is set against the house value. I don't know if this is still the case this year though, but it's worth looking into. We didn't know this when we took this route, but my mum didn't want to sell her home. However, the woman who showed us round the nursing home was very helpful in explaining finances.

By the time you take into account the state pension and attendance allowance, the care seems much more reasonable.

However, if you rent out, she probably won't still be eligible for tax credits, which is a gateway benefit for free false teeth, for example.

I'm sorry to hear about your DM. Is it an option to defer payment for her care?

For example, rent out the property for now and pay for the care once your DM has passed away, when hopefully the value will have increased. I'm sure I read about someone doing this a few years ago.

I think someone can give away £3000 each tax year without incurring inheritance tax. You may be able to double this the first year if she didn't use the allowance last year. It would also be reasonable to pre pay for her funeral as another poster suggested. I think this is probably the most you can do.

Depending on the rental value of the house you could rent it out and this would offset the costs somewhat.
Also you may get capital from growth in its value and I'm sure you can also offset expenditure on the house from capital as well.

I'm not a legal expert but you will be expected not to intentionally deprive her of capital and income with the INTENTION of reducing her contribution to care home fees in the future.
This does NOT mean she has a legal or moral duty to save all her money to pay care fees nor should it mean that you should be paying for her clothes treats and extras. So if she wants or needs anything she (you) can spend her money on it and you should as ultimately if you are paying personally from your pocket for things like hairdressers, clothing, food treats etc you are subsidising the care home.

At the moment she is self funding so the £20 or whatever it is per week personal allowance does not count.

Also anyone challenging any expenditure of this nature would have to prove it was done with the intention of depriving herself of capital or income to pay the fees. Obviously any money spent will reduce capital but if it's for another main purpose that benefits her or is something that she always did when she was well then that's ok so for example if she had always given children/grandchildren £100 on their birthdays and she wished to continue she could. If she had previously given children/grandchildren a larger cash gift on significant birthdays or weddings graduations etc then again she could continue. Obviously these sums would have to be reasonable and fair.

Other examples may be if she had family living far away who are running out of time to visit and can't afford to come - she could pay towards their travel costs. It would probably be possible to prepay a funeral (sorry not very sensitive - OP). Obviously invoices and recipts may be required.
This may depend on her cognitive facilities and capacity but she should within a reasonable limit still be allowed to spend her money as she wishes as long as it isn't with the intention of depriving of income or capital.

Councils are very hot on 'deprivation of assets' and with good reason, since if it were easy to avoid paying care home fees, everybody would be at it.

Having said that, I have every sympathy for people who hate the thought of all that money going in care home fees. Yes, it is the person's own money and should of course be spent on their care, but more often than not you are all too aware of how horrified the person would be if they knew, and how much they would have wanted to leave it to children/grandchildren.

Should add that my mother was in a care home for very nearly 8 years - self funded - and I was often thankful that her Alzheimer's meant she was quite oblivious of the cost. Because I know she would have been appalled. Pre dementia we had often urged her to treat herself to this or that - she nearly always said she'd rather not - 'I'm saving it for you lot.'

Useful factsheet from Age UK: http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS38Treatmenttofpropertyyintheemeans-testforrpermanentcareehomeprovisionnfcs.pdf?dtrk=true

I think that if people have the money they should contribute to the costs, but there should be a 'top hat' on the amount paid by any one person. I know the Govt. talked about doing this, but I don't know if it ever happened?

Surely if you did give away some or all of her money just to make gifts, and there ends up being a shortfall for care home fees, you'd be liable for the difference? Also, not sure where this would leave you legally as having power of attorney if you have responsibility for her finances but don't make provision (where adequate provision already exists) for the fees.

Sorry to be so glum. It's a rotten situation all round and you have my complete sympathy.

Re annuities, it may be worth exploring but they are expensive. We had one for our mother but it was about 10 years ago now when interest rates were better. The cost was about £125k then, and that did not even cover the whole of her fees since her own income covered about a quarter of them. My mother was already 89 when she went into the CH - the provider is making a calculated bet on how long someone is going to live, and obviously they want to win. They typically want full medical history, and IIRC it took a few months for them to come up with their offer.
Because she lived another 8 years the provider lost their 'bet' but we had no way of knowing that beforehand - she came from a long lived family but even so none of them had lived beyond 89. So it's always a gamble.

"I think someone can give away £3000 each tax year without incurring inheritance tax. You may be able to double this the first year if she didn't use the allowance last year. "

As has been mentioned multiple times, this isn't about inheritance tax, it is about deprivation of assets.

A house worth £120k won't be subject to inheritance tax anyway.

People are aware that the inheritance tax threshold is now £325k with a family home allowance of up to £175k per person coming in the next few years, right? It will be £1 million per married couple. Even in my incredibly expensive part of the country, not many houses are worth that.

The vast, vast majority of estates do not pay inheritance tax because they are below the threshold.

Inheritance tax is a bogey man sustained by the media to scare people who will never have to pay it anyway.

And if you do have so much in assets at death that your estate will have to pay some tax (and there are various alternatives and exemptions anyway) - I think your kids will be fine, somehow, with only £1million tax-free and 60% of the rest between them.

I'm pretty sure you can continue to make the same sort of gifts as the person made before - e.g. £25 or £50 to grandchildren on their birthdays.

If you suddenly bumped it up to £1000 all round that's where the LA would get eagle-eyed, in the case of the money running out.

Re state homes vs private, I think there are very few, if any, state run care homes around here. My mother was in an Abbeyfield (specialist dementia) which was very good. I don't know for sure, but I would guess that a fair proportion of the residents were not self funded, I.e. the local authority would almost certainly be paying a rather lower rate.
However they all received exactly the same level of care, self funded or not, and all the rooms were the same - a reasonable size with ensuite.

However this care home was purpose built for dementia, which was one reason it was so good. We looked at many others - including one converted from a hotel. It would have been hopeless for her - a maze of narrow corridors to get endlessly lost in and the room they offered was small and not at all nice. However the public areas were very smart and 'stylish' (to impress relatives who were choosing IMO) - as if people with dementia care! what they need is cosy and homely. This home was also one of the most expensive we looked at.

If you own your own home and have an asset you have the luxury of choosing a nice private care home not being dumped in an awful one.

Absolutely untrue. Mil had to go into a care home as her dementia had gone beyond being able to be cared for at home. No one would take her. Dh and bil traipsed around many, many homes in the local area but as mil was "noisy" her options were limited to one home. This home is rock bottom - in spite of costing £700/week and nearly everyone else is council funded.

OP, we have turned ourselves inside out over your exact same situation and taken legal advice. The fact is you are unfortunately too late. As others have said, with a LPA you can award gifts as your dm previously gave - which you have to be able to prove. You are not able to utilise the £3K annual gift allowance nor the marriage gifts etc. Fil has dementia but still has sufficient awareness to be able to write cheques to gift his allowance. Once you have enacted an LPA you cannot remove money from the estate unless it is for the use of the "sponsor" - ie your dm.

I know a few people who have been through this situation, so I can sympathize

I know some people who have complained to their LA and been advised that they were the rules and no refund

Even though you have PA all the assets legally still belong to your mother

Therefore the assets should be used to provide her with the best care possible

Care is expensive £1000+ a week

The alternative is that your mother lives with family
or
carers are provided in her own home, which costs money and may not be a suitable environment

As it is the "family home" emotions will be high

Do not forget that if your mothers money decreases to the minimum eg 21k if she lives another 10-15 years the state will pay

What is the alternative ?
When you get older sell your house and go on multiple cruises round the world ?
I believe it is SKI (spending kids inheritance)

We are all living longer

We all have choices

At least she is presumably in the home of your choosing. Go through all her assets and she'll end up in the crappy cheapest one that the council will pay for.

There are advantages to being self funded. A lot of people seem to think it's simple - you need a care home, if you have assets you pay, if not the LA does.

But if you need the agreement of social services it's not at all uncommon for them to find every excuse in the book, even when family trying to care for someone are on their knees with stress and exhaustion -I'm talking dementia here.

I know of someone who was so desperate - getting no sleep apart from all the rest, incontinence, etc. - that she told SS that if they didn't act she was going to take her dad to A & E and leave him there. She simply could not cope any more.
And only then did they act.
At least when you are self funded you can choose the time, as well as (usually) the place.

rhoda thats awful. You can get extremely, and i mean almost luxury, care in my area for £1000-1200 a week. And they'll accept people who have severe dementia with even volatile tendancies. I live in Greater Manchester and £700 will only get a basic care package.

I think that the concept of protecting 'inheritance' from care home costs is awful. Why should the state pay for someone's are when they have the assets to pay for it themselves?

My mum and dad worked hard and saved hard. They were very careful with money. My dad died a few years ago and my mum is now in a care home with severe dementia. Her assets are being used to pay care home fees £600 pw - so far totalling in the region of £50k. That's just the way it goes I'm afraid. Dsis and I continue to give our kids the usual £20 or so for Xmas / birthdays - which is what DM did but we wouldn't dream of taking anything else.

The thing that seems unfair is that inheritance for this generation effectively becomes a lottery of what illness they sucumb to at the end of their lives. Many of them have saved and been frugal all their lives in the belief the NHS would cover their care costs cradle to grave and this has turned out to be a false promise. They are the golden cohort who have had the best outcomes in terms of extended longevity and improvement in quality of life, but have not contributed sufficiently to it over their lifetimes. The burden of repaying this deficit now falls on those lucky enough to have assets and unlucky enough to need care in their twilight years (and not have a healthier spouse living in their home). I think a fairer way forward would be to cap care costs to something (probably quite large, say £50k) and then alter inheritance tax to apply to the first £50k of an estate (after which the existing rules would apply) with anything already paid out in care being able to be offset against it. This would mean that after death the majority of this generation would contribute something towards the shortfall in contributions which over their life has led to this mess, and the costs would be shared more equitably.