Many people nowadays are concerned that their assets will be diminished if they move in to a Care Home or Nursing Home in the future. According to Paying for Care* the average cost of a Care Home is £29,250 per year and if Nursing Care is required the average cost is £39,300 per year. In recent years there has been much media coverage advising people to give away assets in order to protect against these fees. The claim is that if you do not own sufficient assets in your own name then you will be assessed as not being able to pay your own fees and as such the Local Authority will pay these for you.
But what are the implications of giving away your assets? And what are the tax consequences of doing so? Here are a few frequently asked questions that we at Everys get asked and some information about the types of things you can do to protect your assets.
What assets are taken in to account when the Local Authority assess your ability to pay your own fees?
If you have capital over £23,250 you will be assessed as being able to meet the full cost of your care whilst in a home. Your capital includes things like the value of your home and the money that you have in your bank accounts.
What assets are disregarded for the assessment?
Your personal belongings which can include your car is generally disregarded, along with most types of income, for example your pension.
Can I give away my home to my children in order to avoid paying nursing home/care fees?
You can give away your home to whoever you like but there are some potential pitfalls of doing this. If you gift your property away then you no longer have control over it. This means that the new owners can sell the house whenever they wish and release equity from it without your consent. There can also be capital gains consequences when the new owner comes to sell the house if it is not their main home. If you give your home away and continue to live in it, the value of the house will also be included in your Estate for inheritance tax purposes – even though you no longer own it. You may also fall foul of the ‘deliberate deprivation’ of asset rules.
What is deliberate deprivation of assets?
If you give away your assets either outright or at an undervalue (i.e below the market value) and then subsequently go in to a home the local authority may make a finding that you have deliberately deprived yourself of your assets and as such use those assets in your assessment when deciding whether you can pay your own fees. When making a decision on this basis they will consider what your age and general health was at the time of making the gift.
So what can I do to protect my assets?
At Everys our advisors can help you plan for the future and provide you with advice in order to protect your assets from Care fees, Inheritance Tax and Capital Gains Tax through your Wills and through Trusts. Call us today for an appointment to see how we can assist you.
*A not for profit company. Research from Laing & Buisson Care of Older People UK Market Report 2014/15.