There appear to be an increasing number of companies and
solicitors promoting products or schemes that they claim guarantee to protect your
home, or other assets, against the cost of care. Often these arrangements fail
to do anything of the sort.
They tend to be marketed very ‘slickly’ and information can
be presented by qualified professionals, so it’s not surprising families feel
they’re doing the right thing.
They’re branded in many ways but you might have heard them
being referred to as ‘Asset Protection’ or ‘Family Protection’ Trusts. It’s not
uncommon for set up fees to run to several thousand pounds.
The past success of these schemes has relied very much on
local authorities turning a blind eye but funding pressure means they’re now
taking a much more aggressive stance.
If a local authority believes that someone has given assets
away in order to avoid paying care fees, they may decide this amounts to a
‘deprivation of capital’. The current law is based on an intentions test.
Proving intent isn’t easy but, if you enter into an arrangement that was sold
to you on the basis of avoiding care costs or perhaps after you’ve had a
diagnosis of a degenerative condition such as dementia, the local authority
will find it much easier.
A really common misconception is ‘the 7 year rule’. Our
clients often think as long as they’ve made a gift at least seven years prior
to needing care that they’ll ‘get away with it’. Actually this rule applies to
Inheritance Tax and not the means-testing rules for care fees. There is, in
fact, no time limit as to how far back a local authority can look.
There might be lots of good reasons for you to establish
some form of trust. You might even find an arrangement does mean you avoid
having to pay for your care – but it’s by no means a certainty.
A good adviser should spend time with you explaining all the
risks and possible consequences.
I would be extremely wary of any adviser that tells you any
such scheme is guaranteed to work. I would even go so far as to say that such a
claim is disingenuous…
Sophie
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