So you’ve considered what steps you can take to protect some of your assets from having to be used to pay for your care and you want to go ahead with these actions.
If you go ahead, will they work? Will the assets you’ve given away be protected? The truth is that this cannot be guaranteed and the Local Authority can challenge these gifts in a number of ways.
Local Authority challenges to care fee protective measures
Lack of capacity or undue influence when you made the gift
The Local Authority could seek to claim that you did not have mental capacity to understand and agree to the gift of your asset or that fraud or undue influence was exerted on you to make it.
The law provides that, where there has been a lifetime gift of a property, the burden of proof would be upon you and your family to show that you did have mental capacity to make this gift and that no fraud or undue influence was placed on you to do this.
Deliberate deprivation of capital
The Local Authority may claim that the gift was a deliberate deprivation of capital by you.
They would have to show that a significant motive for you making the gift was to avoid future payment of care fees and that at the time you gifted the property, you had a reasonable expectation of the need for future care.
The guidance to Local Authorities does state that it would be unreasonable for them to decide that there has been deprivation of capital if:
- You were fit and healthy when you gifted your property; and
- You could not then have reasonably foreseen the need to receive future residential care.
If you are in poor health or if you move into care soon after you make the gift, this may prove problematic.
Therefore, generally speaking, if you make the gift while you are well and there is a long period of time between you making the gift and moving into care, the less likely the Local Authority are to challenge it and, if they do challenge it, the less likely they are to succeed.
If the Local Authority can show deliberate deprivation, the following options would be available to them:
- The Local Authority could treat you as if you still own the property and charge you accordingly. This would effectively mean that you would be expected to fund your care fees from your other capital until this was used up completely.
- In addition, the Local Authority could also take legal action against the recipients of the gifted assets (e.g. your family) to require them to pay the contribution towards your care fees that you would have been required to make if you still owned the asset up to the value of it.
- The Local Authority could also use Insolvency Act legislation to seek to have ownership of the asset or its value returned to you upon the basis that you had gifted it with the intention of putting it beyond the reach of the Local Authority as a future potential creditor.
Comment
There is no time period after which a gift is safe from challenges by the Local Authority. Many people think that a gift is safe if you made it more than 7 years ago. That time limit relates to Inheritance Tax, not to care fees, so it doesn’t apply here.
However, clearly the longer the period of time between making the gift and moving into care, the harder it is likely to be for the Local Authority to be able to challenge it successfully.
How Nelsons can help
Helen Salisbury is a Partner in our Wills, Trusts and Probate team.
If you would like further advice in relation to the subjects discussed above or any other related subjects, please contact Helen or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.