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An elderly person invests £80,000 in an annex of her daughter’s property where the property and title deeds remained in her daughter’s name. What would the recourse be for the daughter if the elderly person went into a care home? Could the government request the daughter pay the money back?

The Question assumes :

  • Inheritance tax advice has been provided on GROB and PET depending on the situation
  • The risk of the daughter being made bankrupt, predeceasing or divorcing and her mother’s assets being taken into account.
  • A lack of any declaration of trust will make the mother’s position more difficult as she would have to rely on constructive trust or promissory estoppel if there was a dispute.
  • Consideration has been made on the annex as to whether this is a separate building and the CGT and SDLT implications of this.

The mother is giving £80,000 to the daughter in return for being provided with an annex in the daughter’s home. This answer only considers residential care costs.

Deprivation of Capital

First you should consider if the mother has any issues with her health and this is the reason for moving in. If she is aware of issues with her health that indicate that it is likely to deteriorate, then she may be seen as intentionally depriving herself of capital. As the Care and Support Guidance, April 2014 Schedule E, states (even though relating specifically to accommodation charges the principle remains for all capital issues):

‘It would be unreasonable to decide that a resident had disposed of an asset in order to reduce his charge for accommodation when the disposal took place at a time when he was fit and healthy and could not have foreseen the need for a move to residential accommodation.’

Therefore, if capital is disposed of at a time when the claimant was fit and healthy and there was no reason to suppose that they would be in need of care. This will be a question of fact in the situation.

Notional Capital

If the local authority believed that the mother deliberately gave away capital then they would be able to treat the capital as if it had not been given away.

Local Authority application of the notional capital rule is that whether care is provided under the Care Act 2014, the Social Services and Well-being (Wales) Act 2014 or the National Assistance Act 1948, Income Support (General) Regulations 1987, SI 1987/1967, reg 51(1), (2) and (3) are directly imported. Care and Support (Charging and Assessment of Resources) Regulations 2014, SI 2014/2672, reg 23 and National Assistance (Assessment of Resources) Regulations 1992, SI 1992/2977, reg 26 introduce a diminishing notional capital rule equivalent to that in Income Support (General) Regulations 1987, SI 1987/1967, regulation 51A(1). However, there is one material difference between these provisions and regulation 51(1) in that a local authority may treat a resident as possessing ‘actual capital of which he has deprived himself for the purpose of decreasing the amount that he may be liable to pay for his accommodation’. The substitution of ‘may’ in for ‘shall’ is very significant. It means that local authorities have discretion as to whether or not to apply the notional capital rule. The discretion makes sense for local authorities because their duty to make arrangements for residential care is independent of their duty to recover care fees. If, therefore, an elderly resident effectively deprives himself of all his capital, the local authority may legitimately take the view that, unless the capital is easily recoverable, applying the notional capital rule will serve no useful purpose.

If the elderly person is in poor health and entered residential or nursing accommodation relatively soon after the gift then the local authority are likely to pursue the daughter to recover the funds expended as they have been invested in her home this is an asset they can recover from. If however, the elderly person is in good health and nothing is foreseeable in terms of ill health, then the gift may be ignored but this is very dependent on the precise circumstances of the case.

Other factors that will affect the position for funding residential accommodation, if this is needed in the future are:

  • The care cap of £86,000 on costs has been delayed until October 2023 at this time
  • If applicable, application should be made for the registered nursing care contribution
  • If the elderly person’s health deteriorated significantly, she would be eligible to be assessed for NHS continuing care
  • Clients with capital in excess of £23,250 will be self funding for nursing care there is notional income of £1 for every £250 between this and the lower capital limit of £14,250. Note these limits will change when the care cap comes into effect.

If you would like a chat to discuss further, please feel free to contact me for a free 30-minute consultation.

Sophie Campbell

01637 800 306

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