Page 3 - Guide To Planning for Care Costs

BE AWARE THAT IF YOU GIVE AWAY MONEY OR ASSETS AND THE LOCAL AUTHORITY TAKE THE VIEW THAT THIS
WAS DONE PRINCIPALLY TO ENABLE YOU TO QUALIFY FOR HELP WITH CARE COSTS THEN THE LOCAL AUTHORITY
CAN LOOK BACK AT THE TRANSACTION, EVEN IF IT TOOK PLACE MANY YEARS AGO, AND THE VALUE OF THE
HOUSE, OTHER ASSETS OR CASH GIVEN AWAY CAN BE TAKEN INTO ACCOUNT AS NOTIONAL CAPITAL WHEN
ASSESSING YOUR LIABILITY TO CONTRIBUTE TO THE COST OF YOUR CARE. HOWEVER – IMPORTANTLY - AS THE LAW
STANDS NOW THE COUNCIL CANNOT RECOVER THE ASSET FROM ANY THIRD PARTY NOW OWNING IT. GIVING AWAY
ASSETS CAN ALSO GIVE RISE TO OTHER ISSUES RELATIVE TO INHERITANCETAX (IHT) And, PRE – OWNED ASSET TAX (POAT),
AND POSSIBLE CAPITAL GAINS TAX PAYABLE BY THE ASSET OWNER. A REVIEW OF ALL THESE ISSUES SHOULD BE
UNDERTAKEN BEFORE ANY STEPS TO DISPOSE OF ASSETS ARE TAKEN.

OPTIONS

It may not be sensible to dispose of assets. Retaining them and using them to buy the best possible
care may be the preferred option of many people. However if having considered all the options
someone wishes to take steps to shelter assets, there are four options which may prevent the value of
your home being taken into account in care cost assessments.

OPTION1 –HOMEGIFT

Give your house to your children, retaining the right to live in the house. The date of a gift of a house is the
date of registration of the disposition transferring ownership in the Land Register. If an application for
assistance with care costs is made within 6 months of the date of transfer of assets, the assets may be clawed
back, or the recipient made liable for the cost of the giver’s care.

If the gift is made outwith the six month period, and for other stated purposes, it may not be taken into
account for assessment of care costs. As a rule the longer the period between the gift having been made
and the care assessment arising, the less likely it would be that the Local Authority could prove that the
gift was made to avoid payment of care costs.

This transfer or gift canbe done in a number of ways, but the way which usually suits most people is

A. A Disposition (transfer of ownership)of the property with a reservationof a liferent (keeping the right to
live there for the rest of your life) and
B. A Power of Attorney in favour of someone reliable, to enable the liferent to be given up in future if you
no longer need it.

A number of other issues arise. If the house in which you live is owned by others, any one of the owners has
a right to demand that the house be sold and the proceeds divided. They may not wish to do so but may be
forced to do so in the event of personal bankruptcy or in the event of a divorce as the part owned may be
taken into account in the divorce settlement or that share in the house may pass to someone else if the
owner were to die. If the house is sold for whatever reason, capital gains tax may arise as the house is not

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