Minimising care costs: false hopes v proper planning

We often come across situations where families have sought to minimise future care costs for an elderly relative either by passing ownership of their home to other family members or by participating in poorly conceived ‘asset protection trusts’. The reality is that these approaches rarely work because they are based on a misunderstanding of how the liability for care costs is determined. False hopes based on false planning usually means that individuals still end up paying care costs because the correct legal planning was not put in place.

Local Authorities are able to claw back assets – whether property or in other forms – that have been given away with the intention of avoiding future care costs; there is no ‘7 year’ rule in relation to this unlike inheritance tax liability. Financially strapped local authorities are taking a noticeably harder line on this issue and becoming more skilled at securing assets.

Media coverage of the so-called ‘Dementia Tax’ has seen the marketing of ‘asset protection trusts’ by unregulated advisers. Sadly, the certainty of high costs associated with these schemes is not matched by the certainty that they will save assets from Local Authority claw back or, indeed, from inheritance tax liabilities.

Despite all this, there is scope for individuals and families to make the best of their situation. The first step is to talk to a regulated legal adviser with a proper understanding of not only how care costs are determined but also the practical, effective and legal solutions that are available.