Homeowners are being warned to ‘tread carefully’ before signing up to any scheme that claims to protect their home from being sold if they need to go into care.
These schemes are aimed at sheltering homes from being included when a local authority assesses an elderly person’s assets to determine how much they should contribute to their care fees.
If their assets are above a pre-set cap – and that cap is relatively low, just over £23,000 – they will be liable to pay for the cost of care themselves.
That means most property owners will be liable to pay for care, even if it means having to sell or rent out their property to raise the funds.
Many elderly people fear having to sell their home, preferring to pass it on to their children. So it is no surprise that there is demand for schemes that will put your house in trust in a bid to keep it out of the local authority’s clutches.
An asset protection trust will put your home in a trust for someone else. Fees to set up these trusts can run into thousands of pounds.
But Janet Davies, from the care fees planning service Symponia, says local authorities are increasingly employing ”avoidance officers” to ensure that residents are not using these trusts to wriggle out of care fees.
She added that products that purport to avoid fees could end up being the next mis-selling scandal, because when they are sold in isolation they often do not meet the family’s overall needs.
Ms Davies urged people to look at their entire financial situation when thinking about care planning.
“These trusts are not the Devil’s products. But it is important not to look at something like this in isolation – you need advice on all the different facets of planning for care and inheritance.”
Danny Cox, investment expert at Hargreaves Lansdown, said that putting money into investment bonds was the most common way to protect assets. These bonds are technically a non-income producing insurance product, and therefore are an exempt asset in the financial assessment against care fees.
“However, this is somewhat an anomaly of the rules and cannot wholly be relied upon,” Mr Cox warned. “Furthermore, people could be caught with the ‘deliberate deprivation of assets’ rule, if they are found to have sheltered assets with the aim of avoiding care fees.”
Chris Belcher, chairman of Solicitors for the Elderly, said “If you do this at a stage of life when you are about to go into a care home, and have made several visits, and then you decide to put your home into a trust, you are more likely to fall foul of deliberate deprivation than if you are 60, hale and healthy and set the trust up to pass on your home to your grandchildren.
“Start planning as soon as you can. That way you can make sure that your plans are robust and will see you through.”
While local authorities have frequently turned a blind eye to this measure in the past, new rules surrounding how we pay for care were announced in February, and it is likely that attempts to shield wealth will be more heavily scrutinised. Lawyers who sell these products could even have their files called as evidence when the local authority makes its funding decision.
If it finds that you have set up the scheme deliberately to deprive yourself of assets to pay for care, your home will be included in the means-testing equation anyway, and the thousands of pounds that you have paid to set up the trust will have been wasted.
Michelle Mitchell, of Age UK, says that the charity ‘would advise people to be extremely cautious of any scheme offering to help you avoid care costs, as this might result in even greater financial uncertainty in the future’.
“Paying for social care is one of the greatest fears of later life,” said Michelle. “The new Care Bill will help clarify how much people will be expected to contribute towards their care, but the rules for managing your assets – including what may or may not be considered deliberate deprivation of assets – can be quite complicated.”
She said that, in many cases, homes do not have to be sold to pay for care.
In some cases, homes can be let out in order to pay fees, while those who go into care can also rely on the Government’s loan scheme, which works like an equity release mortgage – although this may end up with relatives being forced to sell the property when the owner dies.
She added that even if an asset protection plan worked, and a care home resident did manage to secure a local-authority funded place, the resident would end up with potentially less choice about where to go.
More than 130,000 people move into care each year, and more than half of them will pay at least part of their fees. If they run out of funds, the local authority will then pick up the cost, but this may mean moving into cheaper, or more distant, accommodation that meets their funding criteria.
Only 7pc of ‘self-funders’ currently get financial advice.