In a previous article on this web-site dated 18 July 2014, I outlined the basic rules relating to liability for care home fees, including the anti-avoidance ‘deliberate deprivation of capital’ rules. These rules enable the Local Authority to see-through any gift made by the person needing care if that gift is made with the actual or deemed intention of avoiding liability for care home fees. This is a matter of great concern to many people who feel that their house should not be taken into account when assessing their ability to meet the cost of care.
Many Private Client practitioners, including myself, share the view that those Asset Protection Trusts which are designed to get around the deliberate deprivation of capital rules, are potentially doomed to failure. We regularly receive requests for advice on such trusts offered by third parties, which typically cost several thousands of pounds to set up and may also have other practical and tax implications.
Recently in Nottingham, several individuals were jailed for mis-selling Asset Protection Trusts by cold-calling upon elderly clients, for which they charged up-front fees of £2,000. Over a two year period they charged total fees of over £250,000 for setting up these trusts and making Wills and Powers of Attorney, despite the fact that most of the products sold were never actually delivered.
Of course there are several types of Personal Assets Trusts many of which are quite legitimate and do not involve an attempt to avoid care home fees by circumventing the deliberate deprivation of capital rules. This article is confined to those which do.
It is suggested that you take independent advice from an appropriately qualified expert before signing up to any schemes marketed by cold-calling. Your solicitor will be able to advise on schemes which do work and their practical and tax implications.
If you have any queries regarding the issues referred to in this article please contact our Private Client Department.