Advisers warned amid crackdown on LTC fee avoidance

What a Strange World

The article states that money held within a trust is excluded from assessment. And yet local goverment can deem it illegal, so is a trust legal or not legal? Strikes me strange that local government can override trust law. What next - every home has to be owned jointly. Very simple answer, make cash held within a trust assessable or is this something that wouldn't stand in the courts, so are we once again a soft target.

Posted by: Swanny

Nothing strange, just a reality

Swanny, the point is that if a Trust is deemed to be established for the specific purpose of moving assets from a client for the specific purpose of removing them from the financial assessment, the value of the assets can be brought back into account. It has nothing to do with trust law. There are a great many legal firms, and others, out there ready to write asset protection trusts and in a lot of cases I would question the legitimacy of such an action. The clients caught up in this have every reason to ask for redress from their advisers. When will advisers learn; Don’t expose your clients to any risks unless they can afford to take them. When will clients learn; Never pay for advice by way of a product sale as you may not be the only one benefitting from the purchase!!

Posted by: Tony Capener

Deprivation of Assets

@ Swanny Local Authorities can apply a rule called 'deprivation of assets' that basically says if you give away assets with the intention of avoiding care costs then the authority can assess you as still owning those assets. The local authority cannot access the money in the trust but they can refuse to offer taxpayers money to fund the care for those who use such trusts to wilfully deprive themselves of assets. Some of these schemes (I think the one mentioned in this article) are marketed as avoiding care fees, which if my reading of the deprivation of assets rules is correct means that they automatically fail. Local authorities are already becoming much sharper in their assessments and investigation. The other question for clients is this. Do you want local authority care which will be adequate, clean but basic or do you want to choose where you live?

Posted by: Tom scott

Selfishness?

Just goes to show that the best trust is the trust between family members. As my old Mum used to say “Better to give with a warm hand than a cold one”. But then of course many advisers would have nothing to flog. Local Authorities do have more power in this respect than HMRC – but then we know that most local councils are populated by little Hitlers. But then of course there is the old question – how come this problem didn’t exist 30 years ago. Answer: 1. People are now living longer. 2. Years ago the family looked after their aged relatives. So in a way it seems that families now want it both ways. We don’t want to look after Gran, but we do want her money. For those without family – why shouldn’t they be entitled to free LTC? After all they have presumably paid a lifetime of tax. Had no child benefit, have not been a burden on the State Education system and have not cost the state that much overall.

Posted by: Harry Katz

Ageism - zero tolerance!

HSBC was fined for misselling investment bonds. There were a number of advice failures listed and the press latched onto the first one - the failure to match the recommended investment term with life expectancy. It was NOT as the article above suggests life expectancy beyond a "maturity" date. Investment bonds are ideal investments for the elderly for many reasons and an attack on this advice area runs a severe risk of ageism - a discrimination which is disgustingly rampant in financial services. Age restrictions attached to investment products should be seen in the same light as restrictions imposed because of skin colour, disability or gender!

Posted by: Ken Durkin

That Maybe

@Tom I appreciate the deprivation part howver if you look at most legal firms, estate planners websites they all talk about care home fees and the various methods to not pay fees. Is it not like income tax ie tax avoidance or tax evasion - ones legal, one is not. Of course if the trust was setup 5 years ago - thats possibly okay but if it was set up 12 months ago its not. However its the same trust. I do find it the subject interesting, Those involved in advising should write a suitability letter stating that "the property held within the trust may be subject to care home fee assessment depending if the local authority can be bothered to pursue the action". You would think STEP would issue guidlines to their members on how to deal with this issue as clearly trusts can be used legally. Maybe the guidlines should be along the line stated in CRAG paragraph 6.070 which talks about timing. If the trust is setup within x years it does not form part of the assessment assuming that the person was fit and healthy and could not have forseen the need for care. In case law Yule v South Lanarkshire (1999) 12 months was sufficient but this also was argued. So clear guidlines are needed, maybe along the lines of the IHT 7 year rule. Interesting topic.

Posted by: Swanny

Late Call

A bit of a late call this one,bearing in mind Steve Long was/is a member of STEP and actively promoting his scheme around the country to "avoid paying care fees". It was also claimed that Barrister's opinion had been gained at a cost of £30,000. This was a STEP member whose marketing material displayed clear motive to avoid fees but STEP should have been aware of this and monitored their own member. Go away and put your house in order before shouting the odds.

Posted by: Peter Taylor

Deliberate Depravation

Of course it is deliberate deprivation if you actively market trusts to avoid LTC fees. However this does not undermine the value of trusts to protect wealth, you just need to know a specialist who is experienced in this field. I would advise any IFA to find an experienced estate planner who has the competence to guide their clients through this minefield.

Posted by: Darren

Leave With Nothing1

You enter the world with nothing and if you leave with nothing so be it. Why should the state have to pay the costs of an individuals lifetime care. As someone has stated previously, manyh today want their parents to look after their kids etc help when they get in financial difficulty but then when the parent is in their old age they don't want to know. May advice to my clients is spend the lot. Have a bloody good time and don't leave you kids bugger all they will only spend themselves!. The chances of anyone coming after me for that non financial advice is fairly slim!

Posted by: Bob Donaldson

Advisres warned on LTC avoidance

There are a number of issues raised here that need considering. In the post credit crunch world with finite resources what are the limits on giving advice that results in saving tax or enhancing benefits at the expense of the state ? I don't want to be puritanical but there is a moral dilemma in giving advice that could also come back to haunt you. Todays clever plan could be tomorrow's fraudulent scheme. While full advantage should be taken of legislation care needs to be taken where the outcome wasn't what was intended. Taking advantage of poorly drated law may not be acceptable as a defence in the future.

Posted by: Duncan Jones

IFA Role

I have two comments or questions why do IFA's insist on making a clients mind up for them before they have asked the client (Bob Donaldson comments)? Surely it is up to the client to decide whether they would like wealth that has taken a lifetime to build up to be lost to care or alternatively legitimately protected? Also IFA's should stick to giving regulated investment advice and let the experts deal with estate planning advice.

Posted by: Darren