With life expectancy increasing, the reality of funding long-term care is one which more and more clients are having to consider. We have recently come across structures being sold on the market that really are too good to be true. These structures are labelled ‘asset protection trusts’ and have been peddled by lots of outfits. In short, however, they do not work.
The concept of these trusts is that by transferring assets out of your name and holding them elsewhere (known as deprivation of assets) your financial position is viewed more favourably when your local authority comes to assess you for care home fees. By holding reduced assets, the idea is that you are more likely to have your care costs funded by your local authority rather than out of your estate.
Asset protection trusts have also been used for pensions which can undo some of the best Inheritance Tax planning currently available.
Ian Gilmour, one of our Financial Planning team, recently spoke to a new client based in Scotland who had already invested in such a structure. It is clear that these schemes are being aggressively marketed so if you receive a call to discuss these types of trusts please take heed. These schemes are failing if they are being used to mitigate care home fees. The latest deprivation of assets document from Age UK supports this.
In a meeting which one of our financial services contacts was party to, West Berkshire Council were asked about the deliberate deprivation of assets. The Council noted that it had an obligation to find and pay for residential care, but was conscious about keeping costs under control. It recently placed two individuals who had been approved for funding – one in Swindon and the other in Oldham; both a great distance from West Berkshire! Hence it seems there is a significant downside to avoiding self-funding long-term care.
For help and advice with any aspect of retirement planning please get in touch.