Lasting Power of Attorney and Deprivation of Assets
TimMatthias
Member
Hope someone can help with this as I want to recommend sticking with cash, but the adviser wants to invest.
Been asked to provide a recommendation for reinvesting the proceeds of a house sale where the owner is already in care with altzhiemer's and is aged 86. Funding of care is currently covered, but there is a strong possibility that the costs will increase by around £7K p/m as her condition deteriorates.
Adviser wants to recommend an investment bond and use capital withdrawals to meet future costs if needed.
This is certainly not a plan to avoid care fees but, assuming investing in a bond will be seen as deliberate deprivation of assets by the local authority, will they take the current value of the bond at the time of assessment or the amount initially invested into consideration?
Comments
Presumably you are talking about putting the money into a trust arrangement that gives the donor the right to return of capital via the withdrawals?
Otherwise, they will still own the asset and there's no deprivation?
Thanks for the reply Ben. The old lady would still own the bond. I am worried that if the fund value falls in the short term that it will be assumed that she has the original investment amount, rather than the value of the asset. For example, if she invested £100k and the value fell to £90K would she be deemed to have £100K or £90K.
I'm probably overthinking this though.
"Deliberate deprivation of assets means you have intentionally decreased your overall assets, in order to reduce how much you are required to pay towards your needs for care and support."
Investment losses on assets you own aren't in scope for this test.
If the bank she holds the cash in goes bust and she loses £15k because the FSCS will only give her £85k, would the council go back to when the deposit was made?
If the person will still own the asset, then what matters is why they are investing it. What is the objective? If they will comfortably outlive the cash, investing it simply introduces unnecessary risk and cost.
An 86 year old with Alzheimer's does not have the investment timeline to justify market risk for their own needs, in my opinion. The evidence threshold for making an investment via a PoA for reasons that were ultimately going to benefit someone other than the donor are high and would involve ring-fencing at least 100% of their expected lifetime care costs in cash.
Resources/sources:
https://cks.nice.org.uk/topics/dementia/background-information/prognosis/
https://www.ageuk.org.uk/siteassets/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf
https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/articles/lifeexpectancyincarehomesenglandandwales/2021to2022
If there is a power of attorney in place then you could use a trust anyway as attorneys can only gift if it is habitual (doesn't sound like it) and specifically mentioned in the PoA document, which is unusual.
If the client is 86 and with Alzheimer's, there would be vulnerable client considerations, and as mentioned above, as a bond is generally for the medium to long term, life expectancy may be in point too.
In E&W the gifting provisions on a PofA are invalid if they are beyond what the law allows.
This is over 10 years old but still relevant https://journal.step.org/step-journal-may-2013/lpas-under-microscope
Thanks everyone.