Local authorities can look back indefinitely.
However, it refers only to inheritance tax, not to nursing home fees.
Under current UK IHT laws, if you donate an asset (such as your home) and you survive for 7 years, that gift may not count as part of your estate when calculating estate tax in the event of your death. These are called potentially exempt transfers, or “PET”. However, the concept of a 7-year rule for nursing home funding is a myth.Local authorities in the United Kingdom have the power to look back indefinitely when evaluating whether assets have been deliberately given away. Unlike inheritance tax, care fees have no time limit. Whether the transfer was made two or twelve years ago, if the local authority believes that the goods were delivered to avoid any kind of care, it can investigate. The 7-year rule is a term that is frequently used in connection with inheritance tax and donated property. It is a regulation that originates from UK tax law and has important implications for people who plan to move to a nursing home.
Basically, the 7-year rule states that if you give away your property or other assets and survive for seven years after making this donation, these assets will not be included in your estate for inheritance tax purposes. A common misconception surrounding the payment of care is that asset deprivation rules will not apply to any capital that someone gave away more than seven years ago. However, there is no such rule about paying for care: a local authority can look back as much as it wants to to determine if a person has deliberately deprived themselves of their property. The standard provides protection when two conditions are met.
First, more than seven years must elapse between the transfer and the request for funding for care. Second, avoiding paying for care expenses should not have been the primary reason for the transfer. The 7-year rule for nursing home rates is a myth. This misconception stems from the 7-year rule to take into account inheritance tax.
Donations made more than 7 years ago are not counted for inheritance tax purposes. A common belief is that surviving for 7 years after the donation of an asset (colloquially referred to as the “7-year rule” of asset deprivation) means that the gift is not considered a intentional deprivation of assets. However, this is a total myth. Local authorities can go as far back as they like when considering deliberate deprivation.
The next of kin are not legally required to take responsibility for paying for a person's nursing home expenses. If a home is included in the social resources test to determine if it qualifies to pay for care expenses, you may be able to delay the sale of the home by entering into a deferred payment agreement with the local authority. If your capital is tied up in a property, a deferred payment agreement allows you to use the value of your home to pay for your own care over time, without selling it immediately during your lifetime. For information on how to ensure that you or a member of your family are treated fairly in a nursing home, see the CMA guidelines.
Lottie is a free service that helps families and retirees find the best nursing homes and retirement communities in the UK. Many people consider giving away their savings or their home to a family member to avoid the risk of having to sell their home at a later date to pay care expenses. However, if you donate a significant lump sum when you have health problems, or give away assets to avoid receiving care just before a health evaluation, the authority may decide that you have acted improperly to ensure that the state pays the costs of your nursing home. Start your search off on the right foot by requesting a free list from Lottie's team of experts about a pre-selected nursing home.
We can help ensure that Social Services have properly evaluated your wife's income contribution to your nursing home dues. When someone needs to move to a nursing home or needs residential or nursing care, the local authority performs a resource test. Moving to a nursing home doesn't mean giving up good health care, but it does mean understanding how things work differently. The implications of the 7-year rule are important because it could affect your eligibility for state-funded help to cover the cost of nursing home services. Understanding how the limit on nursing home fees works in the UK influences the possibility that complex arrangements will continue to be worthwhile.
We recommend that you seek independent financial advice to ensure that you don't inadvertently violate the nursing home fee rule. The cost of nursing home services is a significant concern for many families, and it's crucial to understand how rules such as the 7-year rule affect these costs.
