Feature

posted 1 Sep 1997 in Volume 2 Issue 6

Carers - Protection of Property Rights

INTRODUCTION

The "Carer" was given a statutory definition by section 46 of the NHS and Community Care Act 1990. The Act defines a "private carer" simply as "a person who is not employed to provide the care in question".

In the U.K. there are approximately six million private carers, most of whom are female relatives and approximately 75% care for the elderly. Under the Chronically Sick and Disabled Persons Act 1970, the definition of an "elderly person" is "someone who is aged 65 or more or is suffering from the effects of premature aging".

The unpaid contribution to community care is immense and is said to have been valued at £32.5 billion in 1992. One in five people between the ages of 45 and 64 provide informal care for relatives and friends but 2 out of 3 of these carers become ill themselves as a result of looking after sick, elderly or disabled relatives. Part 1 of this article addresses property protection for the carer and Part 2 of the article addresses the availability of benefits to private carers and the provisions relating to physical and financial welfare for private carers.

PROTECTION OF PROPERTY RIGHTS

General

Commonly care "at home" arises when the older person's home is sold and a contribution is made to alterations or improvements to the existing home of the carer or both homes are sold and the proceeds are invested in a new, more suitable property.

So often no formal advice is taken when home-sharing is discussed and, if advice is taken in relation to the property aspects of matters, property lawyers may not be familiar with the wider dangers relating to care of the elderly. It is important to recognize that separate representation of each family member may be desirable, if not essential, if there is a conflict of interest, in order to reduce the risk at any later stage of transactions being subsequently set aside.

The areas of law involved can become complex and may include claims as to tenancies, licences, equitable interests, estoppel and ultimately the question of succession.

Carers looking after relatives in their own homes may find, inadvertently or otherwise, that the elderly person may have acquired a beneficial interest in the property under the doctrine of implied, resulting and constructive trusts, particularly where a direct contribution has been made to the purchase price or to improvements carried out on existing property (Lloyds Bank v. Rosset 1990 1AER 111).

Conversely, a Carer moving into a property may be able to establish a proprietary interest as a result of the equitable doctrine of proprietary estoppel.

Either party may find that they are in occupation of a property by licence only, which can be terminated on reasonable notice if it is a bare licence. It is possible that there may be a contractual licence, particularly if some form of payment has been made.

Particular difficulties arise when there is no written documentation dealing with, or recording, agreement between the parties.

LOANS

If the arrangement involved is intended to be a loan then it is important to record this in writing to aid recovery by both the donor and his or her estate. A loan is an asset of the lender and the carer should consider the impact on his or her financial position if recovery of a loan is made and in particular:-

1. Does the lender expect to receive anything in return e.g. rent/contributions to outgoings interest?

2. What may be the impact on other family members if the carer is given a loan which may be waived by Will or in the lender's lifetime? Will this be viewed as preferential treatment and cause a strain on family relationships?

3. What if the borrower (the carer) dies first or becomes involved in divorce/bankruptcy proceedings? The carer may wish to protect his or her own position as well as that of the elderly relative, by using a protective mechanism, for example, placing the funds in trust.

4. What are the implications for the carer if she has to repay this loan, for example if the relative eventually needs residential or nursing care and the loan is treated as a capital resource of the relative?

GIFTS

It is important that a carer, as the recipient of a gift understands and is advised on the implications of being the donee of a gift.

In connection with gifts of property, the Law Society has become very concerned with this and has produced its own Guidelines - "Law Society Guidelines for Solicitors on Gifts of Property relating to the Elderly Client". This sets out to explain:-

Who is the client
The client's understanding
The client's objectives and implications of making a gift
The client's capacity

For Inheritance Tax purposes, the donee of a gift is primarily liable for the tax if it is a potentially exempt transfer (s.199 Inheritance Tax Act 1984) but can claim first bite of the "nil-rate band".

If loans are released by way of gift, the Capital Taxes Office will only recognize such a release if it is under seal OR for the borrower to physically repay the donor and the donor to give a separate cheque to the borrower.

Advice must be given on the Deprivation of Capital Rules under the Community Care Act 1990 and, in particular, a Local Authority's power to treat someone as having notional income and/or capital. Furthermore, the Local Authority may be able to recover the cost of care from the person to whom assets were transferred (s.21 Health and Social Services and Social Security Adjudications Act 1983).

Buying, Owning, Living in Property Together

The Adviser must be prepared to advise on all aspects of the law, including property law, Community Care, taxation and trust law. Problems inevitably arise because of the lack of written documentation dealing with or recording agreement between family members. It is usually taken for granted that, where persons at arms length enter into transactions, they seek advice but this seems to be much less frequent in the case of families who rely upon their moral obligations and trust, only sadly, to find these may be broken or overridden.

Property Law

The fundamentals of ownership and occupation must be addressed and in particular:-

the nature of the ownership - is the property to be owned as joint tenants or tenants in common? It is vital to establish this at the earliest stage. Who and how are payments for extensions, alterations, outgoings, improvements and repairs to be made? Are planning permissions to be sought and are there covenants on the property which restrict in any way the proposals for a granny annexe, extension or conversion? Issues of ownership should be recorded in writing and this can be done by a formal Declaration of Trust, to record either an equitable or legal interest in property, which may be acquired by a contribution to the purchase of a property, to an extension and/or to improvements (see Precedents for the Conveyancer Sweet & Maxwell Issue 151, March 1996, pages 8180 to 8182 and 8183-8185).

It may also be sensible to record general terms, for example if occupation is only by licence, the payment provisions for outgoings and who owns which of the contents. Whilst it might be "over the top" to suggest that a form of "Living Together Agreement" could be adopted, there are many points that arise in common.

Particular attention must be given to the Trusts of Land and Appointment of Trustees Act 1996 and in particular the provisions of sections 12 and 13. The Declaration of 'Trust should deal with the rights (or exclusion of rights) under this Act.

It is important to remember that the exemption from assessment of the property for Community Care is, to a certain extent, limited. The capital value of the applicant's home, or share in the home, is disregarded only if it remains occupied by: (1) a spouse or partner of any age or (2) a relative over 60 or (3) a relative under 60 who is incapacitated. Local Authorities have discretion to disregard the value of the asset in exceptional circumstances. A Carer living in a property with an elderly relative may not qualify under any of these categories and, therefore, if it is the intention that the carer should have the benefit of continuing to live in the property or to utilize the proceeds, consideration must be given to placing the property in trust, for example giving both the elderly relative and the carer a life interest. One of the disregards for assessment purposes, as set out in Schedule 10 of the Income Support General Regulations 1987, as amended by the National Assistance Regulations 1992, is the capital value of a life interest trust.

Provision for Carers on Death and Potential Claims under the Inheritance (Provisions for Family and Dependants) Act 1975

Caring and the right to inheritance are not linked in any legally defined way and the dominant English tradition is one of testamentary freedom.

The Inheritance (Provision for Family and Dependents) Act 1975 does not alter the principle that individuals may give their property during their lifetime or on death to whomsoever they choose. It does, however, provide an opportunity for anyone aggrieved by the terms of a will to apply for a benefit from the estate. Applications for provision from the estate can be made by certain classes of individuals being relatives or indeed anyone dependent on the deceased immediately prior to death (s 1(1)). Carers who feel that they have not been reasonably provided for under the terms of a Will or intestacy may bring a claim, which must be brought within 6 months of the grant of representation (judicial discretion to extend this) (s.4).

The only ground for a claim is that "the disposition of the deceased's estate effected by his will or the law relating to intestacy, or a combination of his will and that law, is not such as to make reasonable financial provision for the applicant". Section 1(2) sets out two standards for judging "reasonable financial provision". The" surviving spouse" standard considers what is reasonable in all the circumstances and it is not limited to provision required for maintenance whereas the "ordinary standard", which applies to all other applicants, takes account only of what the applicant needs for his maintenance.

There is no age restriction but the Courts have shown a reluctance to award financial provision to adult able-bodied children - Re: Jennings Deceased [1994] Ch. 286. The Court of Appeal indicated, however, that in the case of an adult son, capable of earning his own living, some special circumstances, typically a moral obligation of the deceased towards him, had to be established before the Court would determine in his favour. The case of Re: Abram deceased, 1996 2 FLR 379, found a moral obligation in the particular circumstances of the case.

An application can be made by a person who is being maintained wholly or in part by the deceased immediately before his death.

Maintenance within s 1(3) provides that "the deceased otherwise than for full consideration, was making a substantial contribution in money or money's worth towards the reasonable needs of that person". The Court must have regard to the extent to which, and the basis upon which, the deceased assumed responsibility for the maintenance of the applicant and to the length of time during which the deceased discharged that responsibility. The relationship must also have been continuing at death. Circumstances may arise where, immediately before the death, the patient is moved to a hospital or nursing home and perhaps the "carer" will leave or return to their own home. Can it then be said that person was being "maintained wholly or partly immediately before death"?

Carers may need to be careful to avoid the possibility that the care provided will be seen as consideration for being maintained thereby frustrating a claim

Even if the case is successful, the award can only be for such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his or her maintenance. This is for daily living and, in assessing this, the Courts will review all the circumstances, including the applicant's lifestyle.

It may be very difficult to succeed in these proceedings and therefore precautions should be taken to ensure that a Carer is protected from the possibility that she may not benefit either on intestacy of by Will. She should ensure that, where appropriate, her interest in property is recorded by way of Declaration of Trust or protected by joint ownership.

Consideration could be given to entering into a care bargain or contract imposing obligations upon the elderly person as to the disposal of his or her estate inter vivos or by will (Williams on Wills Chapter 2 ps 11-17). Butterworths' 7th Edition has a helpful commentary on Contracts relating to Wills.

Although a Will is, in principle, revocable, it is possible for a testator to bind himself as to the assets of his estate so that the personal representatives must give effect to such an agreement. However, for such an agreement to succeed in enforceability there must be:-

* an intention to create a binding agreement in law - not just a statement or representation

* Certainty as to the subject matter and extent of the agreement

In the case of Schaefer v. Schuhmann 1972 I AER 621 at 627, this involved a promise to reward services by a gift under a will so that this took precedence over a claim against the estate by other beneficiaries. The testator had agreed for valuable consideration under a bona fide contract to confer a benefit by will. It was held that a binding contract had been created by the execution of a codicil.

Other Action

Prior to death, if the elderly relative no longer has testamentary capacity, it should be considered as to whether it is appropriate for either the carer or appropriate persons to apply for a Statutory Will/Codicil to be made under the Mental Health Act 1983, sections 95 and 96. Many Wills are not updated to reflect changing circumstances and this can leave the relative who is caring substantially "out of pocket". There is, of course, no guarantee that the Court will allow such provision to be made. Nonetheless, the Court has regard to the moral obligations of the "testator" in these situations.

Amanda King-Jones, Thomas Eggar Verral Bowled