SAIF Golden Charter

Are funeral plans assets?

Golden Charter’s Gordon Swan outlines the current position on local authorities making financial assessments for care home fees and other benefits

We have consistently held the view that a pre-paid funeral plan is a service rather than an investment or asset.

While benefits legislation indicates that cash received counts as capital, that would be to ignore the fact that, in the case of funeral plans, the cash has been committed for the provision of a future service. As such, the asset is ‘matched’ by a liability in respect of the future funeral.

We would reiterate, however, that our professional advisers have reviewed the legislation and have unearthed nothing which specifically authorises or prohibits funeral plans from being treated as assets in this way. The position will therefore remain unclear in strict legal terms until a test case ruling.

Over the years, some local authorities have interpreted the legislation in different ways. We previously communicated an example where although Scottish legislation sets an allowance to be disregarded when calculating an individual’s estate in relation to care fees, North Ayrshire Council had expected this disregarded capital to be used to pay for funeral costs.

Given the continuing pressure on local authority budgets, we will likely see more variation between councils’ behaviours. In one recent case Hertfordshire County Council refused to disregard a funeral plan, arguing that although the plan is pre-paid it can, at any time, be cancelled and payment returned to the client.

This remains a rare interpretation; our lawyers have referenced published commentary suggesting that, customarily, local authorities would almost invariably not take funeral plans into account.

However, Hertfordshire’s recent behaviour is supported by some posts on relevant forums, suggesting that certain local authorities are trying to treat funeral plans as assets. That appears to fit with a pattern of hardening attitudes; local authorities taking a more aggressive investigation line as care budgets continue to grow more stretched.

Therefore, while the vast majority of local authorities still agree with our view, there can be no guarantee a challenge will not be made or ultimately succeed. Golden Charter’s view remains that purchasing a funeral plan would not be treated as a deprivation of capital comparable to some transfers into investment or discretionary trusts, but we can expect contention around whether a funeral plan is an asset for assessment purposes until there is a definitive ruling.

We will, of course, monitor the situation across the UK and keep Independents informed of any developments.

Should you become aware of any local decisions or variations in treatment, please contact Golden Charter compliance.