Business Clinic: Care home fees row raises partnership questions

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s experts can help. Here, Mike Westbrook, partner and Jack Rogers, solicitor with Thrings offer advice on a tricky farming family situation.

Q My mother is 91 and a partner in the farm business, with full mental capacity but quite frail. She has always lived very frugally, never taking money out of the business, with profits divided between her son (my brother) and daughter-in-law. 

She is now in a care home, with low personal assets due to fees. The farm was purchased in 1993.

Mother has made a will leaving her share to her son, and passed ownership of her bungalow to her son and daughter-in-law in around 2000. 

When she went into the care home I said that my brother was responsible for fees if mother’s money ran out.  I have never received any money from father’s estate or from my mother.

Last autumn my brother and sister-in-law decided to move mother to a much smaller room in another home where the council would pay fees. I said they should consult her, as she was very upset about the move.

They told me I would be responsible for the fees if I didn’t agree, as she would have no assets after six months in the current home. 

Later my brother said she would stay in the present home for 12 months, when her share in business would be gone, then her fees would be up to me. 

See also: Hedges and ditches – who owns what?

A year ago mother’s accountant told me mother was a very wealthy woman but now he says that as there is no partnership agreement she actually has no wealth.

My mother is adamant that my brother and sister-in-law are responsible for her fees. 

She has not been shown the accounts for 10 years, but I understand should changes have been made that benefit other partners, she should have been informed. 

I am not in a financial position to pay her fees. Suggestions appreciated.

A There seem to be two key issues here. Firstly, the transfer of your mother’s interest in the partnership over time and whether your mother was aware of this. Secondly, the query regarding care home fees.

Your query indicates there is no formal partnership agreement in place. In the absence of any formal partnership agreement, the farming partnership will be governed by the Partnership Act 1890.

Partnership asset

First, it would need to be determined whether your mother’s share of the farm is held as a partnership asset. Under the 1890 Act, partnership property includes “property originally brought into the partnership stock or acquired…for the purposes and in the course of the partnership business”.

When no formal partnership agreement is in place, it can be difficult to ascertain exactly what is and what is not a partnership asset.

It may be possible to draw inferences from the partnership accounts and from any other written evidence, and this would need to be considered further.

We will assume it is clear that it is held as a partnership asset.

It seems there may have been transfers of your mother’s share in the partnership to the other partners over time. It is important to establish whether your mother was fully aware of this.

Day-to-day management decisions of the partnership can generally be made by a majority vote of the partners.

However, significant changes, particularly those involving changes to the rights of the partners (to capital, for example), must be made with the consent of all partners.

In addition, any transfers of her capital interest in the partnership would be gifts which, to be effective, would need her agreement and full knowledge.

As there has been a significant change in the capital assets of the partnership, your mother should have been consulted in these decisions and agreed to them. If that was not the case, it may be that those transfers were not validly made.

With regards to your mother’s care home fees, we assume from your enquiry that your mother has been assessed and that her financial contribution towards her care has been calculated by the local authority and she has qualified for funding by it.

Care home fees responsibility

The responsibility for the payment of care home fees is governed by the Care Act 2014. If your mother has capacity she must be consulted about where she would want to live and the local authority must accommodate this where possible.

If your mother has stipulated that she wishes to live in a care home and the costs are in excess of the amount the local authority is prepared to pay (under her assessment), then any additional cost or ‘top-up’ payments must be met by your mother or a third party who is willing and able to meet these costs.  

You therefore might have been asked to pay for the top-up fees if your mother does not have the means to pay for the care home fees herself.

However, she is insisting that your brother and sister-in-law are responsible for her care home costs and your mother should address this issue with your brother and sister-in-law. 

There is a potential further issue here in that if your mother has made recent transfers of capital (which would be gifts) resulting in her not having sufficient assets to meet her care costs, then the local authority can ‘look through’ these gifts when assessing her assets for care fees funding.

If you mother does have mental capacity she might want to consider making a lasting power of attorney relating to property and financial affairs and for her health and welfare.

This would mean decisions about her finances and her care can be made by the attorneys on her behalf. This is a helpful and protective measure to take to safeguard any further conflicts you might face with you brother and sister-in-law if you mother did lose capacity.