Protecting Your Home from Long Term Care Fees Assesment

Property Protection Trust Will

The Property Protection Trust Will is particularly suitable for married, unmarried and same sex couples (who own their home) in the following circumstances: 

• Mature couples concerned about losing their home to pay for care fees  
• Couples where one or both partners have children from previous relationships
• Couples who individually wish to ensure the inheritance of their children (or others) without forcing their partner to sell their home
• Couples where there is a significant age difference between partners

The Threat Posed by Long Term Care Fees

In the UK nearly a million people were living in nursing, residential or long term hospital care in 2005. The cost of caring for the growing army of pensioners is predicted to soar to nearly £30 billion by the year 2030. Women have a one-in-four chance of needing long term care, and men a one-in-six chance.

Whilst the government will pay those costs relating to nursing or medical care (the time spent by a nurse with the patient etc), the individual is liable for the costs of residential and personal care, often called social care, which is means-tested.

If you have assets up to £22,250 you have to pay a contribution to social care costs. If you have assets over £22,250, you have to pay all social care costs! These costs are likely to amount to £20,000 - £30,000 per year or more. However, the family home will be disregarded as part of that person's assets if it is occupied by a partner or other qualifying person, which means that the local authority will not include the value of the house when assessing the person's ability to pay care fees.

If a person has to go into care, then under the Health and Social Services and Social Security Adjudications Act 1983, local authorities can charge residential care fees to (ie run up a bill against) that person's home. After that person's death, the local authority would normally expect the person's representatives to sell the property to pay the care costs. Furthermore, as a last resort a local authority can sell the deceased's property - if it obtains a court order - in order to meet the charge (or bill).  

Your home could be under real threat if you have to go into care and your partner has already passed away. Liberal Democrat MP Paul Burstow estimated that 70,000 homes are sold each year (200 per day) to pay for care fees, meaning that the relatives of those people will not now be able to inherit the family home or the proceeds from the sale of the property.

In effect, if one of you dies and the surviving partner has to go into care, this can amount to a 100% tax on your estate above £22,250. Therefore, to do nothing could be the equivalent of bequeathing your home to the local authority rather than to your family.

The Solution?

The Property Protection Trust Will has been specially designed to protect part or your entire home against care fees in certain circumstances.

Bicester Wills can draw up a Property Protection Trust Will for you, and will also register a "Deed of Severance" for you at HM Land Registry if applicable.  

How a Property Protection Trust Will works 

Ownership of the property must first be changed from "joint tenants" to "tenants in common" by making a Deed of Severance, resulting in each partner then owning, for example, 50% of the house. If a property is owned as "joint tenants", both partners each own the whole of the property and on death the surviving partner will inherit the whole house, irrespective of what is stated in the deceased's Will. However, as "tenants in common" each partner can leave their own share of the property to whom they like in a Will. 

On the death of the first partner, the deceased partner's share of the house is left to certain beneficiaries (eg children) in a Trust, at the same time specifically allowing the surviving partner to continue living in the house rent free for the rest of their life. 

If the surviving partner then has to go into care, the deceased partner's share of the house cannot be assessed for care fees as that share does not belong to the surviving partner (it belongs to a Trust). The most that a local authority could therefore claim to pay for care fees is the surviving spouse's half share of the house. However, a market valuation may result in a "nil valuation", meaning that the local authority would disregard the whole property when assessing your liability for care fees. 

The beneficiaries of the first partner to die will inherit that share on the death of the second partner (and if the second partner names the same beneficiaries in their Will, then they will inherit both shares - ie the whole - of the property). 

Other Benefits of a Property Protection Trust Will

An added benefit of a Property Protection Trust Will is its inherent flexibility regarding the property. For example, the surviving spouse can move house, downsize etc and the terms of the Trust will still apply to the new house. The house could even be sold and the interest from the deceased partner's capital share could provide an income to the surviving partner. 

A Property Protection Trust Will can also be beneficial for young couples, couples with a significant age difference and couples who have children from a previous relationship. Should one partner (eg the older) die, there is a possibility that the surviving partner may remarry or co-habit and have more children. If so, how can the original partner ensure that his/her children will inherit his/her share of the property? The answer to this delicate matter is to make a Property Protection Trust Will, leaving his/her share of the house to his/her children in a Trust. They will then be certain to inherit their parent's legacy on the death of the second partner.

Drawbacks of a Property Protection Trust Will

The only scenario in which a Property Protection Trust Will does not protect the house from being used to pay for care fees is if both partners have to go into care, as obviously the Will only comes into effect on death.

Further professional/legal advice may be needed to set up the Discretionary Trust after the first death, at a modest extra cost.

Why can't we simply give our house to our children / family?

It is illegal to deliberately transfer your own property to your family or trusts in your lifetime if the prime motive is to avoid paying long term care fees. For example, simply giving your house to your children may be interpreted as "deliberate deprivation of assets". Local authorities can take the property back from the recipients if they can prove that the objective was to avoid care fees. However, it is not illegal to leave your share of your property to a Trust in your Will. (Please note - you should think carefully before giving the whole of your property away to children or family members in your lifetime, because you could become homeless should your children get into debt! Also, you may have to pay income tax on the "benefit in kind").

Contact Bicester Wills to discuss how this important planning tool can be incorporated into your Will. 

www.bicesterwills.co.uk

gail@bicesterwills.co.uk

01869 244329

07817 685043