According to insidegovernment.co.uk more than ten million people in the United Kingdom are currently aged over 65, and it is estimated that by 2035, the number of people aged 80 or older is projected to reach 3.6 million.
There are an increasing number of older adults with conditions such as dementia that require them to enter a care home in later life.
When someone has the need to enter a Care Home, the Local Authority immediately issues the necessary paperwork to be completed for “means testing”. Capital limits are used to assess a person's ability to pay for care. If at the time you are admitted to care and your Estate is worth less than £14,250 then the Local Authority will pay for all of your care.
However if your Estate is valued over £23,250 then you must fund the cost of your own care even if this involves selling your family home. With the average care home costing between £800 and £1000 a week it doesn't take long to eat up your life's savings.
Nowadays people are becoming increasingly aware of the need to put in place strategies to protect their homes and other assets for future generations and against the potential sale of their home to pay for care fees.
Assets placed in Trust, including your family home could be protected from being sold to pay for care home fees. However it is important to choose the right strategy for you. Not everyone who is looking into this subject considers whether it is best to put into place death planning or lifetime planning.
Death Planning versus Lifetime Planning
Death planning addresses protecting the home should the survivor go into care because each persons share of the home is only placed into trust in the event of their death , however some couples have concerns about going into care at the same time, if this occurs the house is still at risk because there is nothing in trust yet (no one has died) and no one is living there.
If you are concerned about this scenario you may want to consider lifetime planning for care fees which involves placing the property into a probate trust in your lifetime.
How Does Death Planning for Care Fees Work?
1) Sever the tenancy of the property
If the current ownership of the property is on a ‘Joint Tenants’ basis, you need to equalise your estate, amending your main residence to ‘Tenants in Common’. This can be achieved by a Deed of Severance.
For most people their main asset is their family home. Most people own their property ‘jointly’, meaning they each own 100% of the property. Severing the tenancy of the property will mean that a couple will own 50% each of the property as ‘tenants in common’.
2) Set up a Will and a Family Trust
By making a Will that directs assets into a family trust, on first death the deceased person’s share of the property will move into their Family Trust and the surviving partner can continue to live in the home.
In the event that the surviving person is required to go into care they only have interest in half of the house as the other half is in their deceased partner’s Trust. It is highly unlikely an outside buyer would be willing to buy into the property and so in this instance the value of the home is effectively nil and cannot be assessed to pay for care.
How Does Lifetime Planning for Care Fees Work?
For couples Lifetime Planning for Care Fees involves conveying the main residence split between two probate trusts in your lifetime. Once this has been carried out the trusts own the shares in the property, you retain the right to reside at the property and you can still sell or refinance the property.
If this was the case it would be best to have any future conveyance done by the professional who set up the trust to ensure that the property does not lose the protection the trust affords it.
A single or widowed person looking to protect against the sale of their home for care fees should only consider Lifetime planning. This is because the property will be solely owned and the tenancy cannot be severed. In this case the whole property is conveyed into a single probate trust.
The end result is that the trust owns the property and not you, therefore preventing it from potentially being sold to pay for care home fees.
Summary
With any planning of this nature time is of the essence, as disposal of assets is classed as deprivation, it is important to do this sooner rather than later.
The critical timescale for this is six months, in the first six months prior to needing to go into a care home, moving assets away can lead to being guilty of deliberate deprivation of capital.
If assets have been put into trust for longer than six months it is up to the Local Authority to prove deprivation. The ideal timescale is generally accepted to be five years because this is currently how far case law goes back in bankruptcy and insolvency cases.
Related Links
Deed of Severance
What is Deliberate Deprivation?
insidegovernment.co.uk
