Long Term Care

Inheritance Tax is bad enough but the cost of entering into long term residential care in old age can be even worse, with some people paying 100% of everything they own, over and above a lower capital limit of £13,500, on care fees.

One solution is to give your home away some considerable time before going into long term care. The problem with this is that you will no longer have the right to live there and complications could arise if your children became bankrupt, divorced or die before you – leaving someone else with an interest in your home.  This is an unattractive option for most people. 

Be careful that you do not fall foul of the ‘deliberate deprivation of capital rules'.  These rules state that if you give your home away and enter care you may still have to pay for your care home fees.  This is because the local authority can refuse to recognise the gift and will still treat the property as belonging to you for assessment purposes.

What can you do to protect the family home from care costs?

One solution is for a couple to make wills that are designed to protect at least half the value of the home from care home capital assessment. Let us say we have an older couple with some adult children they.  Their wills could work as follows: 

• assuming they are both joint owners of the home, they can sever their joint ownership and each can then have their own respective half shares (this is known as a ‘tenancy in common’)
• they then make 'mirror wills' giving rights of occupation in the share of the home of the first to die to the surviving spouse – everything else in the estate can still be left to the survivor if they want
• the half share in the home that belongs to the first to die is then held in trust for the children
• if the survivor then enters care. only half the value of the house is taken into account for the capital means test; the other half is held in trust for the children

Are there any drawbacks to this plan?

No. The house can still be sold by both of you until first death as the trust does not come into effect until the first of you dies. When the trust comes into effect, the survivor can still move home as the terms of the Trust are very flexible indeed. The plan does not affect the terms of any outstanding mortgage and the survivor can still sell and down trade homes with half of any equity passing to the children outright. This can further reduce any potential funds to pay for care home fees.

Wright Hassall’s Will Package includes Lasting Powers of Attorney in addition to the wills described above. These are recommended if you want to ensure that someone you trust acts on your behalf should you become mentally incapacitated in future years.

Currently we are offering the care home planning Will Package – to include both wills and both Lasting Powers of Attorney plus Notice of Severance of the joint tenancy – at a fixed fee - please call us for details.