You Could Lose Your Home To Pay For Care Fees – Unless You Take Action Now

There is more than one way in which a person can protect a property against the threat of enforced sale to pay for care fees, such as giving your home away as a gift or taking out a special insurance policy. This article is designed to look at ways in which you can protect your single greatest asset from the Government taking it away from you to pay for care fees.

Property Ownership

Essential to the working of Property Trust Wills, is the way in which you own your property. Most couples own their home as joint tenants. This means that when one of them dies, the property will automatically pass to the survivor – regardless of any intention under a Will.

A property owned by a couple does not have to be held in a joint tenancy, it can be held as tenants-in-common. This involves each partner owning half of the property and this can be left to others (such as children) when one of them dies, by the use of Wills and Trusts.

Owning property as tenants-in-common has the important advantage in that the deceased spouse/partner can leave their share of the home in trust for beneficiaries of their choice whilst granting the surviving spouse/partner a life interest in the home for the surviving spouse/partner’s lifetime.

Should the surviving spouse require long term care, the local authorities could only take into account their share in the home, and not the whole.

Example – Mr and Mrs Brown own a house at 25 Maple Crescent and it is held as joint tenants. They decided to have a special Will drawn up and they set up two property trusts to protect each half of the home in the even of one of them needing Long Term Care.

Firstly, the ownership of the property would need to be altered from joint tenants, to tenants-in-common.

A Will would need to be written to allow Mr and Mrs Brown to create a lifetime interest in the 50% shares of 25 Maple Street for the surviving partner, with the total eventual sale proceeds passing to the children. The surviving partner would have the right to stay in the property or move to another property and they would be able to stay in such property for as long as they lived. On the death of the second partner, the proceeds of the property sale would pass to the children.

Let us assume that Mr and Mrs Browns house at 25 Maple Street is worth about 200,000 and that Mr Brown is the first to pass away. Mrs Brown decides that she wants to move to a smaller dwelling valued at say 100,000. She could sell 25 Maple Street and use Mr Brown’s trust – valued at 100,000 to purchase the new house. Mrs Brown could then spend the remaining 100,000 as she wishes and this could even provide her with an income during her lifetime.

Another way of structuring this case, would be for Mrs Brown to own half of the new smaller property. She could then do what she wanted with her 50,000 and the remaining 50,000 could be invested by the Trustees of Mr Brown’s trust to generate an income for Mrs Brown whilst she is alive. When Mrs Brown dies, Mr Brown’s half share of the property and the capital from the investment would go to the remaining children.

In the event that Mrs Brown needs to go into a care home, then only Mrs Brown’s assets will be taken into consideration. Mr Brown’s half share in the home or the value of the investments made by the trust would be protected for the children. Furthermore, although half of the home is owned by Mrs Brown, it is not feasible that a forced sale of half a property would be possible so the whole property is protected as a consequence.

Is is possible for the remaining survivor to move home or will they have to remain in the same property?

Mrs Brown can move and this is one important flexible option to keep in mind. A home can often become too large for a single persona and it is important to make sure that flexibility is maintained.

Is it possible that the children can force me out of my home?

No. The terms of the trust dictate that they will only inherit when both of you die.

Will a Property Trust and special Will help with estate taxes ?

No. Because your partner has the right to use your half of the home, it is assumed that they still owns the property for the purpose of inheritance or estate taxes.

What if the Government changes the rules – can such an arrangement become invalid?

No – it is quite within the rules for you to leave your share of your home to whoever you want to. Rules may indeed change in the future, in fact it is unlikely that they will stay the same to be honest. Should this happen then, the new rules would only apply to the partner remaining alive and this is the person out of the two of you who is mose likely to need care.

A trust and a Specialist Will is not to be seen as a ‘Loophole’ but it is in fact a simple and common sense approach to estate planning. Should the remaining partner require care once the first partner has died, it is just not thinkable to plan to allow them to inherit the wole value of the assets just before a local government inspector is assessing a means tested set of assets.

Why half – why can’t I put the whole of the house in trust?

If one spouse/partner owns the property in their sole name then yes, you could put the house in trust for the children and allow the surviving spouse/partner to live in it for the rest of their lifetime. If the surviving spouse/partner requires care after your death then the whole of the property is safe.

It is important to set up a trust separate from the formation of the Will. Otherwise, if the partner in who has set up the Will Trust dies first and you need care first, the whole house is at risk since the Will Trust would only be activated by the first death, by which time, care cost fees will have drained your estate. Protecting half of your home is better than losing it all and in any case, it is seen currently as impossible to sell half a home.

What if we do not have children – who could my share be left to?

It is possible to leave your share to any organisation in your trust. Maybe more distant family, some charity or even a combination of both – it really is your choice – but at least it will be you that is making the choice and not a Government taking it for themselves.

Will this protect the home if we both require care?

The answer is yes – as the trust is established on signing and not on death, this will have the effect of protecting half of the home immediately. Given the depth of current thinking (which is unlikely to be changed in the medium term at least), it is so impractical to sell half a home that it is not thought to be feasible by local authorities.

And to conclude – A house is usually the greatest asset that a couple has to pass on to other generations after death. If you are concerned at the thought of selling your home to pay for care fees upsets you, then please seriously setting up a trust and writing a Special Will to ensure that this does not happen to you.

Looking to find the best deal on writing your will, then visit www.regencywills.co.uk to find the best advice on how to stop local governments from stealing your home to pay for care fees and dont let this happen to you.

categories: writing a will,will writing,protecting home against paying care fees