Protecting Your Home and Assets from Nursing Care Costs – Many people are concerned about the implications of the Community Care Act 1990 and associated Government Regulations and Guidelines. They are concerned that should they need to become permanently resident in a residential or nursing home, the local authority may use their property to pay for such care, either by seeking for its sale or by placing a charge against the property until it is sold. The regulations as to exactly what each individual may be expected to contribute are complex, this is not intended to be a guide to that, but rather to explain how by writing your wills you may take steps to protect at least half of the value of your property or even all of it from this possibility.
When could this happen? – For many people, with saving over £23,250 this is a real concern. The value of any property is included in assessing the savings of any person needing care, with the following significant exceptions:
For the first 12 weeks care;
- If the spouse or partner (or another dependent person, such as a handicapped or minor child) is still resident in the property
- If neither of the above conditions are met then should you have no other assets or sufficient income to meet the costs of your care, then your local authority may agree to a “deferred charge agreement”, which is in effect an interest free debt secured against your property, which may accumulate over the years. Interest does however become payable should the debt not be paid within 56 days of death.
How can this be avoided? – For most people the property is their largest asset that is often at risk of being spent on the cost of care. Should they attempt to transfer the property to another person (for example a child) they may either:
- Be caught by the “deliberate deprivation” rules, which mean that if the transfer has taken place within 6 months of the donor going into care, the local authority may still treat the asset as the donor’s and even if more than 6 months before the donor going into care, should the local authority still suspect the transfer was made to deliberately avoid paying for their own fees, they may still investigate and take steps to recover their costs.
- Leave themselves vulnerable to circumstances beyond their own control, for examplewhere the donor’s child divorces or even becomes bankrupt.
- You may need to pay rent to your child for now living in their property, and they would pay income tax on such rent.
What can we do?
Solution: Care Fee Will – Where a couple own a property jointly (with or without a mortgage), they may use their Wills to each gift their share in that property to (usually) their own children. To do so, they must first ensure that their property is owned as tenancy-in-common, which gives them each a share in the property to leave joint ownership normally means that the property will automatically pass to the survivor, which would leave the survivor in the unfortunate position of the sole owner as described above. Therefore, if the property is not already registered as tenants, a severance is necessary. This makes no difference to the situation while both owners are alive. However, it means that each owner can in theirWill leave their share as they wish, but can also ensure the long term security of their surviving spouse or partner in the family home by giving them the right to remain in the property for life. This means that should the surviving spouse or partner then need long term residential care, only half the property is owned by that spouse or partner, the half already given away is protected from the local authority.
Advantages – As long as both spouses/partners are alive, there is no change as nothing is given away at this stage. They are free to sell the property at any time, retaining complete control over it.
Should one spouse/partner need care at this stage, as long as the other spouse/partner remains living in the property, the local authority may not take its value into consideration in assessing the savings of the person needing care. The deceased’s share in the property is given to (usually) the children, so does not pass to the survivor, HOWEVER;
On the death of the first spouse/partner, the survivor retains the right to remain in the property for their lifetime, and also has the right to sell the property and buy another which may also be protected in this way, so the survivor is not vulnerable to the intended beneficiaries wanting their share immediately.
The survivor will also be one of the Trustees of the trust created, with another person trusted by both parties, giving them some control over their future. As the gift has been made by the deceased, it is not a gift from the owner needing care, so is not covered by the deliberate deprivation rules outlined above. And most importantly, should the survivor need long term care, only their own half share in the property may be taken into consideration by the local authority in assessing the value of their savings, protecting at least half the property from this risk.