Protecting the value of your home against care costs

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Article

19 November, 2019

Many people work hard to buy their own home, and it is often their main asset which they hope their families will inherit after they die. However it is often the case that, if someone needs care in later life due to illness or frailty, their home must be sold in order to fund this care.

With life expectancy in the UK increasing, so too is the number of people needing care in later life - there are currently over 400,000 people over the age of 65 living in residential care homes in the UK. If a person has sufficient assets to do so, they will be expected to fund their own care. This can mean that families are required to sell the home of their loved one in order to release the funds to enable them to cover the cost of their care.

This problem has arisen because most couples own their home as "Joint Tenants" which means that when they die the house will automatically pass to the surviving partner, regardless of the terms of any Will that they have left. If the surviving partner later needs long-term care, they will own the whole of the house and therefore the whole value of it can be used to fund care fees.

What can be done to prevent this?

Many people think that the solution to this problem is to give away their property to their children, therefore removing it from the equation when local authorities are assessing their assets. This, however, carries with it significant risk, not least the fact that local authorities can rely on "deliberate deprivation of assets" rules to effectively reverse such gifts in any event.

It is possible, however, to safeguard at least 50% of the value of the property through a trust of the house in mirror Wills. If the couple sever the Joint Tenancy of their property so that they own the property as "Tenants in Common", this separates the property into two distinct shares which can be left separately within their Wills, as the shares will not automatically pass to the survivor. The trust in their Wills would allow them to leave the property to their children, whilst giving their surviving partner a right to live in the property during their lifetime, or sell it and downsize if they need to.

If the surviving partner should need long term care in the future, only the 50% share of the house which belongs to him or her can be used to fund the care fees because the other 50% share is held upon trust for their ultimate beneficiaries. This arrangement allows 50% of the value of the property to be protected from being used to pay for care, and the ultimate beneficiaries would receive at least half of the value of the property.

These types of trusts must be written in a Will whilst you are both still alive and in good mental health. If your partner has already died, or if you own the property in your sole name there may be other options available to you to protect your assets. These options will depend on your circumstances and you may find it helpful to discuss them with a solicitor.

For more information contact Elizabeth Whitaker in our Wills, Probate, Tax & Trusts department via email or phone on 01772 220198. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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