Protecting your home from long term care costs

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Protecting your home from long term care costs

In England and Wales, according to official Government statistics some 69,000 homes are sold each year in England and Wales to fund peoples’ long term care needs. That represents one property every FOUR minutes of everyday. Statistics also show that one in five people will in fact need some form of long term care in their life times. That is 20% of the population. Yet given those odds, how many people actually plan for the possibility? The answer is, very few. Care costs in Essex and Hertfordshire can cost in the vicinity of £700 – £800 per WEEK which is £35,000 – £40,000 per year. So 5 years in care could wipe out someone’s entire estate leaving nothing to be passed on in inheritance. One option many people consider is to give away assets, especially their home, while they are still alive in the hope that if they go into long term care if they own no assets then the local authority will fund their long term care. However, there are rules preventing that. The Deliberate Deprivation rules state that you cannot deliberately deprive yourself of assets in order to avoid paying long term care fees.

The good news is that with timely planning there is a way out.

In the event of long term care the person in care is means-tested. If they own assets and capital (including their home) in excess of £21,500 then they will be expected to fund the full costs themselves.

First the good news. If the spouse of the person who has gone into care is still alive and living in the home the value of the property is disregarded for as long as the spouse continues to live in it.

So what are the options? If both partners are still alive then you must make a Will. If spouse A dies and leaves their property to the survivor and the survivor subsequently goes into care then they will own all of the assets. Thus, if they are in care for long enough, then almost all of it could be taken by the local authority to pay for care fees.

By drafting a Will for both spouses which leaves their respective halves of their properties (and possibly money and other assets too) into a life interest trust on the death of the first spouse, the surviving spouse does not become the owner of the trust assets. Thus if the surviving spouse subsequently goes into care or is already in care, then the assets in the trust are disregarded for the purposes of the means test. They do not belong to the care resident so are protected from the means test. This method protects the assets in the trust, and does not infringe the “deprivation” rules. To make matters better, as a result of a case commonly known as the “Palfrey principle” it may be deemed that the half belonging to the long term care resident could also be excluded from the means test. However, this is not guaranteed.

In this fashion half the house (and maybe other assets as well) and possibly all the house – though this is never a certainty – is protected from having to be sold to pay for long term care fees. How nice to know that at least something can be passed on rather than nothing at all.

Prior Knowledge are well qualified in advising on and writing these kinds of Wills.

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