The
Threat Posed by Long Term Care Fees
In
the UK nearly a million people
were living in
nursing, residential
or long term hospital
care
in 2005.
The cost of caring for the growing
army of pensioners is predicted to soar to nearly £30
billion by the year 2030. Women have a one-in-four chance
of needing long term care, and men a one-in-six chance.
Whilst the
government will pay those costs relating to
nursing
or medical care (the time spent by a nurse with the patient
etc), the individual is liable for the
costs of residential and
personal care,
often called social care, which is means-tested.
(A BBC Panorama programme in March 2006 exposed evidence
of the NHS charging some individuals for the costs of long
term care, even when those patients' primary needs were
nursing care and thus such care should have been provided
free by the NHS. The programme proved that the NHS
misinformed patients or their families, who were then
forced to sell their homes to pay for these care fees).
If
you have assets worth between £12,750 and £21,000, you
have to pay a contribution to
social care costs. If you have
assets over £21,000, you have to pay all
social care costs! These
costs are
likely to amount to £20,000 - £30,000 per year or more.
However, the
family home will be disregarded as part of that person's assets
if it is occupied by a partner or other
qualifying person, which means that the local authority
will not include the value of the house when assessing the
person's ability to pay care fees.
If
a person has to go into care, then under the
Health
and Social Services and Social Security Adjudications Act 1983,
local
authorities can charge residential care fees to (ie run up a
bill against) that person's home. After that person's
death, the local authority would normally expect the person's
representatives to sell the property to pay the care costs.
Furthermore, as a last resort a local authority can sell the deceased's
property - if it obtains a court order - in order to meet
the charge (or bill).
Your home could be under real threat if
you have to go into care and your partner has already
passed away. Liberal Democrat MP Paul Burstow estimated
that 70,000 homes are sold each year
(200 per day) to pay for care fees, meaning that the
relatives of those people will not now be able to inherit the
family home or the proceeds from the sale of the
property.
In
effect, if one of you dies and the surviving partner has
to go into care, this can amount to a 100% tax on your
estate above £21,000.
Therefore, to do nothing could be the equivalent of
bequeathing your home to the local authority rather than
to your family.
Please
note - Prime Wills would like to emphasise that you
should always consider your own needs first and use your
assets in the way you think is most appropriate for your
circumstances. Given the scenario of your partner having
already died and you needing care, you should consider all
your options - eg you may prefer to receive care at home, or
you may think that the most appropriate option is to pay for
the best possible care home that you can afford, even though
you may have to sell your house to do so. If this is your
philosophy, a Property Protection Trust Will is probably not
appropriate for you, even though such a Will can be extremely
flexible.
The
Solution?
The
Property Protection Trust Will has been specially
designed to protect
part or all of your home against
care fees
in certain circumstances.
Prime
Wills can draw up a Property
Protection Trust Will for you, and will also register a
"Deed of Severance" for you at HM Land Registry if
applicable.
How a Property
Protection Trust Will works
Ownership
of the property must first be changed from "joint
tenants" to "tenants in common" by making a Deed
of Severance (England and Wales) or an Evacuation of Special
Destination (Scotland), resulting in each partner then
owning, for example, 50%
of the house. If a property is owned as "joint
tenants", both partners each own the whole of the
property and on death the surviving partner will inherit
the whole house, irrespective of what is stated in the
deceased's Will. However, as "tenants in
common" each partner can leave their own share of the
property to whom they like in a Will.
On
the death of the first partner, the deceased partner's
share of the house is left to certain beneficiaries (eg
children) in a Trust, at the same time specifically
allowing the surviving partner to continue living in the
house rent free for the rest of their life.
If
the surviving partner then has to go into care, the
deceased partner's share of the house cannot be assessed
for care fees as that share does not belong to the
surviving partner (it belongs to a Trust). The most that a
local authority could therefore claim to pay for care fees
is the surviving spouse's half share of the house.
However, a
market valuation may result in a "nil valuation",
meaning that the local authority would disregard the whole
property when assessing your liability for care fees.
The
beneficiaries of the first partner to die will inherit that
share on the death of the second partner (and if the
second partner names the same beneficiaries in their Will,
then they will inherit both shares - ie the whole - of the
property).
Other Benefits of a Property
Protection Trust Will
An added
benefit of a Property Protection Trust Will is its
inherent flexibility regarding the property. For example,
the surviving spouse can move house, downsize etc and the
terms of the Trust will still apply to the new house. The
house could even be sold and the interest from the
deceased partner's capital share could provide an income
to the surviving partner.
A
Property Protection Trust Will can also be beneficial for young
couples, couples with a significant age difference and
couples who have children from a previous
relationship. Should one partner (eg the older) die, there
is a possibility that the surviving partner may remarry or
co-habit and have more children. If so, how can the
original partner ensure that his/her children will inherit
his/her share of the property?
The
answer to this delicate matter is to make a Property
Protection Trust Will, leaving his/her share of the house
to his/her children in a Trust. They will then be certain
to inherit their parent's legacy on the death of the
second partner.
Drawbacks of a Property
Protection Trust Will
The only
scenario in which a Property Protection Trust Will does not
protect the house from being used to pay for care fees is if both partners have to go into care, as
obviously the Will only comes into effect on death.
Further professional/legal advice may be needed to set up
the Discretionary Trust after the first death, at a modest
extra cost.
Why can't we simply give our
house to our children / family?
It
is illegal to deliberately transfer your own
property to your family or trusts in your lifetime if the
prime motive is to avoid paying long term care fees. For
example, simply giving your house to your children may be
interpreted as "deliberate deprivation of assets".
Local authorities can take the property back from the
recipients if they can prove that the objective was to
avoid care fees. However, it is not illegal to leave your
share of your property to a Trust in your Will. (Please
note - you
should think carefully before giving the whole of
your
property away to children or family members in your
lifetime, because you could become homeless should your
children get into debt! Also, you may have to pay income
tax on the "benefit in kind").
Single
/ divorced / widowed people
A Property Protection Trust Will is only available for
couples. If you are single or divorced or widowed and
losing your home to pay for care fees is a concern to you,
there are other options available:
-
Prime
Wills can put you in touch with an
Independent Financial Adviser who will be
able to
give you details of "Immediate Needs Care Plans"
(for people in immediate need of care or already in
a care home) or "Pre-Funded Care
Plans". Both
plans can be
quite expensive, for example an 84-year old
woman already in care paid £50,000 for an Immediate
Needs Care Plan that paid her £14,000 per year
(plus 5% inflation) for as long as she lived (and
she invested the rest of the capital from selling
her home, leaving this to her son in her Will rather
than losing the whole house).
-
If you
have a relative (eg son or daughter) living in your
house, then provided that they have done so for some
time and can prove a contribution to the outgoings,
you may be able to avoid care fees due to
ownership of the house being classed as "joint
beneficial ownership". If this was so, the local
authority may disregard the value of the house when
assessing your liability for care fees. You should
consult a solicitor about this.
