How do I protect my home and assets from care costs?
- If you fail to act now, your home may have to be sold to pay for your long-term care costs.
- Your savings and investments could be wiped out.
- Any income would be assessed and used towards the cost of your care.
- Your children and grandchildren could lose their entire inheritance.
So How Do I Protect My Home From Care Costs?
Most of us worked very hard over the years to buy our own homes and build up our savings for our retirement and would like to leave a ‘little something’ for our children and grandchildren after we are gone. Unfortunately, the costs involved in moving into a care home can literally wipe out your entire savings and your home may have to be sold to pay for care fees. This could mean that your loved ones could receive very little or even nothing at all of what you originally intended them to have.
When someone enters care, they are automatically means-tested. And all your assets including your home are taken into account. Only those who have very few assets will escape the cost of care. So, what can be done? Firstly, it is important to safeguard your home and the first step is to look at the way you currently own your own home. Most people own their homes jointly, which means that on the first death, the survivor will then own 100% of the full property value. This is when your home becomes vulnerable to attack from care, simply changing the way you own your home to what is known as ‘Tenants in Common’, combined with the appropriate Trust planning will effectively ensure that your property is fully protected should either of you enter care.
When would I have to pay for care?
If you own more than the upper limit currently £23,250 which includes your property, any cash or savings, and stocks and shares, you will be expected to foot the full cost of your care fees. You will not be able to receive any financial help from your Local Council until your savings or assets have been reduced to the upper limit. If you have less than the upper limit savings or when your savings dropped to this limit, the Local Council will then assess your ability to pay based on both your capital and income. If you have assets below the lower limit currently £14,250 any contribution you may be required to make towards the cost of your care will be based solely on your income and your assets disregarded.
You are most at risk of losing your home to care costs when you enter care, after owning your home jointly with a spouse or unmarried partner or civil partner and they have passed away. The full capital value of your home will have passed to you, and you will be assessed on the property’s full value along with any formerly jointly held assets, such as savings.
How can I Prevent My Home From Being sold?
The simplest way to avoid this happening is to first change the way in which your property is owned. Most people when buying a property with another person have the property set up as Joint Tenancy and whilst this may be the correct way to own a property in certain circumstances. For the vast majority of people, this is not the best way to own a property for either Care Cost issues or Inheritance Tax liabilities.
Severing the Tenancy on the property and changing the ownership to ‘Tenants in Common’, so you now each own 50% of the property, (percentages can vary depending on personal circumstances), and then by setting up mirror wills each bequeathing each other’s share of the property to either a Property Trust or Family Trust can ensure that your home is not lost to Care Costs.
On the first of you to die their share of the property is left to the Trust, whose beneficiaries will be the spouse or partner, children, grandchildren, or other named beneficiaries. Whilst the surviving partner continues to reside in the property, there are no issues, but once the survivor goes into care, this is when the property and assets will be assessed for care costs.
Once again the Council will designate a value to the survivor’s interest in the property. And once again the value will be dependent on the price that could be obtained from a willing buyer. It is highly unlikely that any outsider would be willing to purchase a property when part of it could be legally occupied by any of the beneficiaries named in the deceased person’s Trust. (Usually, his or her children or grandchildren), and so the value of the person’s share entering care will be held as being nil. After all who would buy a half share in a house?