Life Interest Will Trusts - a safeguard against care home fees?
Michelle Collins, Partner and head of our Private Client department, explains why a Life Interest Will Trust could help safeguard against care home fees.
The advancement of medicine, coupled with the fact that our population is living longer than ever, makes the subject of care home fees and later life planning more crucial than ever.
An increasing number of our clients are worrying about the impact of care home fees and protecting their assets. There are three questions we are most commonly asked - “What happens if I go into care - can my husband/wife still remain living in our home?; “If I go into care will my children ultimately end up losing their inheritance?”; “Will I lose all of my hard-earned money to pay for my care fees?”
Under current legislation, if you have over £23,250 worth of capital you will ultimately pay for your care – be that for care in your own home or fees for a care home. If you have between £14,250 - £23,250 worth of capital then the local authority will fund some of your care and you would contribute the rest. If you have less than £14,250, the local authority will fund your residential care (up to a certain limit per week). The local authority will also look at any income from pensions or private investments when assessing the level of financial assistance they will provide.
Rest assured that, using current rules, if a husband/wife went into a residential care home first and the ‘remaining’ husband/wife was still living in the matrimonial home, the value of the house would be disregarded during the local authority’s means testing.
It is important to be aware of the ‘deprivation of asset’ rules and what the consequences can be. In summary, if the local authority concludes you have deliberately deprived yourself of an asset with a primary reason of trying to reduce or avoid paying for care home fees - for example, in later life, giving a property to children or putting your property into a trust - then it is likely they will continue to include the value of the gifted asset within any means assessment.
A ‘Life Interest Trust’ incorporated within your Will can help you protect your children’s inheritance. This type of Will can safeguard the share of the house belonging to the first to die (usually 50%) by putting it into Trust. This Trust comes into effect upon the death of the person making the Will. Whilst the Trust gives the surviving spouse the right to live in the property rent free - and to move house if necessary – critically it also prevents the 50% share of the property being added to the survivor’s assets. This means that the local authority cannot include it, if and when they assess the level of assets for the purposes of paying for care. We find that this option is increasingly popular with our clients who like the fact they are not giving away and losing control of any of their assets during their lifetime.
Everyone’s circumstances are, of course, completely individual and this arrangement is not suitable for everyone. However, if you are concerned about care home fees then our friendly team of lawyers is able to advise you as to what options might be appropriate. In all and any circumstances, if you are considering putting your property into any form of trust, either during your lifetime or in your Will, we would always advise seeking legal advice from a qualified, experienced lawyer.