It is evidenced that many of us are living much longer than ever before, advancing well into our eighties and even older. But sadly with this increase in life expectancy is the increased risk of developing Alzheimer's dementia and a greater need for care. There are currently 944,000 people with dementia in the UK. This will increase to over one million by 2030 and over 1.6 million by 2050.
1 in 3 people born in the UK this year will develop dementia in their lifetime.
It can come as a shock when a person discovers that they may have to pay tens of thousands, if not hundreds of thousands of pounds to fund their care, which may mean that they have to sell their family home. This would naturally have a huge impact on a person's finances and the inheritance they intended to leave their family. It is of no surprise that people are looking at protecting their assets from nursing home fees and looking at whether they can protect their home.
How much does Care cost?
Social care can be expensive. A typical hourly rate for a carer to come to your home is around £20, but this will vary depending on where you live. Having a carer who lives with you costs from around £800 a week. But it can cost as much as £1,600 a week if you need a lot of care.
There are 2 types of care home:
residential homes have staff that help with everyday tasks such as getting dressed and supply all your meals
nursing homes also offer 24-hour nursing care
A room in a care home costs:
around £700 a week in a residential home
over £850 a week in a nursing home
The price will vary according to where you live and the type of care you need.
How will I be assessed for paying for my own care?
Generally care fees are assessed on a means tested basis. You will not be entitled to help with the cost of care form your local council if:
you have savings worth more than £23,250 – this is called the upper capital limit, or UCL, and will rise to £100,000 from October 2023
you own your own property (this only applies if you're moving into a care home)
You can ask your council for a financial assessment (means test) to check if you qualify for any help with costs. You can choose to pay for care yourself if you don't want a financial assessment.
Can I use a trust to avoid care fees?
Many people place their homes into a Trust arrangement during their lifetime and there are many benefits in doing so. Trusts are particularly useful when planning how money and assets should pass from one generation to another, especially when family structures are complicated by divorces and second marriages. This; coupled with the growing frequency of marriage breakdowns, an ageing population and rising prosperity; makes trusts an excellent tool for long-term planning to ensure a family’s financial stability and security. However, there are no guarantees that by doing so, your home will be excluded from means testing for care fees.
What is ‘deprivation of assets’?
If your local authority suspects that you have put your home or savings into a trust in order to avoid paying care fees then they may challenge you. Transferring assets into a trust primarily to avoid care fees can be determined to be a ‘deprivation of assets’. If it is a clear deprivation of assets – it is not allowed. Although, it be difficult for local authorities to prove intent if you set up a trust when you were fit and healthy with no expectation of illness.
If the local authority suspects that you have deliberately deprived yourself of an asset in order to avoid care fees, they may be able to take the following action:
Treat you as though you still own the asset that has been given away;
Recover the value of the asset from the person who received the asset;
Initiate proceedings under the Insolvency Act 1986 to declare you bankrupt;
Apply for a judgment debt against you in a County Court.
In some cases large legal and/or court costs could be accrued and in addition you may face criminal charges.
If they decide against you, you could face expense, possible criminal charges, and you may be in a much worse position than you were originally, because your care costs will be charged as if you still own the asset(s), but you will in fact no longer have the asset to be able to pay for your care. In such cases, the local authority may refuse to assist with meeting the costs.
Can I give my assets away?
You can't simply give your assets away, especially if you continued to benefit from them. For example, you gifted your home to your son but continued to live there rent-free. This would question what the motivation was to gift your property and you would also fall foul of the Gift with Reservation Rules for Inheritance Tax purposes. This may well be treated as deliberate deprivation.
What is classed a deliberate deprivation of assets?
The act of giving away your money and assets is in itself, not the only thing that can be assessed. Deliberate attempts to reduce your money or assets could also be included.
For example, this could include:
Gifting someone your money, both in and outside your family
Transferring the ownership of your home to someone else in your family, so they aren’t included in the financial assessment for care fees
Demonstrating unusual spending patterns and spending large sums on things you may not normally do so
Gambling with your money
Buying things, such as jewellery or a car, which might otherwise not be included when you are doing a financial assessment
What is a Protective Property Trusts in a Will?
A property protection trust will is a will designed to help protect your property from an assessment to long term care fees. The half share of the family home belonging to the first person to die passes into the trust. Protective Property Trusts work when a couple own their home in individual shares (known as ‘Tenants in Common’) and the first of the couple to die puts their share of property in trust via their Will. The trust will give their surviving partner a life interest in their share of the property, which means they have the legal right to remain living in the property throughout their lifetime and can continue enjoying the house as if it is they were the sole owner. On the death of their surviving partner the trust would come to an end and the share of the property which belonged to their deceased partner would then pass to the beneficiaries stated in their Will, regardless of what might be in the Will of the second person to die.
Protective Property Trusts working in this way can have many benefits and can help prevent things like sideways disinheritance or the loss of property to pay any creditors or care fees of the surviving partner. It may be the right solution for second marriages where both partners have children from previous relationships who they would wish to inherit their share of the house, but where they also want to ensure that their partner is able to continue living in the property if they died first.
Unlike some planning tools you do not have to be married or in a Civil Partnership to benefit from Protective Property Trusts. If you are co-habiting with your partner and own a proportion of your property this could still work for you.
As you can see, there are many good reasons to set up a trust, however, setting up a Trust with the sole aim of avoiding care fees is not one of these. There may also be adverse tax or other implications of putting your assets into a trust, and these need careful consideration before embarking on this course of action. It is always important to obtain professional legal advice before setting up any trusts in your Will to ensure that you are comfortable and that this is right solution for you in your individual circumstances.
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