How To Protect Assets From Care Home Fees

If you want to know more about protecting your estate from care home fees, please contact us at Aticus Law for a free initial enquiry.

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By Nicola Briggs - 12th October 2021

You can protect your assets from care home fees by making a Care Home Fee Planning Will. This type of Will has to be made when both you and your partner are still alive and have mental capacity.

Are you worried about care home fees?

A typical Will for a married couple is to leave everything to each other and then to the children. However, in later life,  this may not be the best course of action. This is because if one person dies, and the surviving spouse then needs State-provided care, then the local authority must be paid from their assets. This could whittle away an estate, leaving just enough to pay for the funeral.

For this reason, we are regularly asked to advise on the benefits of giving away a property to children. This has to be carefully thought out, as there are far more disadvantages than advantages, least of which your child could die, divorce or get into debt before you pass away. Also, a gift of the house will prevent your estate from benefitting from the additional Inheritance Tax allowance of the Residence Nil Rate Band, which could potentially cost your family an extra £140,000 in Inheritance Tax.

Furthermore, a local authority will not stand by and allow you to give away your assets so that the burden of your care falls upon the State. Forms have to be completed showing where savings and assets have passed, so that the local authority can determine whether or not there has been an intention to deliberately deprive oneself of assets. There is no seven year rule, as there is with Inheritance Tax, so the local authority can go back as long as they like when investigating your finances.

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What can you do?

Where a couple jointly own a property they can take steps, which cannot be contested by the local authority, to protect at least half the house. This is done by dividing the ownership of the property (metaphorically speaking) so that each party has their own share, which they are then free to leave by Will. That share can be passed on to children, who will then become part owners of the house. The survivor of the couple can continue to reside there happily on the basis that they still own one half of the property, and the Will of the first to die has given them a right to live in the other half.

The local authority cannot claim that this gift was a deliberate deprivation of assets, as you are clearly not going to need care when you have passed away! However, a mathematical calculation has to be undertaken to ensure that by doing this an Inheritance Tax bill will not become due, where none would have been due had everything been left to each other.

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Care Home Fee Planning Will

If you want to protect your assets in this way, then you need to make a Will commonly called a Care Home Fee Planning Will. The Will can extend to assets other than an interest in your property. A balancing act has to be undertaken between saving as much as possible from the grasp of the local authority and leaving the survivor with sufficient monies to enjoy their retirement.

This type of Will has to be made where both parties to the relationship are still alive and have mental capacity. You cannot make this type of Will if you own the property in your sole name as the surviving spouse. Any Deed of Variation of the Will will not assist, as a retrospective gifting of the one half share of the house to children will still be treated as a deliberate deprivation by the survivor. For this reason, it is important to write a new Will sooner, rather than later.

If you want to know more about protecting your estate from care home fees, please contact us at Aticus Law for a free initial enquiry.

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