One of the main worries people have about their future or that of their older relatives is the issue and concern around entering and paying for long term care. We all hope that we will have the choice to stay living in our own homes, but it is not always possible.
When a person moves into a care home they have a financial assessment, known as a “means test” to assess capital for the payment of care home fees. Emma Carter, Wills, Trusts and Probate solicitor at Hegarty Solicitors discusses how a Property Protection Trust Will could help protect some of your estate.
Planning For Care Home Fees
When making a Will it is possible for some couples to carry out some care home fee planning to protect part of their estate if the surviving spouse needs care.
Many couples will write relatively simple Wills which provide that when the first of them dies, the survivor inherits their estate and when the survivor dies everything left in the estate passes to a child or children. The risk for these couples is that after the first spouse dies and their estate has passed to the survivor, if the surviving spouse has to move into residential care, all of their assets are in the surviving spouse’s sole name and their estate can reduce because of the cost of care home fees.
For example, Mr and Mrs Green both own a property worth £160,000 and have savings of £40,000. If Mr Green dies first and has made a simple Will leaving everything to Mrs Green, she has assets of £200,000 in her sole name. If Mrs Green goes into care these are assessed by the local authority for care fee funding. If care home costs are £950 per week and Mrs Green is in care for three years, the estate will reduce to £51,800 for her beneficiaries (ignoring any income which Mrs Green may have and any other expenses which she may have).
Creating a Property Protection Trust in a Will
By creating a Property Protection Trust in a Will, upon the death of the first spouse, rather than the estate passing entirely to the surviving spouse, the share of the family home owned by the deceased spouse passes into a Trust which the surviving spouse can benefit from. Provisions are made in the Will for the surviving spouse to have a life interest in the deceased’s spouse share of the property. If the surviving spouse requires residential care the deceased spouse’s share of the family home is in the Trust and is not taken into account for care fee funding. The survivor’s share of the family home will be assessed for care fee funding purposes, but the Property Protection Trust Will protects some of the estate.
In the example above, this time when Mr Green dies his half of the home valued at £80,000 is placed into a Trust (although the half share of the home may be valued at less than £80,000). Mrs Green’s assets are valued at her half of the home and savings equalling £120,000. If Mrs Green goes into care for three years at £950 per week, the value of her estate would reduce to the point where she would receive support from the local authority. However, the Property Trust is not used and £80,000 will pass on to the beneficiaries upon Mrs Green’s death.
Under the Will some protection can be put in place for the survivor that the Trustees will not force a sale of a property and they can downsize to a new property, if required. The financial implications of setting up a Trust would need to be considered on an individual basis.
You may wish to seek some advice in relation to whether Property Protection Trust Wills are suitable for your circumstances and Hegarty Solicitors would be happy to discuss your options further with you.Contact Us to find out more