Protecting Your Home From Being Used to Fund Care Home Fees

A report published by The Lancet Public Health in 2018 suggested that the number of adults aged 65 and over needing 24 hour care will almost double by 2035. There has been a lot of media coverage over the years in relation to homes being sold to fund care home fees as for most people, the family home is their main asset. The question we get asked most from our clients in planning their futures is: “What can I do to prevent this from happening?”

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Gifting Property

A common misguided perception is that you can gift the property to your intended beneficiaries during their lifetime and this will prevent it from being sold to pay for care fees. While you can do this, this option is not always effective and it exposes you to a number of risks you should consider. These risks sometimes outweigh the risk you are trying to avoid.

You may indeed run the risk of losing the property in other ways, for example, one of your intended beneficiaries might become bankrupt and their share of the property will be acquired by the Trustee in bankruptcy. Alternatively, one of your intended beneficiaries may go through a divorce and your property will be considered part of their matrimonial assets when finances are being dealt with. In essence if you gift your property away, it no longer forms part of your assets and you have no control of what happens to it. This limits your ability to control the property and your options for the future.

Trusts

What you can consider doing is putting your property into a Trust. This provides an element of protection so that the home does not usually have to be sold to fund care home fees. The benefit of writing the property into a Trust is that you can protect some or all of it from being used to pay for care home fees in the future – but still retain security that you have somewhere to live.  There are possible consequences to setting up a Trust over your home such as what if your Trustees go away or are hard to track down, or if they are professionals have they been closed down, say by the SRA.  What ongoing costs are there?  In addition to this uncertainty the local authority can elect to ignore the Trust you set up on the basis you are doing it to avoid care fees.  A better way might be to use your Wills to manage what happens to your home.

A carefully drafted Will can provide that a share of the family home passes into a Trust on first death, which may give the survivor a right to occupy. With care, such a Trust will ensure that the capital will be preserved and instead pass to the intended beneficiaries. A Trust of this type can be drafted flexibly to allow the survivor to ‘down-size’ or move property.

For further information in relation to putting in place Wills and Trusts in place, contact the Private Client Team on 01908 660966 / 01604 828282 or email PrivateClient@franklins.co.uk.