Professional Will Writing Made Easy
 

Protecting your home from care home fees

 

Care Home FeesWhat is the problem?

 

•    With our ageing population it is expected that as many as 1 in 2 of us in the near future (source: Help the Aged) will need to go into care.

•    Average care home fees cost £30,000 p.a. in 2008 (source: Age Concern).

•    70,000 people were forced to sell their homes last year to pay for care costs alone (source: The Guardian, 17th November 2007).

•    Two thirds of 45-65 year olds have made no financial plans to pay for long-term care, or to protect their assets.

 

Once Social Services has decided you need care, you will be referred to your Local Authority who will arrange a suitable placing and pay for it. They then set the wheels in motion to claim the costs back from you and can take everything over a set amount.
 
If you have capital (including your house) then the Local Authority will make you pay until it runs down to £23,000 and then you pay at a reduced rate until it runs down to £14,000 (2009/10 thresholds), accordingly only the last £14,000 of your capital is safe.
 
Inheritance Tax is devastating at 40% above the £325,000 threshold (2009/10 tax year), whereas this ‘Care costs tax’ is effectively 100% above the £14,000 threshold. Even Tony Blair in 1997 said that this was not fair and all of our clients certainly agree with him.
 

What can you do about it?

 

Transferring your house and savings into a Family Protection Trust can protect them from this happening but we will need to assess your own personal situation very carefully to make sure this is suitable. Please contact us to arrange an initial discuss.
 
Our aim is to ensure your nest egg remains protected, and that the beneficiaries of your Will actually inherit your estate rather than allowing the State to get it.
 

All the alternative options are less effective for different reasons:

 

  1. Do nothing and hope that you won’t need care in the future.

          •    This leaves a lot to chance but it is an option.  Savings on a Trust arrangement fee may prove to be a false economy as you leave yourself open to crippling costs later in life.

  2. Give your assets to your family now, but with consequences, beware!

         •    You could leave your loved ones open to substantial Capital Gains tax bills.  They may also lose any benefits to which they are currently entitled or you could be vulnerable to family fall outs, divorce or even the bankruptcy of a loved one.

  3. Purchase an annuity plan to pay the fees due, but the policy will vanish on death

        •    It does mean spending tens of thousands of pounds upfront in return for an income for life, which could be wasted if you die within a few months, but you may be able to insure against this. Speak to a Financial Adviser for further details as this option is regulated by the FSA.

  4. Including a trust in your Wills that is set up on first death.

       •     A cost effective and proven solution but only guarantees the assets placed in the trust on first death, leaving the survivors share at risk.

What are the benefits to you?

 

Yes, quite a few actually. It will always save you money on Probate fees that would otherwise be paid on your death (e.g. £250,000 estate x 3% fees = £7,500 avoided) because the bulk of your assets (in the trust) can be distributed quickly and easily by the trustees according to your Will. This also avoids the time delays and hassle usually experienced with the Probate process. Your trustees could retain some (or all) of your estate in the trust (at their discretion) if for instance your son/daughter is getting divorced, gambles or is on drugs. A trust cannot be contested whereas a Will can under the 1975 Inheritance (Provisions for Family & Dependents) Act.

 

So it can save money overall and help to safeguard your assets. It ticks all the boxes.

 

Go to the page ‘In retirement’ for more information