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There are a number of different ways in which you can protect your property against the effects of long term care fees, such as gifting away your home or taking out a long term care insurance policy. In this article we will take a look at how you can protect your share in the family home from the effects of long term care should this become necessary later on in life.

Ownership of the Property

An important aspect of why most people have a problem is the way in which they own their properties. It is a fact that the majority of people own their home as joint tenancies. What this means is that when one of them passes away, the property will pass automatically to the remaining partner regardless of what is said in a will.

A property owned by a couple does not have to be held in a joint tenancy, it can be held as tenants-in-common. This involves each partner owning half of the property and this can be left to others (such as children) when one of them dies, by the use of Wills and Trusts.

This type of property ownership (tenants-in-common) has the important advantage of allowing half of the property to be passed on to say the children on the death of the first partner. The remain partner will be allowed to stay in the property whilst ever they are alive and so this makes the whole arrangement work well.

If the remaining partner needs to go into a home, the Government will only be able to take account of their half share in the home and not the remaining half.

Example – Mr and Mrs Brown own number 25 Maple Crescent as joint tenants, and they decided to prepare Property Trust Wills to protect their shares in the property from the effects of long term care.

The first thing to do would be to change the property from being jointly owned to being tenants-in-common.

A Will would then be prepared for Mr and Mrs Brown which would create a life interest in their respective shares in 25 Maple Street for the surviving spouse, with the eventual net sale proceeds passing equally between their two children. The surviving spouse would be given the right to move to another property if that is their wish, and any monies realised from the sale of the property would be invested by the trustees of the Will and the survivor would have the benefit of the income from those investments for the remainder of their lifetime.

As an example, let us assume that 25 Maple Street is worth around 200,000 and that Mr Brown dies first. Mrs Brown then decides that she wants to move to a smaller house valued at say 100,000. Mrs Brown now has the option to sell 25 Maple Street and use the “trust” established by Mr Brown of 100,000 to buy the new house. Mrs Brown could then do as she wants with the remaining 100,000.

Alternatively, Mrs Brown could own half of the new property and the Trustees would own the other half of the property. Mrs Brown could then do as she wishes with her remaining 50,000, and the Trustees could invest the remaining 50,000 from Mr Brown’s’ “trust”, in say a bond, and Mrs Brown would have the income from that bond during the remainder of her lifetime. On Mrs Brown’s death, Mr Brown’s half share in the property and the money in the bond would pass to his two children.

In the event that Mrs Brown needs to go into a care home, then only Mrs Brown’s assets will be taken into consideration. Mr Brown’s half share in the home or the value of the investments made by the trust would be protected for the children. Furthermore, although half of the home is owned by Mrs Brown, it is not feasible that a forced sale of half a property would be possible so the whole property is protected as a consequence.

Could the surviving partner move to another home or must they remain in the same property?

You can move, and many people choose to, particularly if the home becomes too large for one person. It is important that the terms of the trust are flexible.

Is it possible that the children can force me out of my home?

No – the children can only inherit the property when both of you have gone. The trust will be written to ensure that these are the terms which are operated.

Will a Property Trust and special Will help with estate taxes ?

No. As your partner has the right to use your half of the home, it is regarded that they still own the property for the purpose of tax calculations.

Can the Government change the rules to make this invalid?

No. In your Will you are entitled to do what you like with your half of the home. The Government may in the future change the rules relating to care costs, but this would of course then only apply to the survivor of you – the one most likely to need care.

Property Trusts and Wills are not a legal “loophole”, but straightforward common sense. If your partner requires care after your death, why would you want to leave him or her your entire estate outright shortly before he or she is about to be means tested?

Why half – why can’t I put the whole of the house in trust?

If one spouse/partner owns the property in their sole name then yes, you could put the house in trust for the children and allow the surviving spouse/partner to live in it for the rest of their lifetime. If the surviving spouse/partner requires care after your death then the whole of the property is safe.

It is possible to set up a Will Trust which only activates the trust on death. We would not recommend this as this would mean that if your spouse/partner dies before you and you need care beforehand, the whole property could be at risk because the Will Trust would have only commenced on the first death. By this time care cost fees could have drained your estate. It is seen as better to protect half the home than to lose all of it. It needs to be further mentioned though, that given current thinking, local authorities have deemed it impossible to only sell 50 percent of a property.

What if we do not have children – who could my share be left to?

It would be possible to include anyone in your trust. Perhaps more distant relatives, charities of even a mixture of both – it is up to you really.

Would we still be protected if we both were required to go into care?

Yes the home would be protected as soon as the trust has been established and the Will has been activated. This would mean that the whole property has been protected given the current thinking around the practicalities of selling half a property.

Finally – For most families the home is usually the largest asset and it is usually the asset that you want to pass on to the children and their children. If you are disturbed at the thought of losing your family home because one or both of you ever need to go into a care home, then only proper planning by setting up a trust and writing a Special Will will ensure that this never happens to you.

Learn more about writing a will. Stop by Simon Westlake’s site where you can find out all about how to protect your assets from being seized to pay for care fees and how you can take action now.

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