Concerned about your property being sold to fund your future care fees?

The Issue

You probably own your home as joint tenants if you are a couple and solely if you are single. For couples this means you own it wholly, jointly and severally. Ultimately therefore, you do not own it 50:50 as you might have assumed. You actually own all of it together and when one partner dies the surviving partner owns it solely and absolutely.

It is sole and absolute ownership that enables a property to be taken into consideration as an asset by the local authority, and puts the property in danger of needing to be sold to fund care. 

The Reality Today

The 2015 Care Act allows local authorities to assess your assets to determine if you need to pay for your own care.

Currently, if you have assets above £23,250, are on your own and require care, you will probably have to pay for it all - currently averaging around £1,000 per week.

Savings, cash and income would be used first, and then your property would need to be taken into consideration. You would be expected to pay for all of your care until such time as your assets were depleted to below the £23,250 threshold.

You would then pay for a proportion of your care until your assets were below £14,250 - at which point all your future care would be paid for after any relevant income was taken into account.

The Solution

For couples, the solution is simply changing the way you own your property well in advance of any care considerations, i.e. from joint tenants to tenants in common, and setting up two Trusts within a properly structured Will at the same time. In most cases, this will protect the integrity of your home should you ever require care in the future, so long as avoiding care fees was not a primary motivating reason behind the implementation of the strategy. Primary motivating reasons could include protecting your half of your property should your spouse remarry after your death, ensuring that your children would not lose 50% of their inheritance should they be made bankrupt or divorce, and preventing a generational inheritance tax burden in the future. These are all sound reasons for implementing this strategy, which in themselves are not deliberate deprivation of assets, but the implementation of which protects the integrity of the property.

For sole owners, the process is simply to set up a Trust now and convey your property into it. Again, this must be well in advance of any care considerations and the motivation must not solely be for the purpose of preventing your home being used to fund your care.

The Reasoning

When you own your home as tenants in common, you actually own half each. When the first partner dies, they leave their half into their Trust. The surviving partner is the Trustee of that Trust and also the primary Beneficiary, which means that they have complete control over the property and what happens to it.

The children and/or whoever else is also nominated as Trust Beneficiaries for that particular Trust will subsequently have access to that half of the property when the surviving partner dies. The first half of the property then is 100% securely in Trust for the Beneficiaries and will not be at risk. As a result of this simple strategy, because it is not possible to sell just their half of the property, the integrity of the property is protected. While the ''market value" of  half a property is negligible, the Care Act 2015 guidelines do allow for this half to have a charge placed on it under a deferred payment arrangement for care fees. This is why we always recommend the implementation of a Lasting Power of Attorney grant for Property and Financial affairs which will enable your attorney to act on your behalf if you are unable to. Your attorney will be able to negotiate with the local authority for the property to be rented out and a percentage of the resulting rental income taken instead of a charge being placed. The second half of the property will then ultimately go into Trust for access by the nominated Beneficiaries when the surviving partner eventually dies.

The Beneficiaries will at that stage have both halves safe and secure in Trust, and will be able to share and dispose of the property according to the wishes of the Settlors (the original owners of both halves). 

By leaving half the property into Trust on first death, the surviving partner can still sell the property to downsize if they wish, and are not restricted in any way with regards to what they wish to do with the property - it simply means that the integrity of the property is safeguarded and therefore will be in a position to be appointed to the chosen Beneficiaries when the time comes.

For sole owners, the steps involve immediately conveying your property into Trust well in advance of any care consideration and not solely for the purpose of preventing your home being used to fund your care, together with becoming a Trustee and primary Beneficiary of the Trust, with others nominated to become Beneficiaries after your death. This is usually enough to secure the integrity of the property (so long as you do not go into care within 6 months) as the property is not absolutely owned by yourself anymore. Again, it is not legal to force a Trustee to do something that is not in the ultimate best interest of the Trust Beneficiaries.