Long Term Care costs to hit £38 billion a year by 2025.
- Annual cost of long term care in UK expected to rise from £26,000 currently a year to £33,000 per person by 2025
- Longer life expectancy means a 37% increase in the number of people needing long term care in UK by 2025
- Almost one in five (17%) Brits are expecting to fund long term care for an elderly relative
- 11.5 million Brits (23%) would use their property to cover the cost of their own long term care
- 88% of Brits believe the Government needs to set a cap on how much people pay towards long term care
- On average, Brits think the long term care funding cap should be set at £14,000
(Press extract taken from The LV= Future of Long Term Care report 3 May 2012)
Your home could be under threat if you have to go into care!
In recent years it has become more apparent that the State will only provide for those with little or no savings or assets. Thanks to advances in medical science and a general improvement in diet and fitness, most people are living longer. With this in mind it is possible that one or even both partners in a household may require long term residential care at some point in the future. It is becoming much less common for elderly parents to move in with their offspring in later life.
People enter into long term care for many reasons, old age, a serious accident, a stroke or other major illnesses. Under the Community Care Act 1990, if a person has to go into care, the local authority can, by law, force the sale of, or put a charge against, the family home in respect of residential care fees. Care home costs can be in excess of £500 per week. This will soon eat away at the capital/assets you have spent a lifetime building up.
Whilst the local authorities will meet the cost of nursing and medical needs, the individual is liable for all costs related to their personal and residential care, and this is means tested. Under current legislation if you have assets, including your home, of more than £14,250 but less than £23,250 you are entitled to partial assistance with costs. If you have assets in excess of £23,250, you will have to pay all care costs! Could this affect you?
Please note, the family home will be disregarded if it is occupied by a partner, or other qualifying person, which means that the local authority will not include the value of the house when assessing the person’s ability to pay care fees.
Women have a one-in-four chance of needing long term care, and men a one-in-six chance.
The Daily Telegraph estimates 20000 homes are sold each year to pay for care home fees (16/06/11). If no action is taken in advance it is possible for the local authority to become the sole owner of the family home after the death of an elderly parent who has been living in a nursing home, effectively wiping out any potential inheritance for family and loved ones. But there is an answer.
A Protective Property Will Trust.
A ‘Protective Property Trust’ (PPT) is based around three things, the basis on which you own your property, the Trust, and your Wills, which contain the Trust.
A Protective Property Will Trust is only suitable for married couples, unmarried couples, and civil partnerships, who own their property.
It is too late to use a Protective Property Trust once one spouse/partner has passed away.
To create the Protective Property Trust firstly you need to check how the property is owned, whether as “Joint Tenants” or “Tenants in Common”. Most property these days is owned as “Joint Tenants”, with both tenants owning 100% of the property, to create the trust this tenancy needs to be split by way of a mutual notice, creating “Tenants in Common” who will generally own 50% of the property. This will then be registered with the Land Registry Office. The Trust is then included in both Wills but does not come into force until after the first death.
The following points are the main characteristics of a Protective Property Trust:
- Upon first death their share of the property is placed into the Trust to be administered by the Trustees nominated within the Will. The Will specifies who are to be the ultimate beneficiaries of this share in the property, and the Trustees duty is to look after the property for the benefit of the beneficiaries.
- The surviving spouse/partner is given a Life Interest in the deceased’s share of the property, so they are entitled to live in that property for the remainder of their life, and the property cannot be sold without their permission. On the death of the remaining spouse/partner the Trust is terminated, and the property is passed to the named beneficiaries.
- The surviving spouse/partner does not own the deceased’s share of the property. If they then go into residential care then only their share in the family home can be included as part of the means tested assessment. Bear in mind that the local authority will ask an Estate Agent to conduct a valuation of the property, but the value of half a property is generally considered to be “zero” as you cannot sell half a house.
- If the surviving spouse/partner chooses to downsize later, and move to another property the proceeds from the sale can be used to purchase the next property and the terms of the trust remain over the new property.
- If there is any excess capital following a sale then the money is invested and the surviving partner can derive an income from the interest that is generated.
- The deceased’s share in the property is fully protected for the named beneficiaries, so even if the surviving spouse/partner were to remarry the children’s share is protected.
Deprivation of Assets
It is illegal to deliberately transfer your own property to relatives or trusts if your prime motive is to avoid paying long-term care costs, this is commonly known as “deprivation of assets”. However, it is not illegal for you and your partner to each make a provision within your Wills, that ensures upon first death, the deceased’s half-share of the property is left in trust for their children, or other named beneficiaries, rather than passing directly to the surviving spouse/partner.
Care costs in the UK are rising, and with careful forward planning large parts could be avoided!