Care Fee Planning

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Many of us work very hard over the years to buy our own house and build up savings for our retirement and would like to leave a ‘little something’ for our children and grandchildren after we’ve gone.

Unfortunately, the costs of going into a Care Home can literally wipe out your entire savings and your home may be sold to pay for care fees. This could mean that your loved ones could receive very little or even nothing at all of what you had originally intended them to have.

By changing the way in which you own your home, combined with the appropriate Will and Trust Planning, you may be able to ensure that your property is partially or even fully protected, providing your motives were to protect your family wealth, from passing into the wrong hands.

“The costs of residential care fees, are often in excess of £1,000 – £1,200 per week and can quite literally wipe out an entire estate. As a result, there could be very little or even nothing to pass to your loved ones.”

Find out more about our estate planning services, call 0800 240 4587 or complete the form below.

FAQs – Care Fee Planning

What can be done about care costs?

Firstly, it is important to safeguard your home and the first step is to look at the way you currently own your home.

The majority of people own their homes jointly which means that on first death, the survivor would then own 100% of the full property value and this is when your home becomes most vulnerable to attack from Care.

Simply changing the way you own your home to what is known as Tenants in Common, combined with the appropriate Trust planning, can effectively ensure that your share of the property is protected should either of you enter care.

What about my other assets – my bank accounts and savings?

Once again, care fee planning can help by changing the way your assets are invested and held can ensure that your cash or liquid assets are also protected from Care.

At Michaels & Co., our team and associates can advise on all aspects of care fee planning and provide you with the correct strategy to ensure that all or most of your assets are protected.

When would I have to pay for Care?

If you own more than the upper limit currently £23,250 that includes your property, cash, savings, stocks and shares, you will be expected to fund the full cost of your care fees. You would not be able to receive any financial help from your local council until your savings (assets) have been reduced to the upper limit.

If you have less than the upper savings limit, or when your savings drop to this limit, the local council will then assess your ability to pay based on both your capital and income.

If you have assets below the lower limit currently £14,250 then any contribution you may be required to make towards the cost of your Care, will be based solely on your income and your assets disregarded.

You are most at risk of losing your home to care costs when you enter care, after owning your home jointly with a spouse, unmarried partner, or civil partner and they have passed away. The full capital value of your home will have passed to you and you will be assessed on the property’s full value along with any formerly joint-held assets, such as savings. This is why care fee planning is so important.

How can I prevent my home being sold?

The simplest way to avoid this happening is to firstly change the way in which your property is owned. Most people when buying a property with another person have the property set up as Joint Tenancy and whilst this may be the correct way to own a property in certain circumstances, for the vast majority of people this is not the best way to own a property for either care cost issues, Inheritance Tax liabilities or good common sense, robust wealth preservation and protection.

Severing the tenancy on the property and changing the ownership to Tenants In Common, so you now each own 50% of the property (percentages of ownership can vary according to individual requirements) and then by setting up mirror Wills, each bequeathing the Testator’s share of the property to either a Property Trust or Family Trust can ensure that your home is not lost to care.

On the first of you to die, their share of the property is left to the Trust, whose beneficiaries will be the spouse or partner, children, grandchildren or other named beneficiaries. Whilst the surviving partner continues to reside in the property there are no issues, but once the survivor goes into Care the property and assets will be assessed for care costs.

Once again, the council would designate a value to the survivor’s interest in the property and the value would be dependent on the price that could be obtained from a willing buyer. It is highly unlikely that an outsider would be willing to purchase a property when part of it could be legally occupied by any of the beneficiaries named in the deceased person’s Trust (usually his or her children/ grandchildren) and so, the value of the person’s share entering care could be held as being nil.

Can I state what happens to my body in my Will?

Lots of people shy away from discussing their funeral arrangements with family and friends, so making a Will is a good way of letting people know whether you wish to be buried, or cremated and any specific requests you might have for your funeral service.

However, it should be noted that your Executors are under no obligation whatsoever to carry out funeral wishes requested in your Will.

 One way to guarantee your wishes are met is to set up a pre-paid Funeral Plan, in which case, you can include details of these arrangements in your Will.

So I can protect my property but what about my other assets?

Assets such as cash, stocks and shares, bank and building society accounts, PEPS and ISAs etc will be determined as liquid assets and in addition to any income received will be assessed for Care. Changing the way your assets are both held and invested may ensure that they are not assessed for care costs.

Councils are advised that if an investment bond is written as one or more life insurance policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights has to be disregarded as a capital asset in the financial assessment for residential accommodation.

In contrast, the surrender value of an investment bond without life assurance is taken into account.

Income from investment bonds, with or without life assurance, is considered in the financial assessment for residential accommodation, as may be payments of capital by period instalments.

The Care and Statutory Guidance Act – Section 54

“Where an investment bond includes one or more element of life insurance policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights must be disregarded as a capital asset in the financial assessment.”

How can you help when the time for care comes?

Our associates are experts in providing advice on a number of issues that could arise. Together, we can and ensure that the Council or Local Authority adopts the correct approach and the necessary processes are followed. An example of this may be, in respect of whether Continuing Healthcare Assessment and a Needs Assessment have been conducted.

We can also provide advice on the suitability of the contract for the placement, and to liaise with a Local Authority or Council on your behalf when issues arise on the outcome of a financial assessment.

“I wonder whether your eyes glaze over when someone speaks to you about Tax, Wills or Probate… our guest speaker is not only an expert in such matters, but he has a gift of making things simple and easy to understand. Michael Doctors has been helping Parkinson’s people with up to date information on Estate Planning, Asset Preservation and the implications of Long-Term Care.”

Parkinson’s Disease Society – South East Surrey.

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