Care home costs and Will trusts
How to protect your property from care home costs and why you should create a Will trust to protect your property against care fees
If your relative has Capital above the maximum threshold of £23,250 they may want to seriously consider effective legal ways to mitigate their liability to pay for their care home costs in the future. This will help them to legally avoid nursing and care home costs in the future.
There are a number of ways your relative can effectively dispose of Capital without breaching the Local Authority Guidelines, including:
- Setting up a Trust
- Repaying legitimate debts
- Producing receipts for legitimate expenditure
- Purchasing an Investment Bond with Life Cover
However, the Local Authority has the right to review any arrangements which it considers may have caused the deprivation of capital, in other words avoiding nursing home and care home costs and no arrangement is guaranteed to prevent Deprivation of Capital rules being applied. For more information on these rules please see the Department of Health’s guidance on Deprivation of Assets.
Why you should set up a Trust quickly
There is a specific 6-month rule for setting up a Trust in terms of the deprivation of capital rules. If the Trust is set up 6 months before your relative goes into care, then the Assets in the Trust must be disregarded. Whilst this is useful to know, it can be risky trying to plan 6 months ahead, when health and social care needs can arise very quickly so the best advice is to set up a Trust as soon as possible.
It’s too late to think about a Trust when you or your relative are already in care as the opportunity to protect your Assets has already passed, however anyone looking into retrospective claims for care cost refunds, or looking at advice on paying for care should consider setting up their own Trust as a matter of urgency.
Sometimes people are concerned about the perceived loss of control of their assets if they are transferred into a Trust. In fact, the position is quite the opposite. You can give the Trustees specific instructions about how you would like the assets to be used and although these are not legally binding on your Trustees, they will at least have a note of your wishes. It is necessary however for all the Trustees to agree on any course of action in relation to the Trust property, so you will not have to move out of your home if it’s placed into a Trust. You can also sell your home at any time and re-invest the money into another property, which will still be owned by the Trust so there’s no need to worry about any loss of control.
There are a number of distinct advantages to setting up a Trust beyond the obvious saving in terms of care costs. Here are three good reasons:
- Avoiding expensive Probate Costs – when you die, even when you have made a will, your Executor will need to get a Grant of Probate. The costs of this can often be up to 3% of your estates’ value. In addition, obtaining a Grant of Probate can take months or even years. With a Trust, the Probate requirements don’t apply and the Assets within the Trust can be distributed to the Beneficiaries straight away.
- Avoiding Sideways Disinheritance – this is an issue which can arise that is often overlooked by families. Sideways Disinheritance can arise when one partner dies and the remaining spouse inherits the whole estate. If the remaining partner subsequently remarries, then existing Will arrangements are often revoked. On the surviving partner’s death, the estate will then pass to the new partner, which means that children can be disinherited. With a Trust, this can be specifically prevented from happening.
- Children inheriting at the wrong time – this issue can arise where your estate is distributed according to your Will (often passing to your children), but the timing of the inheritance might not be right. If your children are going through a divorce, for example, the inheritance could be caught up in the divorce settlement and therefore wouldn’t pass to your child as you intended. With a Trust, your assets are distributed by your Trustees in accordance with your wishes. The Trustees can, therefore, withhold the distribution of assets if they believe that it would not be what you had wanted to happen at that particular time.
These are all valuable reasons to set up a Trust well before you or your relative go into care, in addition to reducing your liability to pay for your social care costs. Please now take a moment to read the following important information regarding Wills.
Why do you need a Will?
Without a Will, the law decides who inherits and the proceed from the estate goes to the Treasury and not your loved ones. With a Will, you decide. With no Will, it will usually take longer and cost more to wind up your estate and you will have less control.
Why should I use a solicitor?
Although there is not legal requirement to use a solicitor, problems may arise if a Will is not drafted properly and this can cost you time and money. Using the services of a qualified solicitor significantly reduces the risk of problems arising.
Why should you do it now?
The future is difficult to predict and it is important to not leave anything to chance. If you leave it until you need it, it will be too late.
Changing a will
You should review your Will every 5 years and after any major change in your life, for example:
- getting separated or divorced
- getting married (this cancels any will you made before)
- having a child
- moving house
- if the executor named in the will dies
You can’t amend your will after it’s been signed and witnessed. The only way you can change a will is by making an official alteration called a codicil. You must sign a codicil and get it witnessed in the same way as witnessing a will. There’s no limit on how many codicils you can add to a will to amend it.
Making a new will
If there are a number of major changes in your life you should make a new will. Your new Will should explain that it revokes (officially cancels) all previous wills and codicils. You should destroy your old will by burning it or shredding it.
Here are six good reasons to make or update your Will
- Your legal status changes upon marriage or civil partnership and a former Will may become invalid. It is also important if you divorce or remarry due to the impact on any children you may have
- You may need to reconsider how and to whom you allocate your assets in your Will if there are significant changes in your wider family
- Having a Will ensures that the people you want get rights to your property, for example, if you live with your partner but not married, your partner can be given full ownership of property and possessions
- A Will ensures that your wishes as to how your children are cared for in the event of your death are made clear from the outset
- A Will provides protection for your loved ones in the event of you being seriously ill and you can make the process after your death easier, such as stating your funeral wishes
- If you inherit money or property, a Will can help ensure that your loved ones are not hit by a massive tax bill
Why should you use Starck Uberoi?
We prepare hundreds of Wills each year. A standard Will only states who is to benefit when you die. Our Estate Planning Wills department ensures that your estate finishes up where you want it. We can also help reduce the amount of tax payable on the inheritance if you seek our advice in advance.
We can also leave you with our recommendations as to how you might want to protect your estate, for example with a discretionary trust. For more information please see our Wills and Probate area of our website. To book an appointment at any of our offices, email us at solicitor@starckuberoi.co.uk or call 0208 840 6640. Our wills and probate solicitors in Brentford can help you put your affairs in order, as can our teams at our Ealing office, Belgravia solicitors, our Richmond team, our Canterbury team and our wills and probate solicitors in Pinner.
