Paying for Home Care and Care Home Fees
Friday, 11th January 2013
Published 11 January 2013.
Guest blog from Probate Forms.
There’s no law that says if you go into care you will have to sell your home to pay for it. What the law says is that if you go into a care home you will be given certain allowances, but you will be assessed on your ability to pay. One allowance is that the first twelve weeks of your care costs will be free, or if you have a dependent still living in your family home it will not need to be sold.
Otherwise if you have capital in excess of £23,000 you will have to pay for your care, and whilst you can pay by any means you wish, for example using pension payments, for the vast majority of people this will mean having to sell their home.
In order to protect your home you have two main options. First, you could give your home away, for example to your children, or secondly, you could put the home into a ‘Family Trust’.
Both options have their benefits and disadvantages. The best way to compare both would be by looking at an example. Let’s call her Mavis.
Mavis is an 89 year old widow, she lives alone in her own home which is worth £200,000 and she paid off the mortgage some time ago, but she has no other assets. She is in reasonably good health and would like to live in her own home for the rest of her days, or certainly for as long as possible. She is however realistic and knows she may one day have to move into a care home. She worked hard all her life and paid her taxes, and she would like to leave her home to her two children Stuart and Roger.
Let’s first look at the benefits of Mavis giving her home away now to Stuart and Roger:
If Mavis’s health deteriorates and she needs to go into care, she no longer owns her home, so that won’t be taken into account when assessing whether she needs to pay for her care fees.
And the disadvantages:
Stuart and / or Roger might get divorced, become bankrupt, die, fall out with Mavis (or each other), and as they own the home, they may decide to do something with it against Mavis’s wishes, or someone else may have a legitimate claim to it, for example their divorcing wives or a dependent on their death. This might mean Mavis’s home has to be sold before she is ready to leave.
If Social Services can prove that the principal reason Mavis gave her home to Stuart and Roger was to avoid paying care home fees they can set-aside the transfer, and Mavis will still have to pay for her care home fees.
Now let’s look at the benefits of Mavis setting up a Family Trust:
If Mavis’s health deteriorates and she needs to go into care, she no longer owns her home as it’s in trust, so it won’t be taken into account when assessing whether she needs to pay for her care fees.
The house is in trust for the benefit of Stuart and Roger, however Mavis has the right to live there for the rest of her life, irrespective of whether Stuart or Roger pre-decease, get divorced or fall out with her.
And the disadvantages:
Mavis can only consider this option as there is no mortgage on her home.
There is a cost of setting up a Family Trust.
If Social Services can prove that the principal reason Mavis put her home into the trust was to avoid paying care home fees they can set-aside trust, and Mavis will still have to pay for her care home fees.
If Mavis’s estate was larger there would also be Inheritance Tax considerations to take into account, but if you are healthy and unlikely to go into a care home within the next six months, then taking specialist legal advice on the “Family Trust” option may well be money well spent.
If you would like to find out more contact Probate Forms on 0800 7747 567.