Sadly, losing a family home to pay for your care later in life isn’t uncommon. Research has previously shown that most people (half of women and a third of men) will require some form of long-term care later in life.
In some cases, care home fees can be very expensive, and to a lot of people, unaffordable. Thousands of people lose their family home as they need to use it as capital to pay for the care home fees.
What happens to homeowners that enter a care home?
If you own your home, then the local authority will not count it as capital until you have been receiving residential care or living in a home for at least 3 months. Although, even after that, your home still won’t be classed as capital if any of the following people still live there:
- Your husband, wife, partner or civil partner
- A close relative over the age of 60
- A close relative under the age of 16 who you are responsible for
- An ex-husband, ex-wife or ex-civil partner if they are a lone parent.
If your stay in a care home is just temporary, then the home also will not be classed as capital. However, if circumstances change and the stay becomes permanent, the home will be classed as capital 12-weeks from when the decision to make the stay permanent happened.
Could you gift the house to another member of your family as you get older?
Some people may consider gifting their home to a member of their family in order to protect it, although there are some downfalls to this. The member of the family that receives the house will be required to pay tax on interest or income that they receive from the asset.
Another risk is that the family member that received the home may die, get divorced or get into debt, which means that the home could be involved in legal proceedings.
There may also be implications if you have no other reason for gifting your property other than to deprive yourself of assets that would be available to pay care home fees, especially if it is vital. Solicitors, however, are often able to uncover other substantive reasons for not gifting property and the reasons that get identified are usually recorded and not overshadowed by the fear of paying care home fees.
If it can be proved that the only reason for the transfer of the house was to avoid losing it to care home fees, then you’ll be treated in the same way as you would if you still owned the property, and the cost of care would have to be paid.
If the transfer happened at least 6 months prior to moving into a care home, then the Local Authority can automatically recover the property without having to prove reason.
Can a trust be used to ring fence your home against care home fees?
Another option would be to move your house to a family trust, which is another safe way to give away your home. This is by transferring the ownership of your home and other significant assets and moving them into a trust, which can be set up with the aid of both an experienced tax planning and trust solicitor. A family trust will potentially provide full protection for your assets from the future cost of care home fees.
How to set up a trust to reduce your care home fees?
This can’t be done without an experienced trust solicitor who has expertise in estate planning for older clients. They will ensure that the family trust is suitable for you and ensure that the documentation is drafted properly, protects you and that you have appointed the right people to act as your trustees.