Can I protect my children’s inheritance if I move into a care home?
If you, or a loved-one, is facing the prospect of a permanent stay in full-time residential care and is expected to pay a contribution towards this, the value of your assets will be assessed and that may include the value of your home.
Your home may not be taken into account for the cost of care whilst your spouse, partner, older relative, disabled relative, or child of yours aged under 18 still lives there. However, in other cases there is no option for it to be disregarded. Facing this situation can be incredibly overwhelming, and we’d recommend speaking with a local SFE lawyer for support and guidance. Planning ahead can help protect your assets and ensure the best solution is decided ahead of time.
Earlier this year, SFE published a blog on “paying for care”, which you can find here. If you are considering giving away your home outright to try and avoid your home being used to fund your care, this is definitely worth a read (as this may not always be the best option for you).
If, however, you own your home jointly with someone else, such as your spouse or partner, there may be another option for you, which is to create a life interest trust in your will. This trust will be designed to take effect after one of you passes away and will protect that share of your home if the survivor needs permanent full-time residential care.
Here’s an example case study of married couple Bob and Sandra, who have a son and daughter, Richard and Jennifer, together:
• Bob and Sandra own their home, Rose Cottage, jointly as tenants in common. This means that each owner has their distinct share of the property. In the absence of a document which lists what share is owned by which owner, it is assumed that each owner owns an equal share.
• They each have a 50% share.
• Bob, who has Alzheimer’s, is receiving care at home by the family and with the benefit of a care package provided for by the local authority.
• Sandra becomes unwell and sadly passes away. She leaves a will providing a life interest trust in her share of Rose Cottage to Bob for the rest of his life, thereafter the will states it would be split equally between Richard and Jennifer.
• The decision is made for Bob to move into full-time residential care on a permanent basis.
• Bob’s contribution to the cost of his care takes into account assets such as any cash in the bank that he inherited from Sandra as well as his own savings, plus his own 50% share of Rose Cottage.
• Bob does not own Sandra’s 50% share of Rose Cottage outright because it is in the Trust, therefore is not taken into account in the means test for his care fees.
• Rose Cottage is sold and 50% of the proceeds are used for Bob’s care, and the other 50% share is invested under the terms of the Trust, with the income passing to Bob.
Another benefit of this kind of trust is that if the survivor decides to change their will in the future, in the case that they remarry for example, they cannot stop the share of the home of their previous partner that has died from passing onto their intended beneficiaries. Therefore, if in the above example instead Bob stayed in Rose Cottage and met a new partner, Cheryl, he would not be able to gift Sandra’s share of Rose Cottage to Cheryl in his will; that would still pass to Richard and Jennifer on Bob’s death.
This is one basic example of a life interest property trust. For many, the idea of creating any kind of trust in your will may feel quite daunting. Your SFE lawyer can help you consider whether this would be appropriate in depending on your circumstances. They will guide you through the practicalities in easy-to-understand terminology and will, of course be on hand to advise your family after you have passed away.
Always seek specialist legal advice from an SFE lawyer. They’ll have the expertise and experience to make the process as seamless as possible.