How can I protect my home against the cost of Long Term Care..?
It is estimated that 70,000 homes each year are sold to pay Long Term Care cost...
The cost of Long Term Care is increasing each year. In February 2008, Saga estimated that the cost of a 4 year stay in a care home would increase from £28,078 per year to £55,869 per year by 2028. So how can you protect your home from being sold to pay for any Long Term Care Costs?
Firstly, there are some things you should not do. Some people believe that simply transferring ownership of their home to their children will avoid Long Term Care costs, "they can't take off me what isn't mine". NOT TRUE. It is illegal to deliberately deprive yourself of an asset if your prime motivation is to avoid Long Term Care costs. Age Concern's definition is that "deliberate deprivation occurs when a resident transfers an asset out of his or her possession in order to put him or herself in a better position to obtain assistance".
As a guide to funding in England (Scotland, Wales and Northern Ireland apply different rates) when an individual requires care they fall into one of three categories and are treated accordingly:
- Those needing care that are single and currently have assets of over £23,000 have to pay for their own care, be it at home or in a residential or nursing home.
- Those single people needing care who have assets between £14,000 and £23,000 will undergo an assessment of needs by the local authority. The care fees will usually be paid by the local authority, but in turn, the local authority will take any state pension payments the person normally receives to help to pay for the costs. The individual is left with an allowance which is currently £21.90 per week. For every £250 worth of savings over the lower limit of £14,000 this allowance is reduced by £1 per week.
- Those with assets below £14,000 will again be assessed by the local authority but will usually have their cost met in full but in turn, any state pension payments will be taken leaving the individual with an allowance of currently £21.90 per week.
If you own a property you are likely to fall into the first category so in the event of you needing Long Term Care, once any cash savings you might have are used up, your property may be be sold to pay for the ongoing cost of your care until all but £14,000 has been used.
How your property is owned is a key factor in whether you will need to fund your own cost for Long Term Care.
Most properties held between a married couple are owned jointly. This is often referred to as Joint Tenants. When a property is owned as Joint Tenants, it will automatically pass to the surviving spouse on death. If your spouse died while you where in Long Term Care, full ownership would automatically pass to you. Your property could then be sold to pay the ongoing costs of your care.
What can you do?
One way of protecting your home is to change how it is owned.
You may change your jointly owned property so that you each own a separate share. This is known as Tenants in Common. Owning your property in this way means that you can leave your share to whoever you wish (preferably through a trust), to your children for example. A trust would be created in both Will(s) to handle the ownership of each share of the property. The rules of the Trust would state that the survivor could remain living in the house (or indeed sell it and buy another) for the rest of their life. On the death of the survivor the remaining share is passed to the beneficiaries and they are left owning the property in full.
After the arrangements have been made, if your spouse died whilst you were in Long Term Care, you would be left owning your half share of the property. The other half share would now be owned by the Trust, on behalf of your beneficiaries. The local authority would not be able to force a sale unless the Trustee's agreed to do so.
In order for the arrangements to have the best chance of being successful it is vital that the arrangements are made as early as possible. As mentioned above it is illegal to deprive yourself of an asset to avoid care costs. It is not illegal however to alter how you own your home when you are arranging your Will.