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Estate planning for care home fees

View profile for Michael Dunville
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Concerns about protecting a client’s savings from the liability to pay for care home fees remains one of the most common concerns of clients who see us for estate planning advice.

In the case of a married couple, one of the best ways to ensure that as much of the estate as possible passes to the next generation is to include a trust that will take effect on the first spouse’s death. The deceased spouse’s share of the property will be placed in the trust on his or her death and cannot be accessed to pay for care home fees for the survivor. The survivor will be allowed to live in the property for the rest of his or her life and then the property passes to their children.

Many clients are not aware of an additional benefit for the survivor’s care home fees by having the property placed in trust and splitting the property ownership. The additional benefit is that if the survivor has to go into a care home the local authority, when carrying out their financial assessment, has to take into account the market value of the property of the survivor. 

The market value of the survivor’s 50% share in the property is not 50% of the whole value, because if you were to place just the 50% share of the property on the market to be sold, you would not achieve anything near 50% of the whole value.

As there is no market for this type of share, the market value is whatever value it could be sold for at auction, and it is likely to be very close to zero.

Assuming the other assets in the resident’s name are below £23,250, they are likely to be eligible for financial assistance from the local authority, simply by splitting the property ownership between their deceased spouse’s estate and them. 

Following on from this, if a resident qualifies for financial assistance from the local authority, finding a care home that will accept local authority rates may then be difficult. As a result, often the resident will go to a more expensive care home and the top-up payment will be paid by them or by the family.

Before doing so, the resident or their family should ask the local authority if there is a care home available that does not require a top up, so available at local authority rates. If there is no availability, then the local authority is responsible to pay the top up payment for the more expensive care home.

If you want to discuss planning for care home fees in more detail, or think you may be entitled to a refund for top up payments please contact Ben Jones at our office in Watford on 01923 650850. 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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