Consider the following: After many years of hard work, owning your own home and building up some savings. It may seem like you are all set for retirement. You’ve planned out your inheritance leaving something for your children and/ or grandchildren.
Protective property trust
Protective property trust
Are you planning to sign off or transfer your home to your children?
What happens if you need Long term care?
If you have more than £23,250 or more capital, this includes your home. All the care costs are your responsibility to fulfill. This include:
- Full cost of accomodation
- Attract and retain quality, high-paying customers
- Personal Care
These costs will wipe out your entire savings and your property may have to be sold to pay those fees. When anybody enters long term care they are initially “means tested” and ALL of their assets are taken into account.You will only be exempt if you have very little (currently under £14,250).
Transferring your house to your children, think twice. Some of the problems which may arise include:
- If your child divorces, your house will form part of their divorce settlement. A forced sale could arise to pay out the ex-spouse’s share.
- Your child may become bankrupt (this could be as a result of a business failure or credit card debt) they could then force a sale of your house to pay off the creditors.
- If your child dies before you, your house may pass to the wrong person (e.g., to your son-in-law or daughter-in-law).
- Your child could borrow against the house putting the property at risk.
- Your child could sell the house without your permission.
- Your child could pressure you to enter care before you are ready to do so.
- Your child may have to pay Capital Gains Tax on the sale proceeds.
You could also be accused of a ‘Deliberate Deprivation of Assets’. The City Council states:
“If you dispose of any capital, assets or savings before you go into a care home or when you are already living in one, we are required to investigate the circumstances. If we decide that a significant factor in your decision for the disposal was to avoid or reduce the amount you have to pay towards your care home fees, this may result in the financial assessment being completed as if you still have this asset.”
So what can you do?
We will assess your property and see how it is owed. Do you have a Joint tenant? This may be the correct way to own a property in certain circumstances but for many people, this is not the answer for either Care Cost issues or Inheritance protection. Severing the tenancy on the property and changing the ownership to Tenants In Common, so you now each own an identifiable 50% (percentages can vary if required) and then setting up mirror Wills, each transferring the share of the property to a Trust can safeguard your home.
A Protective Property Trust comes into force on the first death.
The share of the deceased’s property is passed into a trust rather than straight to a beneficiary. The Trust is set up to accept the share of the property and at the same time a Lifetime Interest is created for the remaining owner of the other share of the property (normally the remaining spouse or partner) this lifetime interest allows the remaining owner to;
- Sell the property if they want to, in conjunction with the trust.
- Buy another property with the proceeds of the sale of the original property.
- The powers of the Trust allows the remaining spouse/partner to borrow any cash in the Trust with or without interest as deemed by the trustees (remember that the remaining spouse/partner would normally be beneficiary and Trustee).
- The property cannot be sold without the permission of the lifetime tenant.
- The lifetime tenant cannot be evicted from the house for the rest of their lives.
- The ultimate beneficiaries of the Trust would normally be the children after second death.
Remember we offer a free consultation, we can even come to you.