Care Home Fees – What works & what doesn’t

…I understand that you’ve worked and paid tax all of your life, so you don’t want to pay out any more than you have to. The good news is that there are a few things that you can do to reduce the tax and care fees that you may face. Before I get to them however, it is important to make you aware of what doesn’t work. 

Many of you will have heard, or worse been advised, to put your property into a trust to avoid your property being used to fund care home fees. If you do this your actions may be considered deliberate deprivation by the local authority and in most cases won’t work- despite what other Estate Planners may have told you. The local authority are wise to such trusts and should you require care they simply set aside the trust as though it doesn’t exist and value your estate with your property included – the onus is on you to prove there was a legitimate reason for creating the trust that wasn’t anything at all to do with care home fees. You are considered guilty until proven innocent. For the trust to work, you would have to fail to disclose its existence at the point of assessment, and in doing so you’ve probably committed benefit fraud. 

Far too many local people are discovering that these trusts, that they have been sold by ‘’specialists’ are ineffective at a time in their lives when they could do without finding out that they’ve been duped. 

The other ‘trick’ that people are advised of is to sign over your property to who would eventually inherit it anyway. However, unless you then start paying the new owner the full market rent this becomes a gift with reservation, it is also considered as deliberate deprivation and the new owner becomes liable to pay capital gains tax at a level that they probably wouldn’t have been if the property hadn’t been signed over. A total lose- lose situation.  

What you can do to protect at least some of your Estate is to use a life interest trust in your Will. This works by leaving your half of your property to the second level beneficiaries (often your children) but with a life interest in the property for your partner. This means that they can carry on living in the property or sell it to downsize for example. The person with the life interest needs take precedence over the beneficiaries until they die, permanently leave the property or until otherwise stipulated within your Will. The reason this works is because you can deprive someone else of something, but not yourself and it is therefore not considered to be deliberate deprivation. It is also a very good safety net against your children failing to inherit due to second marriage, sometimes referred to as a ‘Bloodline Will’.    

To talk about the options that are legitimately available to you or to discuss any concerns that you may have about your existing Will or trusts please contact me on 01903 821010 or emma.wells@nsure.co.uk.