Care homes fees and your children’s inheritance
It is estimated that between 40,000 and 70,000 homes are sold each year to cover care homes fees, as the average cost of these amounts to £40,000 a year. If your assets are worth more than £23,250, no contribution will be made by the local authority and you will need to fund these costs yourself. Since your home is normally the most important asset, this may significantly impact your children’s inheritance.
There are several ways of dealing with this. First of all, all older people are entitled to have their means assessment procedure by the local authority, despite the fact that they may have substantial assets. This gives a chance to meet up with a professional to discuss your health and maintenance needs. It may be possible that some alternatives to full time care may be suitable. These may be certain alterations to the property, help at home several times a week depending on need, a sheltered accommodation, but not a full care home. The person in need may also qualify for an attendance allowance, which is not means tested.
If the need for a full time care home is obvious, you would need to carefully consider the options regarding your property. It may be that the rental potential of the property is high enough to help substantially. If total value of your other assets is not higher than £23,000, it is also possible to set up a “deferred payment plan” – this is a charge on the property which will have to be paid off only after its owner’s death. Your Local Authority will be able to advise you on details.
If all of the above is not applicable to your case, you should consider putting your property on trust – there are various trust structures that with careful planning will help beneficiaries to retain a higher proportion of your estate. A specialist legal advice will be necessary.
More and more people are also considering transferring their property to their children. On the first glance, this may look an appealing solution. However, it is not that simple. First of all, if the property was transferred when the need for care was already in contemplation, the transaction may be reversed – unlike with lifetime gifts, there is no 7 year rule, so there is no protection against care home fees! Also, if your children do not reside at the property, they will be subject to Capital Gains Tax when they sell it after your death.
There are also important issues that may arise before you pass away. Once you transfer your property, you lose control over it. It may not be a problem for you in respect of your child, but think about all other parties that may be potentially involved. Your child’s possible divorce, bankruptcy or long-term illness may have grave consequences for both you and them!
Clearly, the issue of payment for care is a difficult one, so careful research and planning is necessary to ensure that you obtain appropriate care and your children do not incur losses that may be avoided.