The National Health Service and Community Care Act 1990 came into force on the 1st of April 1993. Ever since then anyone in full-time residential care who have sufficient assets, but modest incomes, have been forced to seek ways of disposing of their property to put it beyond the reach of local authority care fees assessment.
Amount of capital you have
How your capital is used to calculate your contribution to your care home fees
Over £23,250
You will be assessed as being able to meet the full cost of your care
Between £14,250 and £23,250
The capital between these amounts will be calculated as providing you with an income of £1 per week for every £250 of your savings
£14,250 or under
Your capital will be ignored in calculating how much you have to contribute to the
Q. My wife and I signed over our house to our four children seven years ago. If either she or I have to go into a care home, will our children be forced to pay anything towards the fees? The local authority will calculate the amount payable on the capital you have at the time you are taken into care. Your capital will include any buildings, land, shares and savings. If it adds up to more than £23,250 (£22,000 in Wales and £22,750 in Scotland) you will have to contribute towards the cost of your care. However, the local authority has the right to look at any assets you have given away and if it decides this was done to avoid future care fees, it can assess you as if you still owned the capital. If you gave your home to your children for another good reason, or at a time when you were fit and healthy and could not have foreseen the need to move into residential care, it is possible the local authority will not take any action.
WARNING: the seven-year rule only applies to estates that are under the Nil Rate band (currently £325,000 per person), if the joint estates are in excess of the £650,000 (two-nil rate bands) there will still be a charge to inheritance tax on the excess sum at 40%. The seven-year rule only applies to inheritance tax and HMRC; the local authority can look back as many years as they want to see what assets the person in care owned and how and why they disposed of them.
If it can be shown that you have deliberately disposed of assets to avoid paying for care fees then the assets can be reclaimed by the authority to pay for any care fees due.
Contact Kennedy Burchill for further information on the Protective Property Trust.
Q. We own our home in joint names?
Most couples when they buy their home on a mortgage find they own the property as ‘joint tenants’. The up-side to this is that the property will pass to the survivor by ‘automatic survivorship’ regardless of individual circumstances and need, and irrespective of what each Will may state.
The downside is that it is impossible to plan for individual deaths, even via a Will, due to this survivorship situation.
This would be particularly important to know in a situation where a couple has been married or in a relationship before and have children of that relationship that they would want to benefit from their share and interest in their property.
To get around this, you need to consider ‘severing’ the joint tenancy (or ownership) to what is called ‘tenants in common. This will ensure that you both hold your share of the family home in specific shares and as such, you can ‘will’ your share to your children or other beneficiaries as you wish. The Will should also contain a simple but effective property trust, commonly called a Protective Property Trust, which guarantees that the survivor will have the security of being able to remain in the property and have full use of it but that the deceased’s share remains in the trust until the trust ends.
Contact Kennedy Burchill for further information on the Protective Property Trust.
FAQ
In today’s busy and more complicated world, making a Will as part of your planning has never been so important.
Greater wealth and more complex family arrangements can mean at a time when the family should be mourning a loss, loved ones are having to concentrate on sorting out matters that could have been dealt with in advance.
Frequently Asked Questions:
The simple answer is yes. However, there are many pitfalls for the unsuspecting person which may result in estate assets passing to persons not intended to receive them, either because key Will provisions are invalid, or because the person’s choice of words runs foul of legal rules or principles of which the writer was unaware. The best advice is to rely on a professional Will writer to take your instructions and translate them into a legally effective and binding will, without the experience a professional Will writer brings your Will may not have any legal standing meaning the provisions for your family fail to take effect.
We will require your basic personal details and the names and addresses of your family members
Also, before we can draft your will we will require identification and we will ask questions about your wishes. More importantly, before we visit there are several considerations you should make in order to better decide what should be included in your will:
Who do you want to benefit from your will? These people are known as beneficiaries. You may also want to consider whether you wish to leave any money to charity. Who do you want to look after your children/dependents under the age of 18? What type of funeral do you want? How much money, what property, valuables and possessions do you have, for example, property, savings, shares occupational and personal pensions, insurance policies, bank accounts, jewellery etc. Who is going to carry out your wishes? These people are known as the executors and you can appoint them in your will. The courts may also appoint other people to be responsible for doing this job.
You should review your Will at least every two to five years or sooner if your personal circumstances change. For example, if there are additions to your family, or deaths in your family, or financial changes that affect your Inheritance Tax liability.
If you have an unmarried partner (and are not in a civil partnership) you will NOT get a share of your partner’s estate if they die without making a Will. If they haven’t provided for you in some other way, your only option is to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 ‘If you feel you’ve not received reasonable financial provision’, this will take time and there are no guarantees.
NOTE: The statements provided are not intended as a complete or authoritative statement of the law. Furthermore they: Do NOT constitute legal advice by Kennedy Burchill Ltd; Do not create a contractual relationship; Do not form part of any other advice.