HOW TO PLAN FOR THE POTENTIAL OF CARE FEES

Last month, Emma Deering, of Lanyon Bowdler Solicitors in Conwy, looked at the pitfalls of gifting your house to your children to avoid inheritance tax. In this issue, she examines how to prepare your finances to plan for the possibility of care fees in your later years...

What are the current rules and obligations in relation to paying care fees?

Put simply, in Wales any individual who has assets over the value of £50,000 will have to fully fund their care until they get down to that level, and only then will they start to get assistance from the local authority.

Many people who come to see us are concerned about the prospect of paying for their own care when they get older, because care packages are means tested, so if you own a property it will get taken into consideration.

However, it’s important to understand that if you go into care and are assessed on your capital, there are certain things which get disregarded. For example, if you are a married couple and one of you has to go into care and the other continues to live in the family home, then the whole of the property value is disregarded when looking at the capital of the spouse who is going into care.

What can you do now to plan ahead?

A common misconception is that if someone gifts their house to their children it will not be included in their estate when the local council considers if they can afford to pay for their own care – but that is often not the case. In actual fact, if you have given your house away there is a strong risk that a local authority, when looking at your capital, can go back any number of years and argue that the reason you gifted your house was because you were trying to avoid care fees.

Another option which people consider is transferring their house to a trust instead. But again, there is no guarantee that it will obtain the desired result. A much better thing to do is prepare what is known as a care fee planning will, which is a light-touch way to get your finances in order, taking potential care fees into account.

Essentially, you restructure your wills so rather than everything going to the surviving spouse, the half-share of the house belonging to the person who has passed away goes into a trust. The terms of that trust allow the surviving spouse to still occupy the house and enjoy the benefit of the half-share for the rest of their days.

Then if the surviving spouse has to go into care and are assessed on their capital, they only own one half of the property. The other half is owned by the trust and is therefore disregarded by the local authority.

This type of care fee planning will could also cover individually-owned cash assets, and therefore potentially protect half of the value of a married couple’s entire estate. n

For more advice about wills and planning for the future, contact the Lanyon Bowdler team in Conwy on 01492 557070 or visit the website at www.lblaw.co.uk