Avoiding Care Home Fees
Often, following a death, a spouse or civil partner is left on their own. Not only are they on their own but they may also own all of the family wealth, including the matrimonial home. Care home fees are expensive and can quickly and significantly erode the assets the elderly person was expecting to pass to their children.
Certain types of investment bonds are not included in the care home fee means testing calculations and it may be worth exploring these with a financial adviser to protect those monies should residential care become necessary. With any such planning timing is of the essence. Consideration can be given to transferring the house to a discretionary trust with the owner as one of the discretionary beneficiaries plus, say, children and grandchildren.
As a discretionary beneficiary they cannot be assessed as having an interest in the property for care fee purposes (the discretion must be exercised in their favour to create that interest) but the trustees could, if desired, grant them a lease back for life at a peppercorn rent. Alternatively, the house could simply be transferred outright to children (or whoever).
Whatever is done, timing is critical. There must be no contemplation of the need for care when the transfer is completed and, ideally, a minimum of 5 years should elapse before care is needed so as to avoid the potential ramifications of the Insolvency Act under which the local authority may make a claim. Many County Councils will look at all cases so, in short, the sooner the exercise is completed, the better from that point of view. Any such action would not be effective for Inheritance Tax planning unless the person still occupying the property paid a market rent to the new owners.