Legal Options for Residential Care Fees
If you are considering any of the legal options below, then you need to seek specialist legal advice. The main options include: –
- Will Trusts
- Personal Family Loans
- Discretionary Trusts
- Life Interest Trusts
- Property Trusts
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Will Trusts – Residential Care Fees
Will Trusts are a good way of protecting and ring fencing your half share of your home and your other assets from being claimed by the Local Authority if you die and your spouse/partner/beneficiary subsequently goes into residential care.
Make a Will
Making a Will provides you with the peace of mind that your family and loved ones will be protected and taken care of properly in the event of your death.
Will Trusts are an excellent way of protecting your half share of assets if you die and your spouse/partner/beneficiary subsequently goes into residential care. The most common way is to create a Will Trust specifically in relation to your home. Most properties are held by couples on what is called a “joint tenancy”. If that joint tenancy is severed, then a “tenancy in common” is created. This then means that on the first death, instead of the property automatically transferring to the surviving spouse or partner (as it would on a joint tenancy), the property instead falls into deceased’s estate and is disposed of in accordance with the terms of their Will. Therefore, you serve the joint tenancy and create a tenancy in common, and you then make new Wills including a “Will Trust”. A “Will Trust” will leave your half share of the property not to your spouse or partner, but instead direct to your children or grandchildren, but will give your spouse a right to occupy and continue to live in the property until their death, at which point your half share then possess to the children/grandchildren.
Protect Half of Your Property
The benefits about setting up a Will Trust in the above way is that you can protect and ring fence your half share of the property if you die and your spouse/partner/beneficiary subsequently goes into residential care. Your share is then protected and prevented from falling into the hands of the Local Authority if you die and your spouse/partner then subsequently enters into residential care. This way of preserving your assets is far less complicated and expensive than some of the other options that are available. However, using this route only protects half of your assets and not all of them.
Other assets such as building society accounts, bank accounts and so on can be protected as well by using the same principles. However, you need to take more care when dealing with cash assets so that your surviving spouse has the capital they need to continue living in the manner that they have been accustomed to.
Make new Wills with a Will Trust included – If you are married or cohabiting with a partner then make new Wills that include a “Will Trust” to ring fence and protect your half of the assets.
Personal Family Loans and Legal Charges – Residential Care Fees
If a family member or close friend has provided you with help, care and assistance for an agreed fee, and has not been paid yet, then consider securing any outstanding sums owed to your family or friends as a mortgage or legal charge against your property.
Repayment of Loan(s)
If you have agreed with a family member or close friend for them to look after you for an agreed fee that has not been paid then you could consider repaying any sums due to them or securing the sums against your home as a mortgage or legal charge. If you ever enter into residential care then the loan or charge would reduce the value of your assets and would have to be taken into account by the Local Authority.
For example, you might have agreed that your adult son will spend 3 hours a week doing your gardening and DIY at a rate of £10 per hour. If your son has carried out this work for say 3 years and has not been paid, then he would be owed the sum of £4,780. You might have agreed for that sum and all future similar sums to be not paid to your son straight away, but to instead be legally secured against your property, and to be repaid when the property is sold. This means that if you ever went into care and your property had to be sold then your son should receive his money back first before the Local Authority could claim anything from your home.
Seek advice from a solicitor that specialises in these matters such as ourselves and is able to properly assess and advise you on whether this might be a suitable option for you.
Setting up a Discretionary Trust and placing your assets into that Trust can (depending on the reasons and your personal circumstances) sometimes protect and ring fence those assets from being claimed by the Local Authority.
Reasons for Setting Up a Discretionary Trust
If you set up a Discretionary Trust for genuine reasons that are not related to avoiding paying residential care fees, then there is a chance that it might not be challenged. However, if the Discretionary Trust is deliberately set up to avoid paying residential care fees or if you are already in receipt of some sort of support or care from the Local authority then there is a very good chance that it will be successfully challenged and claimed by the Local authority to pay for your residential care fees.
Deprivation of Assets
Placing assets into a Discretionary Trust can be regarded as deprivation of asset and could be assessed by the Local Authority as notional capital. However, if you are named as one of the beneficiaries of the trust and your interest is discretionary, then it becomes difficult to accurately quantify and the residential care notional capital rule could be excluded. It is however essential that some other positive purposes and reasons are stated in the trust deed, such as you wanting to make better provisions for your family. If you wish to proceed with this option, it is essential that you seek specialist legal advice.
Discretionary Trust Benefits
A general Discretionary Trust is a very flexible arrangement. If you have identified a particular group of people you want to benefit but are unsure which of them, in the future, will need help or in what proportions, e.g. you might like to set aside capital for your children and/or grandchildren then this sort of trust could be useful. Some might be more in need than others and family and financial circumstances could change from year to year. Being a beneficiary of a Discretionary Trust gives no entitlement to receive anything from the trust. Who receives capital advances or the income arising would normally be at the trustees’ discretion. A Discretionary Trust can last for up to 80 years and income can be accumulated for up to 21 years.
Seek legal advice from a specialist solicitor such as ourselves to assess and advise on whether setting up a discretionary trust would be of use to you.
Interest in Possession Trusts
Placing your property into an Interest in Possession Trust can help protect and ring fence your home from being taken into account by the Local Authority for residential care fees.
Interest In Possession Trusts
Setting up an Interest in Possession Trust is a useful way of making provision for estate planning and asset protection. An Interest in Possession Trust is often used in a Will when a person dies leaving a surviving spouse e.g. “To my wife for her life and then to my children.” The wife/ widow can enjoy the assets placed in the trust (shares, cash etc or the use of the family home) but is prevented from dissipating the trust capital. This can ensure that the children receive their inheritance.
How an Interest in Possession Trust Works
An Interest in Possession Trust can be set up so that your property and other assets are placed in to the trust, the trust would own your property. This means that you no longer technically own your home or assets and therefore they might not be taken into account in a Local Authority assessment. You would then include permission that your spouse could occupy the property rent free for the rest of their life. Also, that any income generated from the trust is used for your spouse’s benefit. On your spouse’s death the trust property then passes onto other relatives, such as your children.
Reasons for Setting Up a Interest in Possession Trust
If you set up an Interest in Possession Trust for genuine reasons that are not related to avoiding paying residential care fees, then there is a chance that it might not be challenged. However, if the Trust is deliberately set up to avoid paying residential care fees or if you are already in receipt of some sort of support or care from the Local authority then there is a very good chance that it will be successfully challenged and claimed by the Local authority to pay for your residential care fees.
Seek advice from a solicitor that specialises in these matters such as ourselves and is able to properly help and advise on whether this might be a suitable option for you.
Proprietary Estoppel is a legal concept where it is possible for somebody (e.g. a close relative) to claim that as a result of money they have spent or given you, or work they have carried out or something they might have given up that they now have a prior right to your assets and therefore might be able to prevent the Local Authority from being able to claim and sell that asset or property to pay for your care fees.
Proprietary Estoppel is a complicated area which can provide assistance in specific circumstances. In basic terms, this refers to a situation where one person “A” has acted to his or her determent on the faith or belief which was known and encouraged by another “B” that he either has or is going to be given a right in or over “B’s” property. In this situation “B” cannot insist on his or her strict legal rights if to do so would be inconsistent with “A’s” belief.
Residential Care Application
Sometimes this principle can be applied in relation to protecting property from being taken into account in relation to residential care fees. For example you may have agreed with one of your children that if they lived with you and spent time and money looking after and caring for you, that in return you promised that you would hold the property that you own on trust on their behalf. In this example you and your child could enter into an agreement to legally reflect that arrangement. Because your child has a prior right to the home that should then prevent the Local Authority from taking it all into account in any residential care fees assessment.
Consider if this might apply to you. Seek advice from a solicitor that specialises in these matters such as ourselves and is able to properly help and advise you on whether this might be a suitable option for you.
Property Trusts are a popular option for people who own their own home.
Taking actions with the deliberate sole intention of avoiding paying residential care fees rarely works and will be treated by the local authority as a deliberate disposal or deprivation and will be successfully challenged and the assets reclaimed.
However, if you dispose of an asset for a genuine reason that is not related to avoiding paying residential care fees then there is a chance that it might not be challenged. Therefore, by taking actions for other reasons that are unrelated to residential care fee protection that can work.
Basically, there are legally right and wrong ways of taking actions to reduce paying residential care fees, within the law, and of not falling foul of the deliberate disposal or deprivation rules. However, we can only advise and help on using the legal and legitimate ways of doing this. If we are uncomfortable with a potential action, then we will tell you if it’s not a good idea.
It may be legal to take certain actions to protect certain assets from being claimed to pay for residential care fees, but that doesn’t mean that those actions will be effective. The effectiveness of these actions will not be known with certainty for potentially years and possibly much longer. Anyone who believes that there are guaranteed ways of reducing the payment of residential care fees either don’t understand our legal system or is deliberately trying to deceive you. Rarely can anybody say for certain that any actions you might want to take will prove successful, without it being tested by a court. We inform you of the risks, the consequences. Ultimately though, it is important to form your own understanding of the risks and downsides.