Care fee planning – how to protect yourself and your family

Michele Todd, partner at hlw Keeble Hawson, offers guidance on how to limit the cost of care fees

care fee planning

The price of residential care – which can cost up to £50,000 a year – continues to be a great concern to many people who fear they will lose the majority of their assets to the Local Authority.

These concerns have been compounded with the news that reforms, intended to be implemented in April 2016 to introduce a £72k cap on costs, have been deferred until 2020 – leaving many families feeling vulnerable.

What not to do

Simply giving assets away is not the answer. Unlike with inheritance tax where after 7 years the asset is outside your estate, a Local Authority can still challenge the gift after any time period in cases where people made the gift to avoiding paying for their care fees.

You also risk losing your house if you make a gift of it and the recipient dies, divorces or experiences financial difficulties while you are still living in it. Some companies ‘sell’ a bloodline trust – which means the house is not counted as an asset – and becomes the property of the trust, ensuring that wealth passes to children.

However, because the Local Authority examines the ‘intention’ behind the gift, these bloodline trusts are as unlikely to work as simply giving the house away. They are likewise extremely expensive and trust documents have been known to go missing.

What you can do

Couples can change their wills via a Life Interest Trust which enables the beneficiary to receive income from the trust during their lifetime. With care fees, the trust allows people to ring-fence their assets – ensuring their offspring will receive some inheritance.

Via these trusts couples can protect their 50 per cent share of the house. The survivor still has the right to live there and the will is far less likely to be challenged by the Local Authority.

About the author

Michele Todd is a partner at hlwKeeble Hawson and specialises in the field of wills and probate – including specifically tax and estate planning. She is a member of the Probate Section and Society of Trust and Estate Practitioners and is also on the Deputies panel of the Office of Public Guardian.

Last modified: June 10, 2021

Written by 3:20 pm Care and carers