With care costs increasing dramatically, people continue to lose more of their savings, investments, and property to the cost of care than ever before. There are ways you can use your will to protect your estate from care home fees, but this is never something you should attempt to do without expert legal services from a professional solicitor.
In this post, you’ll learn how care home fees can affect you and your family and what you can do today to protect your assets for the future.
Rising Care Home Fees
Research from Prestige Nursing and Care has shown that the average annual cost to stay in a residential care home has increased by £1,536 (5.6%) to £30,926 in the past year.
The average rise is more than 10 times the £156 average increase in pensioners’ income over the same duration. On average, pensioners earn £14,456 a year which would cover less than half of a year’s worth of care.
This is causing concern for many people about the possible costs involved with paying for any necessary care fees in the future and the impact this could have on reducing the value of inheritance received by children after both parents have died.
Consider the following example:
Mr. and Mrs. Jones were in their 60s and had two adult children. Their joint estate was worth roughly £250,000, primarily made up of their home worth £240,000 and £10,000 of savings. They wanted to plan for the future while keeping everything simple and straightforward, so they put in place standard mirror wills. These wills leave everything to the other when the first dies and then to their children in equal shares after the surviving spouse dies.
A few years later, Mr. Jones passed away and his estate passed to Mrs. Jones in accordance with his will. Mrs. Jones continued to live independently over the next few years. Unfortunately, Mrs. Jones suffered a stroke which meant she required residential care. She was financially assessed by the Local Authority who determined that the value of her assets was £250,000. Because this exceeded the maximum threshold, she would have to pay the cost of her care in full.
The residential home fees added up to £30,000 a year and her matrimonial home was sold to pay the costs. She continued to live in the home for five years until she passed away. During this time, she had incurred £150,000 in care costs (5 years x £30,000) which reduced the value of her estate to £100,000 when it passed to her children.
This is a common scenario as couples who aren’t properly prepared don’t realize the impact care costs can have before it’s too late
Protecting Your Assets
If you need to move into a care home in the future and you have more than £23,250 in savings or assets, including the value of your home, you will usually have to pay for the full cost of your care.
If your savings or assets are valued between £14,250 and £23,250, you will usually have to pay a contribution to your care, with the Local Authority paying the remainder. When your assets are below £14,250, the Local Authority will take over paying the fees for your care.
As the cost of care continues to increase, people are seeing their hard-earned assets dry up at an alarming rate. With the average house worth £213,927, if just one spouse needs care, you could lose nearly all your assets to care costs in roughly six years. This would mean you have nothing to leave to your children or grandchildren.
Care Fee Trust Will
Fortunately, there are steps you can take to prevent this from happening. Instead of leaving all your assets to your partner in a mirror will, you can make a Care Fee Trust Will which allows you to leave your assets to your partner for the duration of their life, and then to your children or whoever you choose.
A Care Fee Trust Will requires that the family home is held as tenants in common rather than as joint tenants. This means that each spouse owns 50% of the property rather than owning the home together in a single indivisible share.
With a Care Fee Trust Will, your partner can use the share of the home during their lifetime. Should your partner ever need care, the Local Authority cannot take your share to pay for care fees since your partner does not technically own it. This can help preserve the value of your estate before it is passed to your children.
Elizabeth Middleton Solicitors offers the legal expertise you need to plan for the future and protect your assets. We understand that everyone’s circumstances are different and our friendly and approachable legal team works to develop wills, lasting powers of attorney, and tax and estate planning suited to your unique needs.
Contact us today to learn how our services can help you and your family prepare for the future and protect your estate.