PROPERTY PROTECTION TRUST
LONG TERM CARE FEES
It is not surprising that few of us have considered what the effect might
be on our savings and investments, or even our home, if we ever
needed residential care later in life.
Most people assume that we will pass on our assets to our children or
other relatives in due course, yet this may not always be the case unless
careful arrangements have been made to protect our assets from being
taken to pay care home fees.
Thanks to advances in medical science and a general improvement in
health and fitness, everybody is living longer.
Even with this in mind, it is highly probable that one or even both
partners in a household will require long-term residential care at some
point in their lives. This is particularly so given that it is becoming much
less common for elderly parents to move in with their children these
days.
THE CURRENT SITUATION
In recent years, it has become increasingly apparent that the State will
only provide for those with little or no savings or assets. Everyone else
will be expected to pay at least part, if not all, of his or her own costs.
Currently, anyone with assets in excess of £22,500 (this includes the
family home) would not be eligible for any state help with their residential
care fees. If you have more than £12,000 but less than £22,500 you
would only be entitled to partial assistance.
The net result is that anyone who owns their own home is unlikely to
receive any assistance even though they do not have large amounts of
cash assets.
Even if you don't have the cash readily available, the Department of
Social Security can still place a charge against the family home, which
allows them to recover the moneys owing when the property is
eventually sold.
Average residential care fees start in the region of £500 per week so it is
clear how quickly assets can be eroded. The DSS has often become the
sole outright owner of the family home after the death of an elderly
parent who had been living in a nursing home. But there is a solution.
THE PROPERTY TRUST
A 'Property Trust' is based around three basic elements: the basis on
which you own your property, the Trust terms, and your Wills, which
contain the Trust instrument.
The Property trust can only be created whilst both partners remain alive
and the property must be owned as Tenants in Common .The Trust
instrument is then included in both Wills but does not come into force
until after the death of the first.
Upon the first death their share of the property, typically 50%, is placed
into the Trust to be administered by the Trustees nominated in the Will,
and this usually includes the surviving spouse. The Will also specifies
who is to be the ultimate beneficiary of this share in the property and the
Trustees duty is to protect the property for the benefit of the
beneficiaries.
The surviving spouse, under the terms of the Trust, has the right to
remain living in the property for the rest of their life. On the death of the
second spouse the trust comes to an end and the property passes
absolutely to the beneficiary
This means that the survivor never becomes sole owner of the property
which prevents the Local Authority including the whole value of the
property when totalling assets if the survivor needs permanent
residential care. So the most that could be claimed against is the
survivor’s half of the property.
Does half a property have a value? In 1993 the High Court ruled that
because half a home cannot be sold or rented by itself, there was no
value to it and a market valuation today may well follow this ruling. In
which case, the value of the asset would be zero and the total value of
the property protected.
Why a Protected Property Trust? As well as protecting the home, the
Protected Property Trust safeguards the interests of the surviving joint
owner, ensuring that the survivor has the right to live in the property
without payment of rent for their lifetime. The Protected Property Trust is
flexible and will allow the survivor to move home, buy, sell, upgrade and
downgrade.
Only after the survivor dies does the first share of the property pass to
the children or other beneficiaries. The survivor cannot be forced to sell
or move without consenting. The Protected Property Trust can also
protect the residential rights of a current partner if the property share is
to be left to children from a previous relationship or other beneficiaries
OTHER IMPORTANT FEATURES
• The surviving partner does not own the deceased's share of the
property. If that person then goes into residential care then only his/her
share in the house can be included as part of the assessment of their
contribution to care costs.
• The surviving partner is given a 'Life Interest' in the deceased's share
of the property, so they are entitled to live in that property for the
remainder of their life and the property cannot be sold without their
permission.
• If the surviving partner chooses to sell and move to another property
the proceeds from the sale can be used to purchase the second
property and the terms of the trust remain over the second property.
• If there is any excess capital following a sale then the money is
invested and the surviving partner can take the interest that is
generated as an income.
• The deceased's share in the property is fully protected for the
beneficiaries, so even if the surviving partner remarries, the children's
inheritance is protected
