Sam Dunn: 'Will my parents have to sell up to pay for care?'
Wednesday 27 May 2009
Question: My husband and I are worried that his parents will need to go into a home in a few years' time and will face large fees to be met by selling their house. They have savings of around £42,000, but little else, and want to pass on their property to us but fear it will be swallowed up by care costs. Is their home, and our inheritance, at risk?
Answer: Sadly, your concern is well-placed: finding the cash to pay for care home fees of an average £24,500 a year is a disconcerting matter for hundreds of thousands of other families across the country.
Given that average monthly fees of £2,040 are three times those of a typical UK mortgage, it's a frightening sum of money to think about at a time when – I am presuming – your parents are no longer working.
"The cost of long-term care can shock lots of families, especially when a family home is the only realistic way of paying for it," warns Alex Edmans, an adviser on care funding at Saga group for the over-50s.
As it stands today, your husband's parents' assets will soon be eaten up by fees because they will be deemed wealthy enough to pay.
And here's why: anyone who lives in England and has over £23,000 in "capital" – investments, savings or shares plus the value of your home – will be means-tested and considered by their local authority to be capable of paying the complete cost of their care.
About 40 per cent of the 420,000 care-home residents have to stump up the care costs because they don't qualify for local authority help, Age Concern says.
Your in-laws' savings alone place them in this bracket but, of course, with the average house price hovering at around £150,000, according to Nationwide building society, plenty of other families will also be pushed over the threshold.
There are exceptions, though, where your husband's parental home can be excluded: its value won't be counted if either spouse carries on living there or if other relatives aged 60-plus live there.
To be frank, this isn't an easy situation for you to control: you've no idea how events will turn out – both may need care within months of each other, say – but you can be sure that your in-laws' savings will quickly disappear.
(It's worth noting that once their capital dips beneath £23,000, their local council will at last start to help.)
However, there is a quirky – and legal – way to protect their home by putting it into a specially-created trust but they'll need to act fast while they're still healthy.
This is down to what's called "deliberate deprivation of assets", says Irene Borland, care advice manager at NHFA specialist adviser.
"If the local council thinks you've deliberately acted to protect your assets from being considered for care fees, they can discard their action," she adds, which means their house will be included.
Say your father-in-law suffered a bad fall tomorrow, prompting imminent care, and you tried to create a trust to protect your house from means-testing, the local authority would smell a rat.
But do it today and – hoping your in-laws live healthily for years to come – their home would be secure from means-testing because it had been done long in the past.
To place your home in a trust costs from £500 to £2,000 and essentially involves severing the usual "joint tenancy" on the mortgage deeds into "tenants in common". Effectively, their house is halved and 50 per cent handed to your husband, say, in a trust; this way, his half of the house is kept out of the council's calculations for care means-testing.
This can be a complex process so consult a solicitor.
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