Planning for the Cost of Care
Will poor health in later life put your home at risk?
There is an unspoken fear at the back of many mature people’s minds, particularly if they have children and grandchildren they hope to provide for.
“What if I become frail when I’m older? Will I have to go into a home? Will that rob me of my assets? Will my children’s inheritance be diverted to the council?”
This is an issue that will affect us all. The worldwide trend is that we are living longer but experiencing more vulnerability in our later years.
A recent study by the Institute of Health Metrics and Evaluation at the University of Washington has shown that, since 1980, life expectancy across the globe has increased by ten years, but that healthy life expectancy hasn’t kept pace.
Healthy life expectancy has only increased by just over six years, meaning that, worldwide, our extended lifespan comes with an additional four years of vulnerability in later life.
We see the evidence of this trend here in the UK, with increasing pressure on social care services for the elderly, dubbed a “social care crisis”.
Junior Health Minister David Mowat sparked controversy recently when he told MP’s that the government is looking to save on “soaring costs” of care for vulnerable older people. He suggested that families must, as a matter of course, expect to give as much support to their elderly parents as they do their young children.
Because many parents face the prospect of having to divert much of their children’s inheritance to the council, using the value of their home to pay for care, this is a serious estate planning concern for many families. With the annual cost of residential care averaging £40,000, the cost of a four-year stay in a care home is equivalent to the value of a modest family home in the North West.
However, with the equally soaring cost of housing putting greater pressure on the younger generation, there is growing concern among parents to provide security for their children and grandchildren.
So, how safe is your home? There isn’t a short answer to that question, but it helps to know where you stand legally.
The Current Framework - The Care Act 2014
The Care Act 2014 has set some ground rules as to your rights and obligations as a homeowner if you ever need care: -
If you have a need for care and, your local authority must carry out a needs assessment, regardless of your financial situation. The council must consider and try every option for supporting you in your own home if that is what you want. Even if you don't qualify for funded support, the council must at least give you information and advice.
Council care is means-tested, taking account of both your income and your capital. You must be given a written record of that means test.
Currently, if you have capital of more than £23,250, you must meet your own care costs in full.
However, the council must always disregard a “protected amount” of your capital, currently £14,250. So, the worst-case scenario is that you will always have £14,250 to leave to your family when you’re gone.
Your home’s market value is included in the assessment of capital.
If you have a spouse or partner, you own your house together, and it’s you that needs care, only your half of the house is included in your means test. The value of your spouse or partner’s half is disregarded. So, if you’re in care and your spouse or partner is at home, he or she won’t have to worry about the house being sold from under them, which is some comfort.
However, if, as is often the case, you go into care after your spouse or partner has died, this disregard won’t apply. Nor will it apply if both of you end up in care.
How is your half of the house valued in the means test?
Statutory guidance says the council must get a professional valuer to assess the price a “willing buyer on the open market” would pay for your half, and your half alone.
Crucially, the council can’t just take the market value of the whole house and divide that figure by half. This sounds artificial but has a major impact in practical terms.
It’s very hard, on the open market, to find a “willing buyer” who’d want to buy half a house. This means that the market value of half a house is usually far less than 50% of the market value of a whole house.
For example, if you and your spouse co-own a house that’s worth £150,000, the “market value” of your half, on its own, would be considerably less than the £75,000 you’d otherwise expect if the whole house were on the market.
In principle, if your house is vacant because you have gone permanently into care, the council can insist on the property being sold. However, the Care Act establishes a Deferred Payment Scheme, which replaces a rather messier system that existed under previous legislation.
Deferred Payment Agreements
Under a Deferred Payment Agreement, the council lends you the cost of your care, and the loan is secured on your house. Your house is sold after your death, and the proceeds of sale used to repay the loan.
You are entitled to a Deferred Payment Agreement if:
The council has decided you need to be looked after in a care home, and
Your capital, excluding the value of your house, is less than £23,250.
If you fall outside those criteria, the council can still offer you a Deferred Payment Agreement, but doesn't have to.
Deferred Payment Agreements are big business for local authorities. NHS Digital recently revealed that just under 3000 Deferred Payment Agreements, worth more than £72million, are currently held by a sample of 55 local authorities. This sample represents just a third of local authorities nationwide, so the actual figures are thought to be three times as high.
Protecting the Kids’ Inheritance.
By making intelligent estate planning choices, you can salvage some security for the next generation of your family.
An important first consideration is to start as early as possible. The sooner you put your safeguards in place, the more likely it is that they will work. Don't put it off until you’re “old”.
If you’re a couple, there’s a two-step plan you can adopt.
First, you can change the way you co-own your house by making and registering a Deed of Severance. That means you can both use your Wills to leave your share of the house to the next generation. Without this, your Wills have no effect on what happens to the house when you die. If you die first, your spouse or partner automatically becomes the sole owner.
Next, make a Traditional Will, or, if appropriate, a Family Trust Will. In your Will, make sure that your half of the house is left to the next generation, NOT to your spouse or partner. Instead, leave your spouse or partner the right to occupy your half.
That way, if you die first, and your spouse or partner later goes into care, only their half of the house will be included in their means test.
If you don't do this, and you die first, with your spouse or partner automatically becoming the sole owner of the whole house, the house’s entire value can be included in the council’s means test.
If you’re single, divorced or widowed, this option isn’t open to you. You might instead consider giving your children a “Living Inheritance”, by gifting the house to them, either outright or via a Family Trust. Avoid an outright gift wherever possible, because it can place your home at risk if something later goes wrong in your children’s lives.
Bear in mind, though, that the council, in its means test, can look for evidence of deliberate deprivation of capital. If deliberate deprivation is proven, the house can still be taken account of in the means test, despite having been gifted to your children.
The council can make a finding of deliberate deprivation if the only reason, or the main reason, for the gift, was to avoid care costs. This can be established if, at the time of making the gift, you reasonably expected you’d being going into a home in the near future.
Only think about giving a living inheritance if avoiding care isn’t the main, or only, reason for doing it, and you’re fit and well, living independently, and don't currently expect to need council care.
Inevitably, the question of care is unlikely to come up unless you’re frail and vulnerable. But being frail and vulnerable makes it very difficult for you to manage your day to day finances and speak up for yourself when important decisions about your future are under discussion.
However, you can plan forward now, while you’re fit and well, to retain control of your finances and the big decisions, whatever may happen in the future.
You can do this by making a Lasting Power of Attorney for Property and Financial Affairs and/or a Lasting Power of Attorney for Health and Welfare. Lasting Powers of Attorney enable you to empower the people closest to you, whom you trust the most, to help you with your day to day finances, and speak up for you on the big decisions about your future, if ever you can’t do this for yourself.
And when it comes to the big, personal decisions about your medical care, you can make an Advance Directive, also known as a Living Will, stating what medical care you would and wouldn’t consent to if you couldn’t speak up for yourself. This is the definitive way of making sure your comfort and dignity always come first.
For more specific advice about your situation, and how best to protect yourself and your family, just get in touch, either by completing the contact form below, or by giving us a call on 0151 601 5399.
Video Blog: How to Pay for a Funeral Without Going Into Debt
It's a terrible time when you've just been bereaved, and the last thing you need is practical worries about paying for the funeral.Read more...
A Scary Story! Video Blog
My video explaining how a simple keystroke error almost cost someone their £100k+ inheritance … and what easy action you can take to safeguard yourself against such a thing happening to you.Read more...
Older Childless People “Dangerously Unsupported”
More than a million childless people aged 65 or above are living with dangerously inadequate levels of support, suffering isolation and lack of access to formal care - and that number is expected to double by 2030.Read more...
Taking the Long View
You need to make an estate plan to truly future-proof your family. Here's why, and how to go about it.Read more...
Brexit Turmoil Delivers Reprieve for Bereaved Families
At last, a tiny bright spot amongst the relentless Brexit related misery.Read more...
£110,000 for seven years of care
A court has awarded £110,000 to a granddaughter who provided devoted live-in care for her grandmother for seven years.Read more...
What to Do When a Loved One Passes Away
When you lose someone, the last thing you want is to think about the practicalities, but there are some essential steps you must take to safeguard the estate and ensure that it is passed down as smoothly as possible.Read more...
Estate Planning Essentials for Same-Sex Couples
How to avoid the four most common estate planning pitfalls that can affect same-sex couples.Read more...
D’Oh! Five Ways to Seriously Mess Up Your Estate Plan
If financial security and peace of mind for your nearest and dearest is your priority, it’s essential that you maintain a valid and up to date estate plan.Read more...
Talking About Estate Planning with your Parents
Have your Mum & Dad made their estate plan yet? Should you be concerned?Read more...
What About Your Digital legacy?
How to plan for what will happen to all your online accounts after you’ve gone.Read more...
Don’t let your business get clobbered!
It’s your responsibility to safeguard your business. Here’s how to do it in three easy steps.Read more...
Cost of Care Rises by 10% in Just One Year
The cost of a place in a care home is rising at its fastest rate ever, while pension incomes have little hope of keeping pace.Read more...
Hats off to the “Parentsioners”!
Look around, and you’ll notice you're surrounded by people who quietly go about their daily business of achieving seemingly impossible feats of hard work and organisation. You might be looking at just such a person in the mirror.Read more...
Contested Will Saga Ends in Prison Sentence
A retired window cleaner, who was left £280,000 in the will of a customer, was jailed for failing to hand back the money when ordered.Read more...
Will Inheritance Tax be Simplified?
The Office for Tax Simplification is reviewing the complex Inheritance Tax system. Does this mean there will there be less tax to pay?Read more...
Daughters try to block father’s marriage
Court of Protection forced to decide whether daughters can lawfully block their father’s marriage to his partner of 20 years.Read more...
Three Brothers in Court Battle Over their Mother’s Legacy
The three Heath brothers have already incurred £50,000 in court costs because they didn't have the awkward family conversation about inheritance.Read more...
We Need to Talk About Inheritance
With inherited wealth set to double in the next 20 years, it’s time to get over the awkwardness and have the conversation now.Read more...
Inheritance Tax Bonanza for HMRC
A 23% spike in Inheritance Tax receipts is being blamed on frozen allowances, rising house prices and more aggressive tax collection.Read more...
Dementia Tax – Some Good News?
Cautious optimism as Health Secretary vows to bring forward plans to make paying for care fairer.Read more...
The Tragic Case of “Mr Y”
52-year-old "Mr Y" is being kept alive in a coma while the Official Solicitor defends legal principles.Read more...
Can the Government be Trusted on the Dementia Tax?
Little has been said about the cost of care since the 2017 Dementia Tax controversy. But the few hints dropped by the government have both insulted and threatened parents of adult children.Read more...
Power of Attorney Refunds Available
If you paid £110 to register your Lasting Power of Attorney between 1st April 2013 and 31st March 2017, you are entitled to a refund of up to £54.Read more...
Case Study: Jim and Jean’s Story
Jim and Jean have two grown-up children with complex disabilities. Here’s how their estate plan met their needs.Read more...
The £50million Final Salary Pension Transfer Boom
Here’s why so many savers are moving away from their final salary pension schemes? And why your pension capital should be a key consideration in your estate plan.Read more...
Just how risky are Lasting Powers of Attorney?
An invaluable tool? Or a passport to financial abuse?Read more...
Case Study: Guy and Steve Safeguard their BusinessRead more...
Sheila Kitzinger’s Good Death
Sheila Kitzinger, a passionate advocate for the rights of expectant mothers, pioneered the use of birth plans. And she brought the same control and empowerment to planning her own final days.Read more...
We’re Not Getting Any Older
Life expectancy at age 64 has all but ground to halt, due to the austerity years and a surge in dementia. What can you do for yourself while we wait for a cure?Read more...
Lynda Bellingham’s Sons Betrayed, as Feared
The late Lynda Bellingham’s lack of a proper estate plan risked leaving her sons with nothing – now her widower has done exactly what she least wanted him to do.Read more...
Probate: What’s it all about?
If you are dealing for the first time with the estate of someone who has died, you must quickly get to grips with some probably unfamiliar concepts. This is a short introduction to the issues you may have to deal with.Read more...
Redefining old age?
Seismic demographic changes mean we must re-think what it means to be “old”, says one of the UK’s leading social scientists.Read more...
Case Study: Ray & Joyce
How this retired couple made sure most of their main asset would be inherited by their children – and not the council.Read more...
Business Property Relief
If you are a business owner, it’s likely that your business is one of your main assets. You may want to pass your business to the next generation as a going concern, or you may want your dependants to benefit from the value of the business after you’ve gone.Read more...
Seven Inheritance Tax Tips for Buy to Let Investors
If you’ve invested in buy-to-let, you’ve probably done so with the intention of creating a steady income for yourself, together with capital to hand on to the next generation when you’re gone. But unfortunately, wealth tied up in residential lettings often comes with a significant Inheritance Tax burden.Read more...
The Residence Nil Rate Band
A guide to making the most of the new Inheritance Tax allowance.Read more...
Case Study: Tony and Diane’s Story
How Tony and Diane secured an Inheritance-Tax-free legacy for their daughter and planned a secure retirement for themselves.Read more...
What’s all this fuss about The Dementia Tax?
It’s odd that there has been so much vociferous debate about “the dementia tax”, as if this is an outrageous new concept proposed by a rapacious government. The truth is that people with dementia have been robbed of their legacy for decades to pay for their care.Read more...
Separating Elderly Couples in Care is Inhumane
It's scary that Social Care leaders actually had to be told at a recent conference that separating elderly couples in care is inhumane.Read more...
Inheritance Tax Planning with Enterprise Investment Schemes
Not keen on the government gate-crashing your funeral to demand yet more tax? An Enterprise Investment Scheme may be a useful addition to your estate planning toolkit.Read more...
Sons’ Inheritance Blown on Legal Fees
Two brothers have wasted their entire inheritance on a doomed court battle to contest their late father’s will.Read more...
Helping your Parents to Cope
The Guardian newspaper recently published a helpful group discussion, in which readers shared their own experiences of what has worked for them in offering a helping hand when a parent is finding it all too much.Read more...
The Supreme Court’s Decision in Heather Ilott’s case.
The 2015 Court of Appeal Decision in Heather Ilott’s case has been overturned. The Court of Appeal’s 2015 award of £163,000 has been reduced to £50,000.Read more...
Charitable Legacies - a Win-Win
Leaving a charitable legacy in your Will makes you feel good AND gets you an Inheritance Tax discount – what’s not to love?Read more...
Our friend died without saying she’d left us £110k
The rate at which estates go unclaimed has risen two and a half times in the last five years, according to government figures recently released.Read more...
Who gets the kids if something happens to us?
It’s a horrible thought, isn’t it? Nobody wants to imagine their beloved child being orphaned, but thinking about the unthinkable, and making proper plans, is a vital parental responsibility.Read more...
Is Your Child’s Inheritance Divorce-Proof?
Doreen Crowther may lose her house because her inheritance wasn't divorce-proofed.Read more...
Planning for the Cost of Care
Will poor health in later life put your home at risk?Read more...
Status Quo Rocker Rick Parfitt Disinherited his Wife
The late Status Quo star Rick Parfitt disinherited his wife in the final days before he died, it has emerged. But all is not as it seems.Read more...
My Health Scare - and why I’m so glad I made an Estate Plan
My New Year was overshadowed by a major health scare – but my estate plan assured me that, whatever might happen, my clients and loved ones are protectedRead more...
Your New Year’s Resolution?
If you haven't made your will yet, you risk leaving a mess behind for the people you love.Read more...
George Michael’s Estate Plan
Much missed pop legend provides for his sisters, god-children and favourite charities in his WillRead more...
Our 2017 Continuing Professional Development Programme
Our 2017 Estate Planning Training Programme for Accountants and Financial Services ProfessionalsRead more...
How a £2000 Inheritance Transformed 40,000 lives
Vashti Seth started a charity with a legacy from her dadRead more...
The £72million House Heist
Councils’ £72million raid on older people’s houses to pay for careRead more...
Royle Family’s Caroline Aherne Accidentally Left Her Mum with a £71,000 Inheritance Tax Bill
Inheritance Tax stress for Caroline Aherne's bereaved MumRead more...
“Get a Job!”: Disinherited Daughter’s Court Battle Ends in Humiliation
Danielle Ames loses her fight with her stepmother for a share in her late father’s fortuneRead more...
Danae Brook’s Story: A Blended Family Blighted by Intestacy
How Danae’s husband’s intestacy left this blended family in chaos.Read more...
The Truth about Deliberate Deprivation of Capital
Thinking about making a significant gift to your children? Worried that the council might snatch back the gift if you later go into a care home? Here’s what you need to know.Read more...
Disinherited Daughter v Stepmother
Disinherited Danielle Ames in Court Battle with her Stepmother over her "Idolised" Late Father's FortuneRead more...
Is the Traditional Marriage an Endangered Species?
In a major cultural shift, married couples are now in the minority as most couples choose to cohabit. Is this the beginning of the end for traditional marriage?Read more...
Video Blog - Inheritance Tax and You
Will my estate be affected by Inheritance Tax?Read more...
The Hurt and Rejection of Daisy Goodwin
It's every parent's responsibility to talk to their children about the legacy they might leaveRead more...
Trusts to Manage Inheritance Tax – One Rule for The Duke of Westminster and One for the Rest of Us?
The toxic urban myth that Inheritance Tax is for "the little people".Read more...
Toby Wales’s Story
The power of wills to transform lives for the better.Read more...
Heartache and Chaos from a Lost Will
Alison Shields tells of the distressing consequences of her father's lost will.Read more...
Father’s fear of making a will left his young daughter penniless
How Katy Young was accidentally disinherited by her father's fear of making a will.Read more...
Property tycoon sued beyond the grave.
Ex-civil partner of deceased millionairess in court bid for larger settlementRead more...
Stepfamilies & Blended Families Estate and Legacy Planning
A video guide for people who have stepfamilies or blended familiesRead more...
Frugal Bachelor Leaves Surprise Legacy of £1.5million to his Local Hospital
Heartwarming Generosity of Peter GibbonsRead more...
Case Study - How Dervla’s Inheritance Tax Planning Saved £120k
In today’s climate, “fail to plan” means “plan to pay lots of Inheritance Tax”Read more...
Video Blog - Estate Planning Tips for Business Owners
A Video Guide to Keeping your Business ResilientRead more...
Angela Rippon – a Happy Singleton Putting her Affairs in Order
In advance of the BBC documentary "The Truth About Dementia", Angela Rippon shares her concerns.Read more...
“Do Not Resuscitate” – Could this Happen to You Without your Consent?
The NHS knows that it's happening - and why it's happening - but won't be doing anything about it anytime soon. Here's how to protect yourself and your family.Read more...
The 8 Vital Questions You Should Answer Before You Make a Will or Estate Plan
How to choose an estate plan that's fit for purpose and within your budgetRead more...
Estate Planning Tips for Happy Singletons
This is an estate planning guide for single people - what you, as a happy singleton, can do to plan a secure future and a meaningful legacy.Read more...
Oxo Mum’s Family Torn Asunder by a Badly Made Will
How poor estate planning has left the late Loose Women star’s sons powerless – and possibly penniless.Read more...
Case Study - Bill and Anne, Buy to Let Investors
How we helped a couple ensure a secure future for theselves, their family and their buy to let portfolioRead more...
Estate Planning Considerations for Buy to Let Investors
This is the first in a two-part series that looks at the estate planning concerns of buy to let investors - and some of the many available solutions.Read more...
Come Live with Me and Be my Love ....
Five practical tips for living together securelyRead more...
Colin and Eleanor’s Story - Peace of Mind for Four Generations
This is the story of Colin and Eleanor, great-grandparents who wanted the peace of mind of knowing their assets were protected for the four generations of their family, and that their own personal wishes were respected no matter whatRead more...
Soaring Probate Fees - a Stealth Tax
The Ministry of Justice has announced a fee scale that increases the cost of probate by up to 130 times the present fee. Here are some ways of managing the cost of leaving a legacy for your family, so their inheritance is maximised.Read more...
Joy Williams’ Legal Battle - And Her Lessons for Couples Living Together
Joy Williams has won an exhausting, four-year court battle to save her home – but it could all have been avoidedRead more...
How a £90 Will Cost a Daughter Half a House
Ebenezer Aregbesola used a low-cost will-writing service to prepare his will - consequently a crucial loophole was missed, which robbed his daughter of her inheritance.Read more...
Making Your Child’s Inheritance Divorce-Proof
Marriage isn't always forever - is there a way to protect your child's inheritance from the consequences of a divorce?Read more...
How A Blunder Over Geography Led to a High Court Battle Over a Scientist’s Will.
A High Court battle between The Royal Society and an eminent scientist's family centred on the meaning of the phrase "United Kingdom".Read more...
Twice the Maternal love, but Twice the Inheritance Tax Burden
The Utley family have shared in the national press their heart-warming story of sisterly devotion, and their worries about the way a wholly unexpected turn of events has placed them in a dilemma they’re unsure how to solve. Here are some potential solutions.Read more...
Guest Blog - Building a Secure Future with ISA’s
This guest blog is brought to you by Neil Ridpath, an Independent Financial Advisor with Neil J Ridpath Wealth Management Limited. A fundamental part of planning for yours and your family’s financial security is making the most of your assets. Here, Neil tells us about Individual Savings Accounts, and why they are such a useful tool for getting the best return form your hard-earned savings.Read more...
Standing Up for the “Mustn’t Grumble” Generation.
Recent reports suggest that older people are getting a raw deal in many aspects of life, because they generally don't like to complain. How can we make sure older people receive the great service they deserve?Read more...
Seize the Day! Overcoming Procrastination about Protecting your Legacy
How to overcome the impulse to put off important decision, like protecting your legacy.Read more...
Self employed? Here’s how to safeguard your business and your family
If you're self-employed, your business can be your greatest asset and your greatest responsibility - here's how to keep it safe. come what mayRead more...
“Inheritance Tax is too toxic to save”, says The Fabian Society
The Nation is almost unanimously opposed to Inheritance Tax - but abolition is unlikely so we must fight back in other ways.Read more...
Advance Care Planning - Staring Into the Abyss or Taking Back Control?
Considering an Advance Directive takes some courage - but brings peace of mind for you and your family.Read more...
Don’t Mind the Council Inheriting your House? Then Go Ahead and Make Basic Mirror Wills
The potential price of making simple mirror wills.Read more...
Why leaving your estate to your other half can be a terrible mistake
The risks in making straightforward Mirror Wills.Read more...
The Sad Story of Mr and Mrs Henein - Husband Left Homeless by Lack of Proper Planning
Why it's so important to talk to each other about the future.Read more...
Back to Basics - Why Make a Will?
Why you should make a will, and why it should be up to date.Read more...
Subscribe for Updates & Information
"Thank you for your professional services and personal touch. I felt I was dealing with, and making, a friend. "