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The potential price of making simple mirror wills.

The potential price of making simple mirror wills.

Don’t Mind the Council Inheriting your House? Then Go Ahead and Make Basic Mirror Wills

The potential price of making simple mirror wills.

It's a common scenario. You work hard throughout your marriage, save for your retirement, pay off your mortgage, see your kids safely into adulthood and expect that, at the end of your life, you will life a legacy of financial security behind for your children and grandchildren.

But there is a nagging worry:

What if I have to go into care when I'm older? Will there be anything left for me to pass to my children?

With the average cost of residential care now running at £40,000 per year, it only takes four years of residential care for the entire value of a £160,000 house to be used up to pay for care. And with an average life expectancy of 84 years, but an average healthy life expectancy of 76, more and more of us can expect to need residential care in the last eight years of our life span.

How does this look in practice?

Pete and Sandra are a retired couple in their seventies. They have two grown-up children, Kevin and Julie, who are both married with children. Their house is worth £200,000.

Sandra has mild dementia, and Pete has a heart condition, but they manage at home with a little support from Kevin and Julie.

Pete and Sandra have made traditional mirror wills, leaving everything to each other on the first of their deaths, and equally to Kevin and Julie on the second. They expect that, when they have both passed away, Kevin and Julie will each inherit £100,000 from them.

But then Pete dies. At first, Sandra is able to stay at home, with carers coming in to help, but as her dementia progresses, staying at home becomes too risky, and she eventually has to go into care.

The council carry out an assessment. As she is now the sole owner of a house worth £200,000, Sandra is classed as "fully self-funding" because her capital assets exceed £23,500 in value. So, the full cost of her care must be met from her capital assets. The council will only step in and foot the bill when all but the last £14,500 of her assets have been used up.

When Sandra passes away after four years, the council is entitled to the firs £160,000 of the value the house. Consequently, Kevin and Julie inherit £20,000 each, not the £100,000 each that Pete and Sandra expected. Unfortunately, the main beneficiary of Pete and Sandra's estate is the council rather than their children.

Could things have turned out differently?

Yes, they could - if Pete and Sandra had made Protective Property Trust Wills, this is what would have happened instead:

When Pete dies, instead of passing directly to Sandra, his share of their house passes to trustees, who have clear instructions to look after Pete's assets for Sandra's benefit during the remainder of her lifespan, with Kevin and Julie benefitting after Sandra's death. So, Sandra is able to live on in the house undisturbed.

When she needs to go into care, and the council carry out the assessment, they can only take account of Sandra's share of the house because ownership of Pete's half has not passed to her. At first glance, you might think that this would enable the council to take £100,000. But they can only take account of the market value of Sandra's share. Since willing buyers of a half-share of a house in the market are scarce, Sandra's share is not worth £100,000 on the open market, more like half of that. So, the available funds to pay for Sandra's care drops from £200,000 to £50,000, and out of that the £14,500 must be retained and protected, this means that the sum available to the council drops to £35,500. Once that has been used up, then the council must pay the care bill.

Consequently, when Sandra dies, Kevin and Julie inherit £82,250 each rather than the £20,000 they received from Pete and Sandra making traditional mirror wills.

An investment that pays dividends.

Protective Property Trust Wills tend to cost three times as much as traditional mirror wills - typically, a couple to spend about £400 on making a pair of mirror wills, and about £1200 on making Protective Property Trust Wills, but the extra investment in mid-life can massively increase a child's inheritance. For example, Kevin and Julie's inheritance each is £62,250 greater with Protective Property Trust Wills than with Traditional Mirror Wills.

So, the question you must ask yourself when deciding whether to make Traditional Mirror Wills or Protective Property Trust Wills is: do you want a solution that's low in cost, or do you want one that really works for your family?

To find out more about planning for your family's long term future security, go ahead and fill in the contact form below or call us on 0151 601 5399 - we're here to make sure your assets benefit your family, not the council.

"I decided to get advice about making my will because I was about to travel abroad with my children for the first time in many years. My financial advisor recommended Will Written. I appreciated being able to have a consultation at home, so that I could discuss my situation in confidence. I was able to ask wide-ranging questions and Gina’s knowledge and expertise were reassuring. An estate plan was created for me that exactly suited my needs, resources, family and dependents. I have the peace of mind of having made a will that ensures my assets are safely passed to my children at the end of my life. I also have added protection if I become ill or disabled, because I have made a Lasting Power of Attorney appointing my best friend to manage my affairs if I lose the ability to manage them for myself. "

Christine J

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